Kevin M. Nelson is an intellectual property attorney at Schiff Hardin with a focus on large-scale complex patent infringement litigation
Joel M. Wallace is an intellectual property attorney at Schiff Hardin specializing in patent and trademark issues and non-litigation analyses.
Helen H. Ji is an associate intellectual property attorney at Schiff Hardin. Her practice mainly focuses on patent and trademark law.
The Department of Justice (DOJ) recently filed a brief with the Supreme Court arguing that the Affordable Care Act (ACA) should be found unconstitutional. Although the brief was focused primarily on 3 insurance coverage provisions of the ACA, the DOJ also argued that even the “ACA’s comparatively ‘minor,’ ancillary provisions” are inextricably intertwined and should fall with the unconstitutional provisions. One of the many “minor, ancillary provisions” that would fall under the government’s argument would be the Biosimilar Price Competition and Innovation Act (BPCIA). The BPCIA established a framework for exclusivity for novel biological products and FDA approval of lower-cost “biosimilar” versions of such drugs. It also provided a system for litigation of patent disputes involving those products. It is projected that by 2026 the BPCIA will have saved over $50 billion for patients, health care payers, and providers.
The BPCIA has been far from a perfect system, and arguably it has not achieved its goal of meaningfully reducing the cost of life-saving biological products in the United States. In fact, the United States lags significantly behind the European Union and India in biosimilar approvals and cost savings. And because it is less than ideal from both a patient and business standpoint to toss the BPCIA framework out without a viable system to replace it, now is the time to consider what works well with the BPCIA and what improvements should be made. After all, instead of just blaming the cow, Chicago dealt with the great fire by building one of the world’s greatest skylines.
So, here is what we like about the BPCIA and the 6 things that we would change if we go back to the biosimilars drawing board.
What to Keep: The Approval Standard and the Opportunity for Interchangeability
There are 3 positive aspects of the BPCIA that ultimately should be retained.
Approval standard: Initially the subject of frustration and derision, the standard for approval of biosimilars is the appropriate standard from a scientific and safety perspective and should be retained. The BPCIA requires that for approval a biosimilar must be demonstrably “highly similar to the reference product, notwithstanding minor differences in clinically inactive components.” There should also be “no clinically meaningful differences in terms of safety, purity, and potency.”1 The statute further provides that this standard can be met through analytical studies, animal studies, and clinical studies, with a focus on the assessment of immunogenicity.2 Companies were initially frustrated because neither the statute nor FDA regulations described the quantum of evidence needed to demonstrate that the “highly similar” standard has been met. But the FDA is becoming more familiar with the types of information it should be seeing from applicants, and therefore, approvals (until very recently) were increasing. In addition, the FDA has established a system of meetings for applicants to discuss their plans for submitting their applications and ways to resolve issues in those applications. Although the regulatory process can still be improved through experience, the statutory standard for approval is the correct one to ensure the safety and efficacy of biosimilars.
Interchangeability (in concept): The concept of interchangeability is also a key aspect of the statute that should be retained, although the mechanism needs tweaking, as discussed below. Interchangeability allows a pharmacist to fill a prescription for a higher-cost branded drug with the lower-cost biosimilar version of the same product. This mechanism exists for traditional, small molecule drugs based solely on proof that the active ingredient is the same and that it will result in a similar amount of drug being available in the body as the branded version. No additional clinical trials for efficacy or safety are required. Automatic substitution has resulted in substantial cost savings to consumers and increased market penetration for small molecule products. But biosimilar manufacturers seeking interchangeability in the US market must run complex clinical trials, proving that the drugs will maintain efficacy if patients are switched between the brand and biosimilar products. The complex scientific proof that is required and the high cost of the trials have resulted in no awards of interchangeability in the United States, and the lack of a meaningful opportunity for interchangeability is the primary reason that companies are hesitant to pursue biosimilars.
Because it is unclear whether there will be an interchangeable biosimilar in the near future, the current approach to interchangeability has failed. However, interchangeability is an important statutory incentive for biosimilar applicants, and without it biosimilar applicants must compete with an existing biological product that is sold by a company that often has superior marketing power. The difficulty in attaining interchangeability should not be a reason to abandon it with a new statutory regime; it is incumbent upon the FDA to devise regulations to make it scientifically attainable. We provide a proposal below that provides a further incentive for applicants to seek biosimilar approval.
Notice to sponsor of biosimilar application: Finally, although the information exchange or “patent dance” provisions of the statute should be eliminated, any new statutory scheme should retain the requirement that the applicant notify the reference sponsor that a biosimilar application has been filed and is under review. Much like in Hatch-Waxman Act cases, such notification would be the trigger for a patent infringement lawsuit and additional exclusivity for the reference product. However, as we discuss further below, significant improvements to this notice requirement are needed.
Proposals for Biosimilar 2.0
If the ACA is found unconstitutional in its entirety, we propose that Congress make the following 6 changes to the BPCIA when it is constructing a new pathway for biosimilar approvals and litigation: (1) mandatory biosimilar dispensing for treatment-naïve patients; (2) expansion of the Purple Book; (3) first filer exclusivity; (4) limited period of exclusivity with a potential compulsory license; (5) elimination of the patent dance; and (6) streamlining of the resulting patent litigation.
Default use for treatment-naïve patients: One of the primary reasons that biosimilars have not taken off in this country is that potential applicants are intimidated by the high costs and risks of the regulatory and litigation processes. Without a meaningful opportunity for interchangeability, the applicant will be forced to compete with the reference sponsor, who will likely be better equipped to market and detail their own product. However, if the statute creates a market for an applicant’s biosimilar product, then there is greater incentive for more companies to undertake the risks associated with filing a biosimilar application. To that end, Congress could mandate that all treatment naïve patients be treated with an approved biosimilar product, if available, unless the treating physician or patient opts out. Although the safety of switching from a reference product to a biosimilar has been debated, it is generally accepted that treatment-naïve patients can be safely started on a biosimilar. And because most biological products treat chronic conditions, this requirement will create a sustained market for the biosimilar applicant and incentivize competition. Studies have confirmed that setting generic pharmaceuticals as the default option has been shown to increase generic prescribing rates. The same should be expected for biosimilars. This approach would provide patients access to lower-cost treatments, which has been shown to increase medication adherence and thus reduce preventable morbidity and mortality. We would suggest price controls on the applicant in order to receive this benefit; for example, requiring the biosimilar to be priced at a 25% discount from the average sales price of the reference product over the last 5 years. The applicant should also have to maintain that price (absent competition) for at least 2 years.
Expansion of the Purple Book: In the context of small molecules and Hatch-Waxman, the FDA’s Orange Book has been a useful tool—sponsors have been able to give notice to the public as to what patents purportedly protect their product, and applicants have a better understanding of the patent landscape that could be facing them. On the other hand, the Purple Book for biological products contains very little useful information. In fact, there has been proposed legislation to expand the Purple Book. Those calls should be heeded. As with the Orange Book, sponsors should be required to list in the Purple Book patents covering their approved biological product, and applicants should be required to submit a certification to FDA as to each listed patent that the applicant will not launch its biosimilar product until after the patent expires or that the patent is believed to be invalid and/or will not be infringed by applicant’s biosimilar product if marketed. Unlike the Orange Book, however, the Purple Book should include relevant process patents, because the process for making a biologic product is more often the subject of patent protection. The Purple Book should not include any use codes, and there should be penalties for improper listing of patents in the Purple Book.
First filer exclusivity: There is currently no exclusivity provided for the first biosimilar applicant to file an application. As a further incentive to encourage filing of biosimilar applications, there should be a 6-month exclusivity period for the first applicant to file a biosimilar application, which would be forfeited if that first filer does not obtain approval within 3.5 years of filing and launch its product within 2 years of approval of its application. This approach would be similar to the first-filer exclusivity period under Hatch-Waxman.
Limited exclusivity and compulsory licensing: Instead of the current 12 years of exclusivity, Congress should separate the exclusivity period and provide a compulsory licensing period if litigation runs too long. Our proposal would grant a reference drug sponsor a total of 8 years of exclusivity prior to compulsory licensing while allowing biosimilar applicants to challenge patents 5 years into the exclusivity period. Under this approach, the sponsor should be provided a 5-year period of exclusivity during which no biosimilar application may be filed. After that 5-year period, the applicant can file an application referencing that biological product. Like with Hatch-Waxman, the applicant would be required to file with FDA a certification of patent invalidity and/or non-infringement as to every patent listed in the Purple Book, and must inform the sponsor of its application and certifications once FDA begins formal review. If the sponsor files suit in 60 days from receipt of notification from the applicant, then the biosimilar application shall not be approved for 3 years (earlier if the applicant is successful in the litigation). If this sounds like Hatch-Waxman litigation, well it’s very similar. The twist is that if the litigation is still pending after 3 years and the biosimilar application is already approved, the reference sponsor will provide a nonexclusive license to the applicant that will allow the applicant to launch its product and set a standard for damages in the event the launch was improper. Compulsory licensing schemes for pharmaceuticals have been proposed in other countries, such as the United Kingdom, and the international Agreement on Trade-Related Aspects of Intellectual Property Rights already allows for compulsory licensing in some situations.
Elimination of the patent dance: One of the most bemoaned aspects of the BPCIA is the so-called patent dance, and with good reason. It is confusing, causes unnecessary delay, and frequently involves gamesmanship. We propose eliminating it in its entirety. Under a new statute, applicants would be required to inform the sponsor of the certifications it provided to the FDA and provide information regarding its application so that the sponsor can determine which patents to assert. Applicants would not be required to provide detailed reasons for their certifications: Lawsuits are inevitable regardless of what is included in the detailed statement, and court-required contentions in patent cases provide advanced notice of the applicant’s patent invalidity arguments well before trial. Applicants would be permitted to restrict review of information to outside counsel eyes only, which would include independent expert review. As stated above, if the sponsor files suit within 60 days of receipt of this information, then they are entitled to another 3 years of exclusivity.
Additional litigation streamlining: Finally, the resulting patent litigation can be improved by a statutory requirement limiting the number of patent claims asserted in the litigation. The statute could require the number of asserted claims to be limited by the end of fact discovery, and it could limit either the total number of asserted claims or limit the number of claims per patent family or based on patent subject matter. In addition, patentees could ask the court to increase the number of asserted claims upon a showing of good cause.
In the 10 years since the BPCIA has passed, we have had the opportunity to learn many of the strengths and weaknesses of the act as passed within the Affordable Care Act. If either the Supreme Court or Congress ultimately determines that portions of the ACA are to be repealed, the fundamental premise of the BPCIA should be preserved or reissued in order to improve patient access to lower-cost medical treatments. At the same time, the important lessons learned should also be implemented in the form of the changes we have proposed here. As with the rebuilding of Chicago after the fire, a better version of the BPCIA is possible with careful planning and vision.
1. Regulation of Biological Products. §262(i)(2), 42 USC (2017).
2. Regulation of Biological Products. §262(i)(2)(A)(i)(I)(aa)-(cc), 42 USC (2017).