Biologics in the practice of law.

• Author: Kelly, Lindsay
• Position: Thirty-Fourth Annual Federalist Society National Student Symposium

Biologics have come to occupy an increasingly important role in the medical industry, accounting for well over $200 billion in worldwide sales in 2014. Not surprisingly, biologics also occupy a prominent place in the practice of life-sciences law. Before expanding on how biologics and the law interact, however, it is important to first define "biologics." Most treatments for chemotherapy and autoimmune disorders are biologics. In contrast to a drug, which is a mixture of chemicals according to a set recipe, a biologic comes from a living organism. (1) Rodents, for example, might be a possible source. (2) Because no two biologics will be identical, there can be no "generic" biologic. Rather, a competing biologic may be deemed "biosimilar" or, if heightened requirements are met, "bioequivalent" to a reference biologic. Until recently, the concept of biosimilars was not recognized or approved in the United States. This changed with a little-known provision of the Patient Protection and Affordable Care Act, which is revolutionizing the pharmaceutical industry.

This Essay begins by discussing the recently implemented legislative pathway for marketing biosimilars in the United States, and the intersection of this pathway with the Leahy-Smith America Invents Act's mechanism for inter partes challenges to patents. The Essay then explores the competitive strategies at play in, and the initial economic effects arising from, the burgeoning biosimilars market, and ultimately concludes that the societal effect will be beneficial, if less dramatic than proponents of the Patient Protection and Affordable Care Act intended. Strong demand and high prices for biologics have created a robust black market in which smugglers enable physicians to obtain and administer to unknowing patients delicate, temperature-sensitive, non-FDA-approved biologics intended for use on the other side of the world. Drawing in part on the Author's personal experience as a federal prosecutor, the Essay explains why this black market is dangerous for patients who were neither informed of nor consented to treatment with non-FDA-approved biologics. The Essay concludes by exploring how both the legal and illegal markets for biologics are affected by the relationship between doctors and insurance providers, including federal and state governments and formularies, in which patients are merely passive participants.

1. THE LEGISLATIVE PROCESS FOR MARKETING BIOSIMILARS

   Historically, the Hatch-Waxman Act (3) provided a legislative pathway to obtain FDA approval of generic drugs. (4) This legislation was enacted in 1984 and signed into law by President Ronald Reagan. (5) However, until the Patient Protection and Affordable Care Act (6) (PPACA) was passed in 2010, no equivalent pathway existed for biologics. (7) This legislative vacuum effectively insulated biologics manufacturers from competition, no doubt contributing to biologics' high prices and profit margins. The PPACA changed this competitive landscape through the Biologics Price Competition and Innovation Act (BPCIA). (8) The BPCIA allows companies that wish to introduce "biosimilar" or "bioequivalent" (per a heightened standard) pharmaceuticals to obtain FDA approval and enter the market. (9)

   These "generic" biologics are aptly called "biosimilars," as they are derived from living organisms and are similar, but not identical, to the biologics for which they will be substituted. (10) This stands in stark contrast to a generic drug, which involves mixing chemicals according to a set recipe. (11) The comparative complexity of biologics makes the process of manufacturing and testing biosimilars much more expensive and time-consuming than the equivalent stages for generic drugs. (12) Yet the vast majority of the most profitable medications in recent years have been biologics, not drugs. (13) As such, everyone from generic drug companies to competing biologics manufacturers is eager to capture a slice of the biosimilars market. (14)

   At present, many companies are in the midst of clinical trials for new biosimilars. (15) However, only a few biosimilar applications have been filed with the Food and Drug Administration (FDA), and just one biosimilar has been approved to date. (16) On March 6, 2015, the FDA approved Novartis AG subsidiary Sandoz's Zarxio, (17) which is biosimilar to Amgen's Neupogen. (18) Both biologics are approved for use in cancer patients undergoing chemotherapy or bone marrow transplants, among other treatments. (19) On September 3, 2015, Zarxio became the first biosimilar to enter die United States market when Novartis launched the biosimilar at a fifteen-percent discount compared to Neupogen. (20) Just prior to the Zarxio approval, in late February 2015, an FDA advisory committee postponed a scheduled March meeting to discuss Celltrion's application for a biosimilar to Janssen Biotech's Remicade, which is used to treat autoimmune diseases such as rheumatoid arthritis and Crohn's disease. (21) Apotex, a generic drug company, has two biosimilar applications under review for versions of Amgen's Neupogen and Neulasta, both of which are administered to cancer patients to reduce the risk of infection during chemotherapy. (22)

   The expected cost savings from biosimilars will not materialize immediately, or perhaps even anytime soon. For starters, there remains a period of exclusivity under the BPCIA. (23) The original biologic manufacturer is guaranteed twelve years of regulatory exclusivity before a biosimilar can be introduced. (24)

   Indeed, the FDA will not even accept an application for a biosimilar within the first four years after the biologic was approved. (25) Additionally, the first approved biosimilar is granted its own period of regulatory exclusivity--between one and three-and-a-half years--before another biosimilar can enter the market. (26) Thus, a minimum of thirteen years will pass before a truly competitive market--that is, one with three or more players--will exist for any biologic. Neupogen serves as a real-world example. Even if Apotex's pending biosimilar application is approved as a second biosimilar to Neupogen, the Apotex biosimilar will likely not be permitted to launch until 2018, given ongoing litigation between Sandoz and Amgen.

   Moreover, obtaining regulatory approval to market a biosimilar is just the initial hurdle in a long and expensive path to reaching market. Biologics, like drugs, are usually protected by a portfolio of patents covering all unique aspects of the manufacturing process and each method of use. (27) Patent protection, which is independent of FDA approval, extends for twenty years from the date of the patent application. (28) The BPCIA therefore also envisions an elaborate set of exchanges between a biosimilar applicant and the "reference product sponsor" (the manufacturer of the branded biologic), culminating in two rounds of patent litigation. (29) The BPCIA "patent dance," (30) as it is colloquially referred to by patent lawyers, differs greatly from the Abbreviated New Drug Application (ANDA) litigation for generic drugs prescribed by the Hatch-Waxman Act. (31) As just one example, the Hatch-Waxman Act requires a manufacturer to identify publicly the numbers and expiration dates of the patents that cover its branded drug; (32) the FDA publishes this information in what is known as the "Orange Book." (33) Under the BPCIA, the reference product sponsor identifies its covered patents privately to the biosimilar applicant as part of the "patent dance." (34) Because the biosimilars industry is still in its early stages in the United States and the contours of the BPCIA are only beginning to be defined through litigation, this is the ideal moment to give some thought to this momentous development in the medical industry.

   In the first-ever BPCIA litigation, Sandoz Inc. v. Amgen Inc., (35) Sandoz sought declaratory judgment that two patents exclusively licensed to Amgen covering Amgen's Enbrel biologic were invalid and unenforceable, and would not be infringed by a Sandoz biosimilar. (36) When it filed suit, however, Sandoz had not yet filed a biosimilar application with the FDA. (37) For this reason, the district court dismissed the case for lack of an Article III controversy (38) and the U.S. Court of Appeals for the Federal Circuit affirmed. (39)

   The next BPCIA litigation was also between Sandoz and Amgen, though the parties' roles were reversed. In Amgen Inc. v. Sandoz Inc., Amgen as plaintiff sought--ultimately unsuccessfully--to force Sandoz to comply with the disclosure provisions of the "patent dance." Specifically, when Sandoz filed its biosimilar application for Zarxio, Sandoz refused to provide Amgen with information regarding its manufacturing process. Though its biosimilar application had not yet been approved, Sandoz also purported to provide Amgen with the statutorily-required 180-day notice of commercial launch.

   In response, Amgen sought regulatory and judicial relief. Amgen filed a Citizen Petition asking the FDA to require a biosimilar applicant to certify, as part of the biosimilar application process, that it will timely disclose its application and manufacturing processes to the reference product sponsor. (40) Amgen asked the district court for a preliminary injunction barring Sandoz from marketing Zarxio pending a court ruling on whether the "patent dance" is mandatory. Notwithstanding the pending Citizen Petition, the FDA approved Zarxio as a biosimilar on March 6, 2015. (41) Less than two weeks later, on March 19, 2015, the district court denied Amgen's request for a preliminary injunction, (42) thereby opening the door for Zarxio's commercial launch. The district court held that Sandoz was not required to provide Amgen with a copy of its biosimilar...