Alert June 16, 2009

FTC Weighs In As Congress Considers Generic Biologics

This year marks the 25th anniversary of the Hatch-Waxman Act in the United States, which created a pathway for generic drugs by means of an abbreviated version of a New Drug Application for small molecule drugs regulated by the Federal Food, Drug, and Cosmetic Act. However, no pathway currently exists in the United States for generic biologics, or “follow-on biologics” (“FOBs”), by means of an abbreviated version of a Biologics License Application (“BLA”) for larger and more complex biological molecules regulated by the Public Health Service Act. In recent years there has been accelerating movement toward establishing such a pathway.

In response, President Obama’s fiscal year 2010 budget proposal (dated February 26, 2009) set as one of its goals to “accelerate access to make affordable generic biologic drugs available through the establishment of a workable regulatory, scientific, and legal pathway for generic versions of biologic drugs.” 

Shortly thereafter, the lines were drawn in Congress between those more inclined towards FOB applicants (“the generics”) and those more inclined towards the BLA holders (“the brands”).

On March 11, 2009, Representative Henry A. Waxman (D-CA) introduced HR 1427, a pro-generic bill, followed six days later by HR 1548, a pro-brand bill introduced by Representative Anna G. Eshoo (D-CA). The differences between these bills are readily apparent with respect to three topics considered by the U.S. Federal Trade Commission (“FTC”)  in its June 10, 2009 report on follow-on biologics:  (i) branded exclusivity [for the benefit of BLA holders], (ii) a pre-approval patent resolution process [between FOB applicants and BLA holders and, possibly, third parties] and (iii) FOB exclusivity [for the benefit of certain FOB applicants]  

Branded Exclusivity Under HR 1427 and HR 1548

Under HR 1427, an FOB application can be filed at any time although the bill does provide for a delay in approval. In general, the U.S. Food and Drug Administration (“FDA”) would not be able to approve an FOB application prior to five years from the approval date of the BLA product – if no major substance in the BLA product had previously been approved – or three years from approval of a BLA for an already approved product that contains reports of new clinical investigations and represents a “significant therapeutic advance.”  Two more extensions, based on additional studies, could tack on one additional year in which an FOB application could not be approved. Thus, in total, HR 1427 creates a market exclusivity period of up to six years during which no FOB applicant would be able to enter the market for the particular biological product.

Under HR 1548, an FOB application cannot be filed less than four years from the date of approval of the BLA product. Moreover, an FOB application could not be approved less than 12 years from the date of approval of the BLA product. Two more extensions, based on additional studies, could tack on two-and-a-half additional years in which the FOB application could not be approved. Thus, in total, HR 1548 creates a market exclusivity period of up to 14.5 years.

While both bills recognized the need for some sort of branded exclusivity, the maximum exclusivity under HR 1548 is almost two-and-a-half times the maximum exclusivity proposed by HR 1427.

The Pre-Approval Patent Resolution Process Under HR 1427 and HR 1548

Both bills propose complicated schemes for challenging certain patents and seeking judicial resolution before an FOB application is approved by the FDA.

Disclosure to an FOB Applicant of Patents That Can Be Challenged

Under HR 1427, if an FOB applicant (or prospective FOB applicant) wishes to know what patents it might have to consider for possible challenge, the FOB applicant would be required to contact the BLA holder and ask it to disclose all of the patents owned by or licensed to the BLA holder that the BLA holder believes in good faith relate to the BLA product – i.e., the product marketed by the BLA holder, not the FOB product.  The BLA holder’s patent disclosure must include patents that claim the approved biological product, formulations, any method of using the product, any component of the product as well as any process of manufacturing the product or component that can be used, regardless of whether that process is actually used. If the BLA holder does not disclose a patent in response to a disclosure request, it is then precluded from asserting that patent at a later time against the company that made the disclosure request. This feature of HR 1427 is clearly meant to induce the BLA holder to identify all the relevant patents in response to a disclosure request.

As for timing, the BLA holder would be required to disclose the relevant patents within 30 days of receiving the disclosure request and would have to keep updating the information for a period of two years. An FOB applicant (or prospective FOB applicant) would be able to submit additional requests for patent information at any time, which would mean that the BLA holder would have to keep providing the FOB applicant with updates for two more years starting from the service of the new request.

Under HR 1548, an FOB applicant would be required to send to the BLA holder, within 30 days of the acceptance of the FOB application by the FDA, a copy of the FOB application and additional detailed information relating to the method of manufacture of the FOB. HR 1548 further provides that within 30 days of the FOB application’s acceptance, a public notice would be issued by the Secretary of Health and Human Services identifying the product which is the subject of the application. After the notice is issued, any third party claiming to have an ownership stake in a relevant patent may contact the FOB applicant and identify at least one such patent. The FOB applicant must then provide the third party with the same proprietary information which was provided to the BLA holder. Within 60 days after receiving the information from the applicant (or 90 days in the case of third parties), the BLA holder (and interested third parties) would be required to identify for the FOB applicant all patents they believe concern the FOB product – not the BLA product – along with the expiration dates of those patents and an explanation of why they believe the patents would be infringed. The disclosure must also mention whether the patents are available for licensing.

Of note, the only patents which must be disclosed under HR 1548 are those which expire after the FOB application may be approved – a date which must be later than 12 years after the approval of the BLA product.

Notification by an FOB Applicant of Patents It Is Seeking to Challenge

HR 1427 states that at any time after submitting an FOB application, an FOB applicant may send the BLA holder a notification stating that it believes that one or more of the patents disclosed in response to its disclosure request are invalid, unenforceable and/or would not be infringed. Along with such notice, the FOB applicant must provide a detailed statement of the factual and legal bases for its belief that the challenged patents are invalid, unenforceable and/or would not be infringed. Under HR 1427, challenging any of the disclosed patents would be strictly voluntary; the FOB applicant need not address any disclosed patents which it elects not to challenge. Furthermore, whether or not a patent is challenged would not change when the FOB application is approved – i.e., there is no delay in approval of the FOB application if litigation is initiated as a result of the challenge.

Under HR 1548, for each patent disclosed by the BLA holder or interested third party (as relating to the FOB product), the FOB applicant must, within 45 days of identification of each such patent, either make a statement that it will not commence marketing of the FOB prior to the date of expiration of the patent in question or provide a detailed written explanation as to why the FOB applicant believes that the challenged patent is invalid, unenforceable and/or would not be infringed.

Thus, unlike HR 1427 which allows the FOB applicant to pick and choose which of the disclosed patents to challenge and to essentially ignore the remaining disclosed patents, HR 1548 requires that the FOB applicant make an affirmative statement as to which of the disclosed patents it will challenge and which of the disclosed patents it will acquiesce to.

Litigation Regarding Challenged Patents in an FOB Applicant’s Notification

Under HR 1427, providing a notification to the BLA holder of the FOB applicant’s challenge of a patent owned by or licensed to the BLA holder constitutes an act of infringement. Instead of rewarding the BLA holder for promptly bringing suit on challenged patents (by delaying approval of an FOB application based on commencement of litigation), HR 1427 punishes the BLA holder for delaying suit. That is, if the BLA holder fails to assert a patent mentioned in the FOB applicant’s notification within 45 days of receipt, the BLA holder would only be able to recover reasonable royalties. HR 1427 also provides that, to the full extent permitted by the U.S. Constitution, an FOB applicant may bring a declaratory judgment action for any of the patents mentioned in the notification for which the BLA holder does not bring suit within 45 days. By contrast, the BLA holder may not bring a declaratory judgment action for infringement of any patent not challenged, even though the patent was identified in response to the FOB applicant’s disclosure request.

HR 1548 similarly provides that a statement that a challenged patent is invalid, unenforceable and/or would not be infringed constitutes an act of infringement. Once such a statement is made, the BLA holder and/or third party may bring suit for patent infringement; however, there is no delay in approval of the FOB application if suit is brought within a certain period of time. If suit is not brought, then the FOB applicant is limited in terms of bringing a declaratory judgment action with respect to the challenged patents. HR 1548 precludes an FOB applicant from bringing a declaratory judgment action until the later of (i) three years prior to the end of the 12-year exclusivity for the BLA product or (ii) 120 days after the statement of invalidity, unenforceability and/or non-infringement has been provided.

FOB Exclusivity Under HR 1427 and HR 1548

Under HR 1427, the first application approved as interchangeable with the BLA product may be entitled to 180 days of marketing exclusivity before the FDA would be able to approve another FOB product as interchangeable with the BLA product. HR 1427, however, has other provisions to ensure that the company with the first approved interchangeable FOB does not “park” its exclusivity by failing to market its interchangeable product. For example, if the company with the first approved interchangeable FOB was not sued on any of the patents it challenged, then it might enjoy 180 days of exclusivity if it promptly marketed its interchangeable FOB after approval. However, if that company delayed marketing its interchangeable FOB for more than a year after approval, then it will have forfeited its exclusivity and a subsequent interchangeable FOB could be approved by the FDA. Moreover, in order to avoid the issue of “authorized generics,” HR 1427 prevents the marketing of what it calls a “rebranded interchangeable biological product” during the exclusivity period.

Under HR 1548, there is an exclusivity period of 24 months for the first approved interchangeable FOB product. The counting of the 24 months under HR 1548 would start on the date of commercial marketing of the first interchangeable FOB product or the date the FOB product was determined to be interchangeable. HR 1548, however, does not address the issue of a company with exclusivity sitting on that exclusivity instead of marketing its interchangeable FOB product. In addition, HR 1548 does not address the issue of authorized generics.

Nevertheless, one aspect shared by both HR 1427 and HR 1548 is that, regardless of exclusivity, other FOBs could immediately be approved and come on the market – they just would not be approved as interchangeable with the BLA product until after the exclusivity period has expired.

The FTC Report on Follow-On Biologics

Despite the differences between the pro-generic HR 1427 and pro-brand HR 1548, they both recognized the need for some sort of pre-approval litigation as well as some sort of exclusivity for the first approved FOB product that is interchangeable, and not just similar, to the BLA product. Thus, it is surprising that the FTC took the position that neither a pre-approval patent resolution process nor FOB exclusivity is needed in any FOB legislation.

What is more dramatic, is that the FTC expressly disagreed with the entire basis for branded exclusivity articulated in the pro-brand HR 1548. The FTC clearly stated that “a twelve-to fourteen-year exclusivity period is unnecessary to promote innovation.”  While the FTC recognized that “to the extent that there are new biologic molecules that cannot obtain patent protection, an exclusivity period may be warranted,” it went on to note that “there is no evidence about the lack of patentability of new biologic products, nor that market forces have been insufficient to incentivize their development.”  Accordingly, while the FTC disagreed with the branded exclusivity period proposed in HR 1548, it “has not recommended a specific length for an exclusivity period.”

Since the FTC Report was published on June 10, 2009, supporters of HR 1427 and HR 1548 have lined up to either praise the FTC’s position on branded exclusivity or to condemn it. Rather than helping to resolve the issue of FOB legislation, it looks like the FTC report has merely reinforced the positions of competing stakeholders.