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Article: February 2018: Life Sciences Litigation Update

February 01, 2018
Business Litigation Reports

Amgen Inc. v. Sandoz Inc., No. 2015-1499, 2017 WL 6375146 (Fed. Cir. Dec. 14, 2017). This Federal Circuit decision is a remand from the June 2017 Supreme Court decision addressing the consequences when the proposed marketer of a biosimilar refuses to engage in the statutory “patent dance”—a pre-litigation information exchange—with the marketer of the innovator or reference product. The issue presented on remand was whether the Biologics Price Competition and Innovation Act (“BPCIA”) preempted the innovator, Amgen, from asserting state law unfair competition and conversion claims against the proposed manufacturer of the biosimilar, Sandoz, under either field and/or conflict preemption grounds, when Sandoz refused to engage in the information exchange.

The BPCIA is a set of regulations that covers biological drugs. Biological drugs are generally more complicated than conventional drugs and are often made through biotechnology methods or other cutting-edge technologies. Amgen sells the biological product Neupogen® that is used to ameliorate certain side effects of chemotherapy in cancer patients. Sandoz applied for FDA clearance to market a proposed follow-on or “biosimilar” version of Neupogen®. The BPCIA creates the rules by which companies like Sandoz can make biosimilar versions of existing biological drugs. On remand, the Federal Circuit barred Amgen’s state law claims finding that “the preemption analysis here demonstrates that Amgen’s state law claims conflict with the BPCIA and intrude upon a field—biosimilar patent litigation—that Congress reserved for the federal government.” Id. at 11.

BPCIA requires biosimilar applicants to provide the maker of the reference product with confidential access to “manufacturing information pertaining to the biosimilar product” relevant to a potential claim of patent infringement. Id. at 3 (citing 42 U.S.C. § 262(l)(2)(A)). Sandoz, however, refused to provide Amgen with the information required under § 262(l)(2)(A), alleging that it was not a mandatory component. Id. In October 2014, Amgen sued Sandoz in the Northern District of California asserting, along with patent infringement, that Sandoz engaged in unfair competition and conversion under California Unfair Competition Law by failing to disclose the information required by the BPCIA. Sandoz, in turn, counterclaimed seeking a “declaratory judgment that the BPCIA permitted its actions, [and] that Amgen’s state law claims were unlawful and/or preempted.” Id. The district court dismissed Amgen’s unfair competition and conversion claims, stating that “Sandoz did not violate the BPCIA or act unlawfully.” Id. at 5. Amgen appealed the final judgment as to its “unfair competition and conversion claims and as to Sandoz’s BPCIA counterclaims.” Id. The Federal Circuit heard the appeal and affirmed the dismissal. Id. at 1. On appeal to the Supreme Court, the Court directed the Federal Circuit to decide on remand whether California law would treat noncompliance with the BPCIA as “unlawful” and if so, whether the BPCIA preempts any additional remedy available under state law for a party’s failure to comply with the BPCIA. Id. at 2.

On remand, Amgen argued that the BPCIA does not preempt state law remedies for failure to comply with § 262(l)(2)(A) and that Sandoz’s failure to comply with § 262(l)(2)(A) is both unlawful under the California Unfair Competition Law and an act of conversion. Id. at 5. Sandoz argued that principles of both “field” and “conflict” preemption bar Amgen’s state law claims. Id.

Under field preemption, “state law is pre-empted where it regulates conduct in a field that Congress intended the Federal Government to occupy exclusively.” Id. (citing English v. Gen. Elec. Co., 496 U.S. 72, 79 (1990)). Here, the Federal Circuit agreed with Sandoz that “the BPCIA preempts state law claims predicated on an applicant’s failure to comply with § 262(l)(2)(A).” Id. at 8. The court stated that “no presumption against preemption applies in this case because biosimilar patent litigation is hardly a field which the States have traditionally occupied.” Id. (citing Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341, 347 (2001)). It is well-established that Congress granted federal courts exclusive jurisdiction over patent cases, and “the FDA has exclusive authority to license biosimilars pursuant to the provisions of 42 U.S.C. § 262.” Id. The Federal Circuit also noted that field preemption exists for biosimilar patent litigation because the BPCIA is a “complex statutory scheme” that established a process of FDA approval of biosimilars and adjudication of associated patent disputes that was specifically intended to balance both “innovation and consumer interests.” Under these circumstances, the Federal Circuit held that “the federal government has fully occupied this field” so field preemption exists. Id.

Under the doctrine of conflict preemption, federal laws take precedence “where it is impossible for a private party to comply with both state and federal requirements, or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Id. (citing English, 496 U.S. at 79). Here, the Federal Circuit agreed with Sandoz that “conflict preemption also bars Amgen’s state law claims” because Amgen’s complaint sought “through state law to impose penalties on Sandoz unavailable under the BPCIA for failure to comply with § 262(l)(2)(A)’s disclosure requirements” giving rise to a “conflict in the method of enforcement” between the BPCIA and state law that creates “an obstacle to the regulatory system Congress chose.” Id. (citing Arizona v. United States, 567 U.S. at 406 (2012)). The Federal Circuit reasoned that it “must assume that that Congress acted intentionally when it did not provide an injunctive remedy for breach of § 262(l)(2)(A)’s disclosure requirements,” and “made a deliberate choice not to impose certain penalties for noncompliance with federal law” such that “state laws imposing those penalties would interfere with the careful balance struck by Congress.” Id. (citing Arizona, 567 U.S. at 405-06.) The Federal Circuit found that any state claim in conflict with those determinations would necessarily conflict with, and therefore be preempted by, the federal scheme. Id.

Based on the foregoing factors, the Federal Circuit held that Amgen’s state law claims were preempted by the BPCIA and “intrude upon a field, biosimilar patent litigation, that Congress reserved for the federal government” and were, therefore, properly dismissed. Id. at 11.