Senators Ask FTC to Investigate Biosimilar Litigation Settlement Agreement

McDonnell Boehnen Hulbert & Berghoff LLP

The high cost of biologic drugs was one of the (if not the) most compelling motivations for Congress to adopt a biosimilar pathway as part of the Affordable Care Act in 2010 (aka "Obamacare").  Passage of the Biologic Price Control and Innovation Act (BPCIA, codified at 42 U.S.C. § 262(k)) created for the first time a pathway for FDA approval of biosimilar drugs in the U.S.  But from the beginning there have been grumblings, particularly regarding the term of the data exclusivity period (see "Congress Jumps on Bandwagon to Reduce Biologic Drug Exclusivity Term"; "President's Latest Budget Proposal Seeks Decrease of Data Exclusivity Period and Elimination of Pay-for-Delay Agreements"; "Senators Send Letter on Biosimilars to FDA"; "Senators Back 12-Year Data Exclusivity Period for Biosimilars and President Obama (Once Again) Does Not"; and "President's Latest Budget Proposal Seeks Decrease of Data Exclusivity Period and Elimination of Pay-for-Delay Agreements").  As biosimilar applicants have utilized the FDA's implementation of the abbreviated biologics license application (aBLA) pathway, and parties and the courts have begun to work out the litigation provisions of the Act (42 U.S.C. § 262(l)), the question of settlement of such litigation has arisen.  As mentioned in a recent roundup of the biosimilar landscape (see "Status of U.S. Biosimilar Approvals and Pending Applications"), there have been several biosimilar patent litigations that have settled or been avoided by licenses between branded biologic drug makers (termed "reference product sponsors" under the law) and biosimilars applicants.  For example, Genentech entered a global licensing agreement on March 31, 2017 with Mylan/Biocon over their Herceptin® biosimilar, Ogivri (trastuzumab-dkst) (although this biosimilar is not yet on the market), and Amgen/Samsung-Bioepsis's Amjetiva® (adalimumab-atto) is scheduled to enter the market in competition with AbbVie's Humira® in January 2023 as the result of a settlement agreement between the parties (see "HUMIRA® Biosimilar Update -- Settlement in AbbVie v. Amgen Case Announced and AbbVie v. Boehringer Ingelheim Litigation Begins").

Settlement agreements between conventional branded and generic drug makers were the source of a long dispute between pharmaceutical companies and the Federal Trade Commission, culminating in the Supreme Court's decision in FTC v. Actavis in 2013.  Before that decision, Congress implemented a protocol requiring any such "reverse payment" settlement agreements (called "pay-for-delay" by the FTC and those opposed to the practice) to be vetted by the Commission, wherein ones deserving of suspicion as being anticompetitive would come to the FTC's attention (and presumably corrective action).

No such regime has been put in place for biosimilar drugs, and two Senators, Charles Grassley (R-IA) and Claire Klobucher (D-MN), think the FTC should commence review of the Humira® settlement.  Part of their angst on the issue is a disparity of biosimilar entry dates between the U.S. (2023) and Europe (October 2018).  Part is their innate inclinations:  Senators Grassley and Klobucher have carried the branded company abuse torch for a while (see "The CREATES Act of 2016: Senate Listens to Generics Industry").  And of course perhaps the biggest factor is the high cost of Humira®, which is and has been the top-selling biologic drug for several years, and the price of which cannot but help to be reduced when biosimilar competitors enter the marketplace.  It must be noted in passing, however, that the size of such a reduction is unlikely to be as great as has been the case for conventional generic small molecule drugs.  In a fashion predicted by an FTC White Paper prepared before enactment of the BPCIA (see "No One Seems Happy with Follow-on Biologics According to the FTC"), the few biosimilar providers on the market have priced their drugs at only 15% less than the reference product sponsor (Sandoz's Zarxio® (filgrastim-sndz) (in competition with Amgen's Neupogen®); Pfizer's Inflectra® (infliximab-dyyb) (in competition with J&J/Janssen's Remicade®), although Merck-Samsung-Bioepsis's Renflexis® (infliximab-abda) (another Remicade® competitor) launched at risk (i.e., while patent litigation was on-going) at a 35% discount).  While this is a significant savings in aggregate (say, for example, insurers and the Federal government), it is not the windfall for consumers that some (including perhaps these Senators) seem to think it will be.

Nevertheless, these Senators have sent their letter to FTC Chairman Joseph Simons, reproduced below:

Dear Chairman Simons:

We write to urge the Federal Trade Commission (FTC) to look into whether strategies to hinder or delay generics from entering the market – such as anticompetitive "pay for delay" settlement agreements that have plagued generic pharmaceutical markets for years – may be being utilized for settlements regarding biologic medicines.

As you are aware, the FTC estimates that these pay for delay settlements can cost consumers and taxpayers $3.5 billion in higher drug costs every year.  Since 2001, the FTC has filed a number of lawsuits to stop these deals, and has worked with Congress on legislation to end pay for delay settlements.  We would like to continue those efforts to combat these agreements and explore their impact on the biologic market.

Biologics play an important role in treating many serious illnesses and are among the fastest growing classes of therapeutic products.  As they are more expensive than simple molecule pharmaceuticals, biologics constitute a substantial and increasing proportion of our nation's healthcare costs.  Without biosimilar competition, U.S. patients and payers will likely see additional price increases on biologics in the years to come.

For example, AbbVie Inc.'s (AbbVie) Humira is a biologic medicine that treats multiple inflammatory diseases and is the world's top-selling prescription drug with annual sales of $16 billion, including more than $10 billion in the United States alone.

Over the past year, AbbVie entered into global settlement agreements of all intellectual property litigation with both Amgen Inc. (Amgen) and Samsung Bioepsis (Samsung) over their biosimilars of Humira.  Under the agreements, Amgen and Samsung will not launch their products in the United States until 2023, but both companies will be able to launch their biosimilars into the European market in October 2018.  This means that while European patients will benefit from biosimilar competition later this year, Americans may be without access to Humira biosimilars for almost five more years.  While such terms in patent settlement agreements may not always be inappropriate, the incentives for parties to delay biosimilar entry are present, and biologic markets could be susceptible to patent settlement abuse.

In light of the importance of biosimilar competition to drive down prices and improve the quality of life for American patients, we urge the FTC to examine global patent settlements relating to biosimilars to ensure they are not in violation of antitrust laws.

Thank you for your prompt attention to this important matter.  We appreciate the FTC's efforts to ensure that potentially anticompetitive practices do not impede competition in the pharmaceutical market.

As yet the Commission has not responded publicly.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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