IP: Obamacare’s constitutional impact on patents

A variety of patent issues arise from the act’s Biologics Price Competition and Innovation Act

Enactment of the Patient Protection and Affordable Care Act (commonly known as the PPACA or Obamacare) resulted in barrage of media coverage that has endured as the law nears its 2014 implementation date. An important aspect of the PPACA that is rarely discussed, however, is the impact this law will most certainly have on patents and the concomitant, but unintended consequences that will invariably follow. In particular, patent issues arise from a portion of the PPACA known as the Biologics Price Competition and Innovation Act (BPCIA). Under the BPCIA, applicants can file a biologics license application (BLA), commonly known as a biosimilars application,  under 351(k) of the Public Health Service Act. The BPCIA creates an abbreviated licensure pathway for biological products shown to be biosimilar to or interchangeable with an FDA-licensed reference product. In essence, this pathway creates a more efficient route for cheaper drugs to enter the market. Certain entities, however, believe that this abbreviated licensure pathway tramples not only their intellectual property rights, but also their constitutional rights.

The consequences of the BPCIA came to the forefront when at least one company challenged the biosimilars approval process. On April 2, 2012, Abbott Laboratories filed a citizen petition asking the Food and Drug Administration (FDA) not to accept biosimilars applications referencing BLA 125057, for its multibillion-dollar drug Humira (adalimumab), or any other BLA submitted to the FDA before March 23, 2010. The basis for that petition rests on the Fifth Amendment. Essentially, the petition asserts that accepting a biosimilars application referencing a pre-enactment BLA constitutes a taking in violation of the Fifth Amendment. 

Opponents of Abbott’s citizen petition maintain that Abbott has not met the criteria for establishing a regulatory taking under Supreme Court jurisprudence. Opponents further argue that Congress intended for biosimilars applications to reference BLAs submitted to the FDA before and after March 23, 2010. 

This article discusses the positions taken both in favor of and against Abbott’s citizen petition.

Citizen petition

Any person or entity may file a citizen petition with the FDA requesting the agency to take or refrain from taking any administrative action, including refusing to accept and/or approve a biosimilars application. With the burgeoning industry of follow-on biologics, innovators can now be expected to strategically file citizen petitions to impede or delay approval of biosimilars in the same way they have done to combat generic entry into the pharmaceutical market. 

Abbott’s position

The crux of Abbott’s citizen petition is this: The Fifth Amendment prohibits the government from taking private property without providing compensation. Abbott and other reference product sponsors have invested substantial time and money in seeking licenses to market their products. An innovator’s license application contains data and information that qualify as trade secrets. These trade secrets are the private property of the reference product sponsors and therefore are protected by the Fifth Amendment. When the FDA approves a biosimilars product on the grounds that the reference product has been shown safe, pure and potent, it uses these trade secrets. Because Abbott submitted its license application before the passage of the BPCIA, it had no notice that the FDA would use Abbott’s trade secrets in support of approving a competitor’s product. It follows that the FDA’s use of these trade secrets to support approving biosimilars would “frustrate these sponsors’ investment-backed expectations regarding their property and would constitute a taking under the Fifth Amendment to the U.S. Constitution that requires just compensation.” Thus, according to Abbott, the FDA should apply the BPCIA to permit reviewing and approving biosimilars applications that cite only reference products whose 351(a) BLAs were submitted after the BPCIA’s enactment.

Opposing position

In comments and letters submitted to the FDA in response to Abbott’s petition, opponents argue that the FDA should deny the petition for at least these reasons:

  • The FDA would not use trade secrets in reviewing biosimilars applications.

In its comments submitted to the FDA, the Generic Pharmaceutical Association pointed out that a biosimilars application can only include, and the FDA would only consider, the applicant’s own confidential data and public information about the reference product. The BPCIA “clearly envisions that no confidential data is to be used in FDA’s consideration of, or a company’s application for, a biosimilar.”  

  • Even if the FDA did use Abbott’s trade secrets, such use does not constitute a taking under the Supreme Court’s takings jurisprudence.

To support its position, Abbott must prove it had a reasonable investment-backed expectation that the FDA would never rely on the public fact of approval at the time such approval was sought. Here, according to opponents of Abbott’s petition, the Public Health Service Act and the Food, Drug and Cosmetic Act, both of which were used to approve biologics before the enactment of the BPCIA, never included such a guarantee.

  • Abbott’s petition is premature because the economic effects of the purported taking cannot be determined as no biosimilars application has been filed yet. 

The Supreme Court has emphasized that the regulatory takings inquiry “necessarily entails complex factual assessments of the purposes and economic effects of government actions.” In light of this reasoning, challengers of Abbott’s petition insist that it is premature and hypothetical. Whether Abbott can claim a compensable taking, and what the appropriate compensation is, if anything, requires scrutinizing many complex facts and circumstances surrounding Abbott’s claim. Yet, before a single biosimilars application has even been filed, Abbott would have the FDA suspend operation of the BPCIA’s biosimilars program altogether on the grounds that any FDA use of confidential BLA data in connection with a biosimilars application, on its face, constitutes a taking.

  • Congress intended for BPCIA to apply to reference sponsors’ applications submitted before and after passage of the PPACA.

In an April 20, 2012, letter to FDA Commissioner Dr. Margaret Hamburg, Rep. Anna Eshoo, D-Calif., provided a quick response to Abbott’s citizen petition. Eshoo, along with Rep. Jan Inslee, D-Wash., and Rep. Joe Barton, R-Texas, was one of the principal authors of the BPCIA. In her letter, she noted that the BPCIA’s biosimilars regulatory pathway “balance[s] the need for patient access with incentives for innovation ... by establishing 12 years of data exclusivity for innovator products.” The letter points out, however, that “the BPCIA clearly states that this period of exclusivity applies to all biologics and the expiration clock is retroactive” (emphasis added). She stated that it was congressional intent for the new pathway to apply to BLAs submitted before and after the passage of the the PPACA, and that Congress “specifically designed the legislation this way in order to allow for immediate and/or impending use of biosimilars by patients at a lower cost and to capture the large savings which could be gained from top-selling biologics losing their exclusivity around time of passage.”

Conclusion

On October 1, 2012, the FDA notified Abbott’s counsel that it has thus far been unable to reach a decision on Abbott’s petition “because it raises complex issues requiring extensive review and analysis by Agency officials.” According to the Generic Pharmaceutical Association, if the FDA grants the petition, it would suspend for at least a decade Congress’ express goal of increasing competition in the biologics market. Of course, from Abbott’s perspective, a granted petition would result in a substantial windfall because it would ensure that the FDA could never approve a biosimilar for Humira. Now the FDA must decide whether this is the result Congress intended when it drafted the BPCIA. 

Contributing Author

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Philip Y. Kouyoumdjian

Philip Y. Kouyoumdjian is a Member of Cozen O’Connor’s Intellectual Property Practice Group. He litigates patent infringement cases across a range of technologies on behalf...

Additional Contributors: Richard T. Ruzich

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