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Pharmaceutical Patent Litigation and the Emerging Biosimilars: A Conversation with Kevin M. Nelson, JD

February 2017 Vol 10, No 1 - Perspectives
Stanton R. Mehr
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Ongoing patent litigation and the “patent dance” in general have been thorns in the side of biosimilar drug manufacturers and payers who are anticipating lower-cost alternatives to high-cost reference biologics. Recently, American Health & Drug Benefits interviewed Kevin M. Nelson, JD, Partner at Duane Morris, and an expert in the areas of intellectual property and complex pharmaceutical patent litigation. Mr Nelson has also been very active in the biosimilar drug arena, in speaking engagements and advising pharmaceutical companies regarding 351(k) applications and litigation.

Let’s start with an important basic question: What is the distinction between regulatory and statutory exclusivity with regard to drug approval?

Mr Nelson: One term relates to exclusivity given by a regulatory body, and the other term relates to exclusivity based on congressional action; however, regulatory and statutory exclusivities are actually intended to establish the same thing—the exclusivity period given to new drugs entering the market.

The exclusivity period for biosimilars and biologics is, of course, different from the exclusivity period that is given to small-molecule drugs (ie, new-drug exclusivity is 5 years; for orphan drugs, it is 7 years). Those are regulatory exclusivity periods that can delay the filing or US Food and Drug Administration (FDA) approval of an application for a competing generic drug. For biologics, we have a statutory exclusivity period of 12 years (despite the Obama Administration’s attempts to limit this period to 7 years).

Keep in mind that in talking about exclusivity, we are not addressing the “patent wall,” which is a different type of exclusivity. All patents involve a term of exclusivity, which is derived from the US Constitution, but pharmaceutical patent laws are the only area in which the patent term can actually be extended statutorily. This compensates for the time that the medication is subjected to review by the FDA.

Different Patent Types, Different Strengths

Patents exist to protect intellectual property; however, not all patents are the same: Can you describe the different categories of patents that can apply to pharmaceutical drugs?

Mr Nelson: Sure. Although the new chemical entity or “composition of matter” patent is perhaps the best understood category, many aspects of the entire drug manufacturing process, and how the drug is used, can be patented. The greatest number of patent filings that we see today are called “method-of-use” patents. Those patents do not apply to the drug substance, or to how it provides the medicinal benefit; rather, the patent describes how a drug is used to treat a condition. That may apply to the specific indication, or it may apply to specific ways to take the drug (eg, dosing schedules) or to its pharmacokinetic properties (ie, how the drug is absorbed and eliminated).

The route of administration, including the device used to deliver the medicine, is an area that is often given little consideration in the patent due diligence searches. The device itself may be protected by a patent, in addition to the drug, and people often overlook this when developing lower-cost alternative medicines.

Think of it in this way: each drug essentially has its own “thumbprint,” which comprises the drug substance, and the way it is manufactured, delivered, and used. A thumbprint has different characteristics; drug developers will patent all of these distinguishing characteristics of the drug.

Among these different patent categories, is one type of patent stronger than the other, or less likely to be determined to be invalid by the court system?

Mr Nelson: The strongest patent will be the one that protects the molecule—the actual drug. In the case of a second- or third-generation drug category, you may ask, “Well, this drug is new, but isn’t it really a cousin of this drug, whose patent has expired?” New chemical patents are usually harder, although not impossible, to challenge.

The patents that tend to be more vulnerable are method-of-use patents, particularly when there are multiple methods involved. Generic and biosimilar applicants can often avoid infringement-of-method claims by omitting or carving out from their drug labeling indications or information that is protected by patent. By omitting such information, the applicant usually has a strong argument that it is not “inducing” infringement (ie, not teaching or encouraging doctors or patients to practice the method claimed in the patent).

Applicants, however, must be careful that such omissions don’t adversely affect the safety or efficacy of their drugs; otherwise, the applicant avoids a patent issue but runs into a regulatory problem.

A patent that protects a drug that is changing from an immediate-release formulation to a controlled- or extended-release form may also be easier to design around (ie, find a different way to create the new extended­release formulation that does not violate the patent) or find it invalid.

The “Patent Dance”: How to Stop the Music

Let’s discuss the infamous patent dance. From a 30,000-foot perspective, what is your view of the considerations surrounding the Biologics Price Competition and Innovation Act (BPCIA) and the patent dance itself?

Mr Nelson: Congress’s goal was an admirable one. Congress members wanted to improve on the Hatch-Waxman Act with regard to biologics. Legislators recognized that biologics are expensive to develop (ie, the reference drug and the biosimilar drug), but they are important drugs clinically. And although protection is necessary, healthcare cost reduction is also necessary. So legislators realized that vetting the issues before a drug reaches the market is imperative.

Some of those efforts went a bit off track, and it may be time to reevaluate them, because the BPCIA has not necessarily worked as intended. It is, however, still early in the process of biosimilar approvals, with only a handful of approvals and lawsuits existing to date. And remember that the Hatch-Waxman Act went through many changes over 30 years, to constantly improve the legislation. It has been a fairly successful effort over the past 32 years. We are seeing some hiccups early on with the BPCIA as well (see below).

The Patent Dance, Step by Step

Step 1. Within 20 days after the FDA has accepted its 351(k) application, the biosimilar drug maker must provide the sponsor of the reference drug with access to the biosimilar application and relevant manufacturing information for the proposed biologic (all information held confidentially)

Step 2. Within 60 days of receiving the materials provided by the biosimilar drug maker, the manufacturer of the reference biologic must provide to the biosimilar applicant a list of potentially infringed patents, and identify whether it would be willing to license any of these patents to the biosimilar drug maker

Step 3. Within 60 days of receiving the list of patents thought to be infringed, the biosimilar drug maker must provide the reference drug sponsor a document describing—on a claim-by-claim basis—the reasons why (factually and legally) each of these patents is invalid, not enforceable, or not infringed by their drug

Step 3A. Within these same 60 days, the manufacturer of the biosimilar agent may deliver to the sponsor of the reference drug a list of patents that the biosimilar applicant believes could be subject to a claim of patent infringement

Step 4. Within 60 days of receiving these materials, the reference drug manufacturer must provide a statement describing the basis for patent infringement for each case, as well as a reply to any statement regarding validity and enforceability raised by the biosimilar drug maker

Step 5. The 2 manufacturers then have 15 days to negotiate in good faith to reach an agreement about the list of patents, if any, that should be subject to a patent infringement action; if they reach such an agreement, then the reference drug maker must file an infringement action within 30 days for each patent on the negotiated list

Step 5A. If they do not reach an agreement, the biosimilar sponsor must notify the reference drug maker of the number of patents it will document in a second list (each will have 5 more days to exchange a list of patents that each party believes should be the subject of the infringement suit); within 30 days after this exchange, the reference drug sponsor must bring an infringement action on all the documented patents

Step 6. Regardless of the outcome or status of the litigation resulting from any of the steps above, after receiving FDA approval, the biosimilar drug manufacturer must notify the reference drug sponsor of its intent to commercialize their drug. During the next 180 days, the biosimilar drug may not be marketed or sold

Let’s talk about one of those hiccups—the requirement to notify the reference drug manufacturer of the intent to commercialize the biosimilar. What was the original intent of this 180-day notification clause?

Mr Nelson: In the Hatch-Waxman Act cases, the concern is that if during litigation the 30-month stay of approval of a generic expires, and the drug is ready for approval and launch, would everyone then have to figure out whether the patent was invalid or infringed? Are there damages due? That causes considerable stress on all sides, including the courts.

The goals of the 180-day notification period for biosimilars were to offer a provision directly in the statute that instructed everyone on how to handle potential patent infringement and to ensure that there was sufficient time to file for injunction if necessary, or to make some sort of agreement or settlement between the biosimilar and the reference drug manufacturers.

Instead, we are seeing criticism that by requiring the biosimilar applicant to wait until it is licensed (ie, approved by the FDA) before the biosimilar drug maker can provide that 180-day notice to the reference drug maker, we are essentially extending the exclusivity period by 180 days. This was not anticipated: this provision was supposed to serve as a 180-day window for the parties to resolve the patent issue before there was a chance for that drug to be available on the market.

Did the BPCIA authors think there was a downside to allowing the 180-day period to begin at the time the drug application was filed with the FDA?

Mr Nelson: When the FDA first accepts a 351(k) drug application, it simply means that the biosimilar drug maker has met some technical requirements. The FDA could say, “We need more information on your biosimilar.” For example, if the FDA requires a change of formulation parameters that were established in view of an existing patent, that could moot certain arguments in the litigation, while elevating the importance of other arguments. This changes the dynamics of the case. With a biosimilar, these changes can be significant. We may have a drug that is vastly different at the time of its approval compared with the time of its original application. It seems to me, as an outside observer, that the goal to move that notification closer to the approval time was the result of a compromise. I believe the wording was not nailed down as well as it could have been.

Do you expect that changes will be made to the notification requirement within the next 2 years?

Mr Nelson: Maybe far sooner than that. The Supreme Court is wrangling with this question right now. Whichever way the Supreme Court comes out on this issue, there will be efforts by the side who is unhappy with the outcome to have some changes made to the law in Congress. I expect we will see heavy lobbying efforts put toward it.

Taking the Leap at the Launch of Biosimilars

Let’s review a real-world situation. Celltrion and Pfizer’s Inflectra (infliximab-dyyb), a biosimilar to Johnson & Johnson’s Remicade (infliximab), was approved in early April 2016, and the 180-day notification period expired in early October 2016. Pfizer announced in October 2016 that its biosimilar would launch before the end of November 2016. Patent litigation with Johnson & Johnson is still ongoing for this drug. What is the risk for them launching before the patent determination or settlement is made?

Mr Nelson: In this case, it will become only a regular patent infringement suit. The risks are monetary damages, potential injunction, and drug recall if no injunction is being put in place in advance. Because Pfizer was aware of the patents in question, the argument can be made that it willfully infringed on the patent; in other words, the damages can be increased.

The bigger concern is more likely a drug recall than the monetary damages. With monetary damages, they can pay that out of revenues earned. In the case of a recall, however, they are disappointing their customers and potentially damaging relationships. With new biosimilars, this may not be a huge concern, but as the uptake of biosimilars starts to increase, this concern may be magnified.

How do courts determine monetary damages in these cases?

Mr Nelson: Damages are calculated based on lost profits for the patent holder or on a “reasonable” royalty. If there are no other competing drugs on the market, this is a fairly simple calculation. If there are other competing drugs on the market, even if they are not additional biosimilars, but they are in the same category, it may be very difficult to determine lost profits from the introduction of this biosimilar. However, the patent holder is still entitled to some damages.

This is where the case law has gotten really complex, because various factors may determine this reasonable royalty. So, there is no specific formula, but there is a rule of thumb.

This could get quiet dicey. In the unlikely case of the 2 other anti–tumor necrosis factor (TNF) biosimilar drugs reaching the market in 2017, there is the possibility that all 3 anti-TNF biosimilars can be under patent litigation and/or launch at risk at the same time, and their FDA indications overlap. Trying to determine what is the market share loss caused by any one of the 3 drugs would be nearly impossible.

Mr Nelson: That’s exactly right. It becomes a very costly fight.

Obviously, with the FDA’s approval of Amjevita, Amgen’s adalimumab-atto, a biosimilar to AbbVie’s Humira (adalimumab) in September 2016, many in the managed care community believe that AbbVie will successfully defend its maze of patents through at least 2022; however, a few experts believe that the maze of patents is little more than a lifecycle-extension effort. What do you think may happen with this case?

Mr Nelson: First, let me explain that my thoughts are mine alone, not those of my law firm, or of my clients.

AbbVie has done a good job of putting up a patent wall. It has expended a lot of efforts and money to erect it. However, there are also very good and creative lawyers on the other side trying to take down the wall with very strong legal precedent.

I represent some venture capital companies, and they want to predict the outcomes of these cases. The difficult part of such predictions is that we do not know which arguments will be ultimately raised by the parties (some will be put out there, and some will be pulled back); how experts will perform on the witness stand; and where the case will be heard, or which judge will eventually hear it. All these factors can make a difference in the final outcome of the case. When it gets closer to a trial, we can have a better idea of how to evaluate that. If the case goes to appeal, other issues must also be considered. It all depends on the arguments of the biosimilar drug maker and the applicant, and how they are made.

Any time the validity of a patent is litigated in a district court, however, the reference drug company has the initial advantage, because it is up to the new drug applicant to invalidate a presumed valid patent (which amounts to almost a home court advantage). That is why we are seeing an increase in the number of inter partes review petitions, and we should expect to see that increasing trend in connection with biosimilar challenges.

That is a long way of saying that it is truly hard to predict what will happen at this early stage.

How would you characterize, overall, the first attempts by drug manufacturers to bring a biosimilar through the 351(k) pathway?

Mr Nelson: We have learned some lessons, but I think there is still much more to learn. Sandoz made a very strong showing with Zarxio (filgrastim-sndz), a biosimilar to Amgen’s Neupogen (filgrastim), and made a strong case for interchangeability, even though the company didn’t request interchangeability, based on the extensive switching studies. This was probably more than most people expected for the first approved biosimilar.

Innovating how biosimilar drug makers try to get their drugs approved by the FDA could be a very risky business. Advisory committees are often expecting the comparability argument to be made in one way for instance, and they are being asked to take leaps of faith with regard to extrapolation. Are certain innovations in approaching the approval process safer than others in terms of getting a drug approved?

Mr Nelson: We have many sophisticated biosimilar companies, large and small. Much of the innovations taking place are related to the drug characterization, and the FDA has said that it wants to get to a point where the stronger characterization becomes, the fewer clinical studies it will require.

These drug companies have very sophisticated (and proprietary) characterization techniques and statistical approaches. That is where I think we will see a good deal of innovation. Initially, those will have to be backed by clinical trials for confirmation. The more drug makers can match up those data, the more clinical study confirmation requirement may be reduced, and the faster drugs will be approved and get onto the market.

Author Disclosure Statement

Mr Mehr has provided consulting services to Boehringer Ingelheim.

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