Abbott Laboratories #1Last April, Abbott Laboratories filed a Citizen Petition with the U.S. Food and Drug Administration, asking the agency to refrain from accepting biosimilar applications under the Biologics Price Competition and Innovation Act (BPCIA) that cite reference products (biologics) for which a biologics license application (BLA) was submitted to the FDA prior to March 23, 2010 (see "Abbott Asks FDA to Refuse Certain Biosimilar Applications").  The BPCIA, which provides an approval pathway for biosimilar biological products and constitutes a portion of the Patient Protection and Affordable Care Act that was signed into law on March 23, 2010, allows the FDA to accept biosimilar applications four years after a reference product has been licensed and to approve such applications twelve years after the reference product has been licensed.

In its Petition, Abbott specifically asked the FDA to:

[C]onfirm that it will not accept for filing, file, approve, or discuss with any company, or otherwise take any action indicating that the agency will consider, any application or any investigational new drug application (IND) for a biosimilar that cites, as its reference product, BLA 125057 for Humira® (adalimumab) or any other product for which the biologics license application (BLA) was submitted to FDA prior to March 23, 2010, the date on which the BPCIA was signed into law.

Abbott explained that the FDA should refuse biosimilar applications for all pre-enactment reference products, including its own biologic Humira®, because to approve such applications would constitute a taking under the Fifth Amendment of the U.S. Constitution, which requires just compensation.  Noting that "[a]n innovator's resulting license application typically reflects more than a decade of research and contains analytical, preclinical, and clinical data, as well as detailed manufacturing information, most of which qualifies as trade secrets," Abbott contended that "[t]hese trade secrets are the private property of the reference product sponsor and are therefore protected by the Fifth Amendment to the U.S. Constitution."  According to Abbott's Petition, "[w]hen FDA approves a biosimilar biological product on the grounds that the reference product has been shown safe, pure, and potent, it uses these trade secrets."

Washington Legal Foundation #2The FDA continues to collect comments regarding Abbott's Citizen Petition, and has thus far received comments from the Generic Pharmaceutical Association (GPhA), Therapeutic Proteins International, LLC (a manufacturer and supplier of finished biosimilar recombinant therapeutic proteins products based in Chicago, IL), and Zuckerman Spaeder LLP (a litigation firm with offices in Washington, DC, New York, Tampa, and Baltimore).  Each of these commenters has asked the FDA to deny Abbott's Petition.  Last month, the Washington Legal Foundation (WLF), a public interest law and policy center, became the most recent group to submit comments on Abbott's Citizen Petition, but in contrast with the GPhA, TPI, and the Zuckerman firm, submitted its comments in support of Abbott's Petition.

The WLF's comments begin by noting that:

Any company that submitted a biologics license application (BLA) to FDA after adoption of the BPCIA in 2010 was on notice that FDA would be using information submitted in support of the application to evaluate the safety of biosimilars.  Accordingly, the company would have no basis for seeking Fifth Amendment compensation for such use of its trade secret information, because it would have no reasonable investment-backed expectation that its information would not be so used.  But many if not all companies that submitted a BLA to FDA before adoption of the BPCIA (including Abbott, which submitted an application for Humira® in 2002) would very reasonably have believed that their trade secret information would not be used to assist their competitors in this manner and, on the basis of that belief, invested heavily in the development of their biological product.

As a result, the WLF supports Abbott's request that the FDA not approve any application or any investigational new drug (IND) application for a biosimilar that cites a reference product for which the BLA was submitted to the FDA prior to March 23, 2010, albeit with the caveat that the FDA could approve such applications if it had "made an explicit determination that approval of that specific biosimilar would not trigger federal government liability under the Takings Clause."  With respect to this caveat, the WLF acknowledges "[i]t is possible that some sponsors who submitted BLA applications in the months immediately preceding March 23, 2010, lacked a reasonable investment-backed expectation that FDA would neither disclose their trade secrets nor use them as the basis for approving biosimilars."  In its comments, the WLF expresses concern that "approving biosimilars without first giving serious consideration to Fifth Amendment compensation claims that would arise therefrom would seriously erode both property rights and public confidence in the reliability of government promises," adding that "[i]f FDA determines that it is free to ignore its past promises of confidentiality to BLA applicants, businesses subject to government regulation will be less willing in the future to spend the massive sums necessary to develop innovative and life-saving products."

The WLF explains that:

Congress adopted the BPCIA for the purpose of reducing health care costs, both for itself and for other purchasers of biological products.  Those cost savings are to be effected by reducing the profits that would otherwise flow to the manufacturers of biological products, by increasing competition and thereby forcing down prices.  Congress concluded that although forcing down prices -- and thereby decreasing the profitability of producing biological profits -- might lead to a reduced number of new, life-saving biological products by reducing incentives to engage in research and development, any such detriments were outweighed by the BPCIA's cost-saving potential.  The Constitution does not restrict Congress's right to undertake such cost-benefit calculations.

The federal government is not permitted, however, to reduce health-care costs by taking private property.  Reduced health-care costs may be a laudable goal, but the Constitution does not permit it to be accomplished at the expense of property rights.  The Fifth Amendment's Takings Clause was "designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole."  Armstrong v. United States, 364 U.S. 40, 49 (1960).

With respect to Abbott's citation of Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984), in support of its position on BLAs submitted to the FDA prior to March 23, 2010, the WLF argues that the case is "directly on point and requires a finding that approving biosimilar applications would require that Takings Clause compensation be paid to many if not most sponsors of approved BLAs that were filed before adoption of the BPCIA in 2010."  According to the WLF, in Ruckelshaus, which involved Monsanto's submission of trade secret data to the EPA in support of its application to register a pesticide, the Supreme Court deemed one factor to be dispositive with respect certain of Monsanto's claims, namely "Monsanto's reasonable investment-backed expectations that information it supplied to EPA would not be disclosed and would not be used by EPA to approve registration applications submitted by Monsanto's competitors."  The WLF contends that:

Monsanto demonstrates that if the federal government begins granting biosimilar applications with respect to reference products for which BLAs were filed before the adoption of the BPCIA in March 2010, it will face significant Takings Clause liability to sponsors of those approved BLAs.  . . .  [F]or many decades FDA provided explicit assurances to the biotech industry that it would maintain the confidentiality of data supplied in connection with BLAs to the extent that the data offered any competitive advantage to the supplier of the data, and that it would not use the data to approve biosimilars because FDA had no authority to do so.  In light of FDA's explicit assurances, biotech companies' expectations that confidentiality and use restrictions would be maintained was certainly "reasonable."  Those expectations were also "investment-backed"; indeed, biotech companies routinely invest more than $1 billion dollars to develop a biological product and to win approval for their BLAs.

With respect to the GPhA's argument that "reasonable expectations must also take into account the regulatory environment, including the foreseeability of changes in the regulatory scheme," the WLF notes that it "does not necessarily disagree," but adds that:

[T]he foreseeability of changes in the regulatory scheme does not excuse efforts by the federal government to renege on explicit assurances that the biotech industry has relied on, to the tune of billions of dollars.  The federal government is largely free to alter regulatory schemes on a prospective basis; but the Takings Clause requires it to pay compensation to individuals and businesses when the changed regulatory scheme retroactively unsettles their reasonable investment-backed expectations and thereby destroys their property.

In response to the Zuckerman firm's argument that the BPCIA provides manufacturers of biological products with just compensation for the use of their trade secrets in the form of exclusivity periods, the WLF contends that this argument is "without merit," noting that "[w]hile the exclusivity periods afforded to manufacturers of biological products by the BPCIA undoubtedly have some monetary value, that exclusivity is worth considerably less than the profits they would generate if FDA were to honor its commitment not to use their trade secret data in approving biosimilars."

The WLF closes its comments by asserting that

Because there is no evidence that Congress contemplated that the United States could be required to pay "just compensation" claims to biotech companies, FDA should not approve a biosimilar application for any reference product for which a BLA was submitted before March 23, 2010, unless and until FDA has determined that the sponsor of the reference product, at the time the BLA was submitted, lacked a reasonable investment-backed expectation that its trade secret data would not be disclosed or used by FDA.

In so arguing, the WLF explains that:

The absence of any mechanism for paying potentially massive "just compensation" claims to biotech companies indicates that Congress did not authorize FDA to confiscate trade secret rights that those companies reasonably expected would be honored.  Neither the BPCIA's statutory language nor its legislative history includes any indication that Congress reached any conclusions regarding the strength of the Takings Clause claims that sponsors of approved BLAs were likely to raise in response to the Act.  In the absence of such an indication, the most logical conclusion is that Congress intended that FDA should make such determinations on a case-by-case basis before approving a biosimilar.

The WLF therefore concludes that:

Until such time as FDA determines, after careful consideration, that the sponsor of the pre-March 2010 reference product at issue reasonably expected (at the time it submitted its trade secret information) that FDA would make uncompensated use of the trade secrets to assist competitors, FDA should not approve an application to market a biosimilar based on that reference product.  Any other policy would expose FDA to massive Takings Clause liabilities that Congress has not authorized the agency to incur.

Additional information regarding Abbott's Citizen Petition, including copies of the comments submitted to date (except for the WLF's comments, which have yet to be posted), can be found here.

For additional information regarding this topic, please see:

• "Rep. Eshoo Expresses Views on Abbott's Biosimilars Petition in Letter to FDA," October 25, 2012
• "FDA Continues to Review Abbott Petition on Biosimilars," October 24, 2012
• "Abbott Asks FDA to Refuse Certain Biosimilar Applications," April 23, 2012