The Supreme Court heard oral arguments on Wednesday in its first biosimilar case.  On a petition filed in Sandoz, Inc. v. Amgen, Inc., et al. No. Case No. 2015-1039, and a cross-petition filed in Amgen Inc., et al. v. Sandoz, Inc., Case No. 2015-1195, the Court was asked to interpret two provisions of the Biologics Price Competition and Innovation Act (“BPCIA”).  Parties submitting amici briefs are discussed in this earlier post.  A transcript of the oral argument is available here, and an audio recording of the oral argument will be available after conferences this afternoon here on the Supreme Court’s website.

The questions presented to the Court, as discussed in detail in our prior article, are: (1) whether a biosimilar applicant is required by the term “shall” in section (l)(2)(A) of the statute to provide the reference product sponsor with a copy of its biologics license application and related manufacturing information, and if the applicant fails to provide that information, whether a declaratory judgment action under section (l)(9)(C) and/or a patent-infringement action under 35 U.S.C. § 271(e)(2)(C)(ii) are the only remedies available to the reference product sponsor; and (2)  whether notice of commercial marketing can only be effective after approval by the Food and Drug Administration, and whether notice of commercial marketing set forth in section (l)(8)(A) of the BPCIA is a stand-alone provision that permits an injunction to delay commercial launch of all biosimilars by an additional 180 days after FDA approval.

Below at the Federal Circuit, the majority of a split-panel (Judge Lourie and Judge Chen) held that when an applicant fails to comply with the disclosure requirement of section (l)(2)(A), the BPCIA permits the filing of a declaratory judgment suit for patent infringement, and that such suits, pursuant to 42 U.S.C. § 262(l)(9) and 35 U.S.C. § 271(e), are the only remedies available.  In other words, the biosimilar applicant has the choice to opt-out of the “patent dance,” and the remedy provided to the reference product sponsor is the ability to file an immediate declaratory judgment action on any patent that claims the biological product or a use of the biological product.  The Federal Circuit’s majority decision also includes a footnote recognizing that while the language of (l)(9)(c) does not expressly include process patents, 35 U.S.C. § 271(e)(2)(C)(ii) does not exclude process patents and “allows the [reference product sponsor] to assert process patents, ‘if the [subsection (k)] applicant. . . fails to provide the application and information’ and ‘the purpose of [the subsection (k)] submission is to obtain approval . . . to engage in the commercial manufacture, use, or sale of a . . . biological product claimed in a patent or the use of which is claimed in a patent before the expiration of such patent.’ 35 U.S.C. § 271(e)(2).”

With respect to the second issue, a different majority of the panel (Judge Lourie and Judge Newman) held that the notice of commercial marketing under section (l)(8) is a “stand alone” provision of the statute that requires the biosimilar applicant to provide notice of commercial marketing after the product is “licensed,” meaning that such notice is only effective after FDA approval and is required regardless of whether there are outstanding patent infringement issues remaining at the time of the notice.  The Court reasoned that providing notice only after approval of a license allows the reference sponsor to definitively determine the patents involved and the scope of potential injunctive relief.  The result of that decision, however, is that approval of every biosimilar product is delayed an additional six months (180 days) beyond the 12 year exclusivity period provided by the BPCIA.  Judge Chen provided a strong well-reasoned dissent on this issue explaining why the extra six month “windfall” of exclusivity is improper and why the majority was wrong to interpret (l)(8) as a stand-alone requirement.

It is the opinion of this author that Judge Chen was correct on both issues. Prior to oral arguments, I expected that the Supreme Court would readily affirm the Federal Circuit’s decision that the BPCIA allows the applicant to elect not to disclose information pursuant to (l)(2)(A) and that it provides the only remedy available to the reference product sponsor in the form of an immediate declaratory judgement action on any patent.  I also expected the Supreme Court to reverse the Federal Circuit on the notice of commercial marketing issue and to allow the biosimilar applicant to provide notice at any time after its application is accepted for review by the FDA (and at least 180 days prior to the date of first commercial marketing).  The questions posed by the Court during oral argument make it difficult to predict if the actual outcome will match my expectations.

Although this was first case on the docket for the day, Chief Justice Roberts announced before arguments began that the Court had decided to grant each side five extra minutes. Counsel for Petitioner, Sandoz, argued first, followed by Counsel for the United States, then Counsel for Respondent and Cross-Petitioner, Amgen, concluding with rebuttal reserved by Sandoz.

Counsel for Sandoz opened by saying that “The Biosimilars Act created a comprehensive and self-contained scheme for the early resolution of patent disputes. Regardless of the actions an applicant or sponsor take along the way, the end result is the same, patent litigation.” She argued that “Courts should apply that comprehensive scheme as written. They shouldn’t look elsewhere for consequences.”

Justice Kennedy asked the first few questions of the day seeking clarification on the timing of FDA’s decision to approve a biosimilar product compared to the actual grant of a license, in light of the exclusivity provisions of the BPCIA.  Justice Sotomayor inquired how long it takes for the FDA to approve a biosimilar, and Justice Kennedy asked if the applicant was apprised of the approval prior expiration of the exclusivity.  He commented that it seems the “180 day notice has to run from the time that the product is licensed.”  Counsel for Sandoz responded that such a reading is foreclosed by the language of the statute because the only timing element of the statute is tied to the date of first commercial marketing, not licensure of the product.

Justice Breyer questioned how one could provide notice of commercial marketing without knowing what the final licensed product is, and noted that the FDA has a lot of “power over what is licensed.” Then, he clarified that “maybe that isn’t what notice means. Maybe it just means notice that you will commercially market X, or maybe it means some combination thereof.” Justice Breyer characterized this as a “crucial ambiguity” that has to do with arguments on both sides.  Justice Breyer suggested several times that perhaps agency rulemaking would help the Court, saying:

We are being asked to interpret very technical provisions that I find somewhat ambiguous and am operating in a field I know nothing about. But it’s going to have huge implications for the future. So why isn’t the way to go about this case to ask the agency to issue some regulations? Then when we see their interpretation, you all will be able to argue that their interpretation exceeds the statutory delegation. And by doing that, we would have a better picture.

Justice Breyer came back to the idea of agency rulemaking, which was a consistent theme of his questions and comments, throughout the argument.  Counsel for Sandoz explained that neither the FDA nor the PTO has rule-making authority to interpret the BPCIA, urging the Court that this is an issue of statutory interpretation.  Later, when counsel for the United States presented his arguments (in support of Sandoz), he affirmed that although FDA is involved in licensure, Congress separated the FDA from the patent litigation process provided by the BPCIA.  The Court asked counsel for the United States to confirm that neither the FDA nor the PTO had rulemaking authority, which he did, agreeing with Sandoz that the issues presented are ones of statutory interpretation.

Justice Sotomayor asked counsel for Sandoz to address the issue of how the reference product sponsor would know exactly what the biosimilar product will be and have enough information to form a good faith belief of infringement for purposes of litigation if the applicant, like Sandoz here, does not provide the reference product sponsor with access to the biosimilar application.  Counsel for Sandoz first pointed to the artificial act of infringement created by the statute and based solely on the filing of an application as evidence of Congress’ intent to allow litigation to proceed early — before product approval or licensure. Second, Sandoz’s counsel argued that because the reference product and the proposed biosimilar are “highly similar,” under the statute, the reference product sponsor would have “a good faith basis to bring suit on any patent that covers its own product or any patent that covers a use of its own product.”  Justice Roberts seemed skeptical of that argument, pointing out that the reference product and the biosimilar are not identical.

It was clear from the questions being asked that the Court was trying to understand both the litigation process and remedies that Congress envisioned under the BPCIA.  Justice Kagan asked counsel for Sandoz if the reference product sponsor would always sue if they have a valid patent. Justice Ginsberg asked counsel to explain the difference between the two phases of the litigation, phase I and phase II.

Justice Gorsuch questioned counsel for the United States about the position that a declaratory judgment suit is the exclusive remedy for failure to comply with the disclosure requirements of (l)(2), raising issues of preemption and potential inconsistencies under state and federal law.  Justice Roberts also expressed concern that “in terms of the preemption question, . . . it’s very hard to give a comprehensive answer to the questions presented without considering whether . . . [under] state law, you can get the same injunction. It’s really asking us to put together a puzzle where a big piece is missing.”  Counsel for the government explained that the questions being presented in the appeal rest entirely on federal law, and the state law claims were found moot.  He also noted that while strong arguments would exist in favor of preemption, the issue was not part of the appeal and had not been briefed, suggesting that the Court should simply decide is what’s required under the statute, leaving open any other questions of state law and preemption.

Justice Breyer raised concerns about whether allowing the applicant to provide notice of commercial marketing early in the process, for example the day after the application is accepted for review by the FDA (“day 2”), would upset the negotiation process envisioned by Congress under the statutory scheme.  Specifically, Justice Breyer noted that the statute sets up a “system, where you’ve put tremendous incentives on people to negotiate and to work it out in an orderly way,” and questioned whether “you can just gut it by simply filing your commercial notice on day 2?” At the end of his discourse with counsel for the government, Justice Breyer pointed to this question as another example of why he believes “this would work out a lot better if you could somehow get this to a rule making.”

When counsel for Amgen began his argument he noted it was “tempting” to just stand up and give a “tutorial on this extremely complicated situation,” but indicated that instead his presentation would be guided by the Court’s earlier questions. The questioning, however, again began immediately.  Justice Sotomayor asked several questions about Amgen’s argument that notice must be given only after the product is approved by FDA and whether this would always force the phase II litigation to start after the reference product sponsor’s 12 year exclusivity period has expired. She also inquired whether Amgen assumes that the commercial launch has to be 12 ½ years rather than 12.

Justice Gorsuch and Justice Sotomayor both posed questions to counsel for Amgen about the remedies provided by the statute, even assuming that the Court agrees “shall” means “shall.”  Justice Breyer asked whether the Court should simply answer the question of whether shall means shall and just stop because the statute “doesn’t say that’s the only remedy or that there are others.”  Justice Roberts followed up with additional questions on preemption and how state law comes into play under the federal statute.  Counsel for Amgen argued that “California law is not incorporating into state law, federal remedies. It says it is a violation of our state law, fair commercial practices law, to violate a command of another sovereign’s law.”  He recognized however, that the remedy under state law was an injunction, not damages or anything else.

Justice Sotomayor then questioned whether, under Amgen’s theory of the case, state law would in effect “force a biosimilar to invoke Phase I” because in the event that the biosimilar applicant elects to opt out of any stage, the reference product sponsor could go to court under state law seeking to force compliance with an injunction.  This raises the question of whether the Court will ultimately deem it necessary to consider the issue of preemption as part of determining whether a declaratory judgment suit is an exclusive remedy.

The questions presented make it clear that the Court has a lot to consider before reaching a conclusion on the issues presented, and suggest that perhaps the decision could be broader in scope (if the Court deems it appropriate to addresses preemption) or narrower in scope (if the Court simply defines “shall” and stops) than many people anticipated.

The Supreme Court’s decision is expected to issue in June 2017.