Top Ten Key Issues Concerning “Biosimilars”November 30, 2009
The principal federal health reform bills currently being considered by Congress — H.R. 3962, the "Affordable Health Care for America Act," which was passed on November 7, 2009, by the House of Representatives, and S. 3590,[i] the "Patient Protection and Affordable Care Act," which was introduced on November 18, 2009, for consideration by the Senate[ii] — propose to create a pathway by which the Food and Drug Administration ("FDA") would approve biologics that are "biosimilar" to previously approved biologics. Based on our comparison of these bills, it appears that a consensus has emerged as to the likely mechanics of that pathway, in the event that health reform legislation is enacted.
Described below are 10 key issues concerning "biosimilars" that should be of interest to stakeholders in the biologics industry at this critical juncture. (For more detailed information about each of these key issues, please see the companion Epstein Becker Green Client Alert entitled "The Proposed Approval Pathway for 'Biosimilars' and its Potential Implications for Various Stakeholders.") Epstein Becker Green will provide additional information about these issues as further developments warrant.
1. The proposed approval pathway introduces two new clinical concepts: 'biosimilarity' and "interchangeability.' Both proposed bills would allow for the licensure of biologics that are "biosimilar" to "reference products" approved under the existing Biologics License Application ("BLA") pathway. The provisions in each bill concerning the approval pathway are nearly identical.
'Biosimilar' defined. The FDA would evaluate the information contained in an application for such a product to determine whether the subject product is "biosimilar" to the reference product identified therein. The subject product would be "biosimilar" if it "is highly similar to the reference product notwithstanding minor differences in clinically inactive components" and "there are no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency of the product." Such a determination by the FDA would substitute for a demonstration of the subject product's efficacy, which would have been established by the reference product.
'Interchangeable' defined. A biosimilar application could include, at the election of the sponsor, information that the FDA would evaluate to determine whether the subject product is "interchangeable" with the reference product. The subject product would be "interchangeable" if it "can be expected to produce the same clinical result as the reference product" and, "for a biological product that is administered more than once to an individual, the risk in terms of safety or diminished efficacy of alternating or switching between use of the biological product and the reference product is not greater than the risk of using the reference product without such alternation or switch."
Biotechnology companies should begin familiarizing themselves with the concepts of "biosimilarity" and "interchangeability" and should monitor the FDA's activities regarding the development of guidance documents that flesh out the meaning of these concepts, in general terms and with respect to specific product classes.
2. The bills propose to classify protein-based products as 'biological products.' Both bills would revise the definition of "biological product" to include non-chemically synthesized proteins. (Historically, some protein-based products have been approved as "drugs.") Accordingly, applications for all products within this revised definition would be evaluated by the FDA's Center for Biologics Evaluation and Research, unless such a product is in a class that includes a product already approved as a "drug" by the FDA's Center for Drug Evaluation and Research. (In such a case, the product presumably also would be subject to approval through the pathway for drugs.) However, both bills include a provision that would convert all approved drug applications for products that fall within the definition of "biological product" (as revised) to BLAs 10 years after enactment.
Biotechnology companies that manufacturer protein-based products currently regulated as "drugs" should begin considering the potential impact of this jurisdictional transfer.
3. The bills would subject applications for biosimilars to user fees. Both bills would subject biosimilar application sponsors to user fees already charged to sponsors of New Drug Applications ("NDAs") and BLAs. However, the Senate bill also would require the FDA to collect information and, if appropriate, to conform those fees to the costs of reviewing biosimilar applications.
Given that Abbreviated New Drug Applications ("ANDAs") currently are not subject to user fees, generic drug companies considering entering the biosimilars market should acquaint themselves with the FDA's processes and guidance regarding user fees.
4. The proposed bills would grant exclusivity periods to reference products and to first-to-be-approved interchangeable biologics. Both bills would prohibit the FDA from approving a biosimilar application until 12 years after the date on which the reference product identified therein was approved, and the FDA could not accept such an application for review during the first four of those 12 years.
Both bills also would grant a period of exclusivity to the first biosimilar that the FDA determines is also interchangeable with the reference product. The FDA would be prohibited from determining that a second product is interchangeable with the same reference product until the earliest of four dates tied to the approval or launch of the first interchangeable biosimilar or to the resolution of patent infringement litigation involving the first interchangeable biosimilar. (Presumably, the FDA would not be prohibited from approving the second product's application on the basis of established biosimilarity.)
Biotechnology companies should consider how the various potential exclusivity periods for reference products and interchangeable biologics intersect with one another and with the patent infringement litigation process discussed below. These issues may affect strategies for developing and submitting applications for interchangeable biosimilars.
5. In addition to approval requirements and reference product exclusivity, market entrance of biosimilars would be influenced by patent protections. Because of the unique composition of biological and biosimilar products, innovative strategies may be available to biotechnology companies that wish to protect their intellectual property. For example, a biological product, unlike a chemical compound, could be protected by a patent on a specific gene, amino acid, or protein sequence or by pathway and method of treatment patents. Conceivably, such patent terms could extend years beyond the 12-year exclusivity period that would be granted to reference products under both bills.
In addition, biologics are eligible under the Hatch-Waxman Act for patent term restoration, which may restore up to five years to the term of an unexpired patent. However, the restoration cannot result in a patent term that exceeds 14 years from the date on which the product's application was approved. Therefore, it appears that any resulting restored patent term would exceed the 12-year exclusivity period that would be granted to reference products under both bills by only two years.
Biotechnology companies should consider the benefits of various patent drafting and restoration strategies when seeking the best protection for their biologics.
6. The proposed bills would establish a biologics-specific process for patent infringement litigation. Both bills would establish an intricate process for conducting patent infringement litigation involving biosimilars. This process would differ significantly from the process governing litigation between NDA and ANDA sponsors. Most notably, whereas NDA sponsors are required to list all patents related to the subject drug with the FDA for publication in the Orange Book, reference product BLA sponsors would not have a similar requirement. Instead, a biosimilar application sponsor would provide a copy of its application to in-house and outside counsel designated by the sponsor of the reference product BLA, provided those attorneys have no role in prosecuting patents related to the reference product. The parties then would engage in a series of information exchanges designed to identify those patents that may be infringed by the biosimilar and that subsequently would be the subject of patent infringement litigation.
Given the novelty and complexity of the proposed litigation process, biotechnology companies should prepare to familiarize themselves with its intricacies, as failure to adhere to the process could result in statutorily imposed disadvantages.
7. The 12-year exclusivity period proposed for reference product biologics could result in an increased scrutiny for anticompetitive activities. In contrast to the approach taken in the proposed bills, the Federal Trade Commission ("FTC") has taken the position that creating an abbreviated approval pathway for biosimilars that does not include a long exclusivity period for reference products could increase competition without stifling innovation. In a June 2009 report, the FTC interprets market data to suggest that competition between a biosimilar and its reference product would more closely resemble "brand-to-brand" rather than "brand-to-generic" competition. Accordingly, the FTC argues that traditional methods of competition, such as market pricing and patent protection, would be sufficient to protect reference products upon entry of biosimilars. Therefore, in the FTC's view, a long exclusivity period for reference products, such as the 12-year period proposed in both bills, is unnecessary and could result in anticompetitive effects.
Given the tenor of the June 2009 report, biotechnology companies should be prepared for continued scrutiny of allegedly anticompetitive activities, including pay-for-delay settlements of patent infringement litigation (discussed below), the misuse of the FDA citizen petition process to delay entry of biosimilars, and an anticompetitive market concentration through mergers or acquisitions involving competing biologics.
8. Antitrust authorities likely would scrutinize 'pay-for-delay' settlements involving biosimilars, as they do those involving generic drugs. Currently, the FTC and U.S. Department of Justice ("DOJ") strongly oppose "pay-for-delay" settlements in the pharmaceutical industry, arguing that reverse payments from patent holders to generic drug companies to settle patent infringement disputes can constitute anticompetitive conduct if those settlements delay the entry of generics into the market.[iii] This strong opposition suggests that similar settlements involving biosimilars also would be subject to FTC and DOJ scrutiny.
Moreover, H.R. 3962 actually would facilitate review of potentially anticompetitive agreements involving biosimilars. H.R. 3962 would require agreements "regarding the manufacture, marketing, or sale of" biosimilar or reference products, or agreements "contingent upon, provid[ing] a contingent condition for, or otherwise relat[ing] to" such agreements, to be filed with the Assistant Attorney General and the FTC. Although this legislation would not presume that pay-for-delay settlements involving biosimilars generate unlawful anticompetitive effects, policy concerns similar to those in the pharmaceutical market may exist.
Biotechnology companies should anticipate antitrust authorities scrutinizing pay-for-delay settlements involving biosimilars, especially if health reform legislation establishes a requirement to submit such settlements to those authorities.
9. Under the proposed bills, Medicare Part B would provide incentives to physicians to prescribe biosimilars. Both bills include provisions relating to the reimbursement of biosimilars under Medicare Part B, which covers certain drugs and biologics, including those administered by physicians in an outpatient setting. Under S. 3590, the reimbursement amount for any biosimilar product would be calculated such that, assuming that prices for reference products were higher than those of corresponding biosimilars, physicians would have an incentive to administer biosimilars instead of reference products.
In contrast, H.R. 3962 distinguishes between interchangeable and non-interchangeable biosimilars. Whereas a non-interchangeable biosimilar would be reimbursed just as any biosimilar would be under S. 3590, the reimbursement amount for an interchangeable biosimilar under H.R. 3962 would be calculated such that the "administration" portion would be the same for either type of biosimilar (and equal to that of the reference product), but the "ingredient" portion for an interchangeable biosimilar likely would be higher than for a non-interchangeable biosimilar.
Because enhanced reimbursement for interchangeable biosimilars is one of the few areas of disagreement between the two bills, biotechnology companies should monitor the outcome of the legislative process to determine whether any legislation ultimately enacted provides for enhanced reimbursement for interchangeable biosimilars, compared to other biosimilars.
10. Treatment of biosimilars in the managed care settings also may have a significant impact on utilization patterns. Notwithstanding the FTC's conclusion that competition between a biosimilar and its reference product would more closely resemble "brand-to-brand" competition, it is not currently clear how interchangeable and non-interchangeable biosimilars would be treated under "generic substitution" requirements imposed by health plans and governed by state pharmacy laws. For example, would health plans utilize their formularies or implement other utilization management techniques to encourage the dispensing of all biosimilars or only interchangeable biosimilars (to the extent otherwise permitted by law)? Generally, when the first generic version of a prescription drug enters the market, the innovator drug may be excluded from coverage under a pharmaceutical benefit entirely. This may not be the case, however, for reference biologics or, at least, for reference biologics with no interchangeable alternative.
Given the uncertain treatment of biosimilars in the managed care setting, biotechnology companies should review their contracting strategies and consider how those strategies may be affected under various potential outcomes.
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This "Life Sciences Top Ten" was authored by Alaap B. Shah, Benjamin S. Martin, and Lee H. Rosebush. The authors thank the following additional Epstein Becker Green attorneys for their contributions: Constance A. Wilkinson, Patricia M. Wagner, and Kathleen A. Peterson. For additional information about the issues discussed in this "Life Science Top Ten," please contact one of the authors or contributors or the Epstein Becker Green attorney who regularly handles your legal matters.
[i] The actual number of the bill pending in the Senate is H.R. 3590. Our understanding is that the Senate health reform legislation was added to an uncontroversial bill — H.R. 3590, the "Service Members Home Ownership Tax Act of 2009" — which was previously passed by the House of Representative as part of a parliamentary strategy to bring the legislation to the Senate floor. To avoid confusion, we refer to the Senate bill as "S. 3590."
[ii] S. 3590 was synthesized from S. 1796, America's Healthy Future Act, which was approved by the Senate Finance Committee on October 13, 2009, and S. 1679, the Affordable Health Choices Act, which was approved by the Senate Health, Education, Labor, and Pensions Committee on July 15, 2009. The provisions in S. 3590 relating to the approval pathway for biosimilars originated in S. 1679, and the provisions relating to reimbursement for biosimilars under Medicare Part B originated in S. 1796.
[iii] In a recent speech, Jon Leibowitz, Chairman of the FTC, advocated for "reverse payment reform," noting that eliminating reverse payments was one of the FTC's "highest priorities" because doing so could save consumers $35 billion over the next 10 years. In July 2009, the DOJ argued in its supporting brief in In re Ciprofloxacin Hydrochloride Antitrust Litigation (on appeal to the U.S. Court of Appeals for the Second Circuit) that pay-for-delay settlements should be treated as presumptively unlawful.