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Biologics Price Competition and Innovation Act:

Basics of the New Law and Implications for Biologics Companies

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• The BPCIA was signed into law in March 2010 as part of the Affordable Care Act.

• Establishes abbreviated FDA approval pathway and patent dispute resolution process for follow-on biologics (“FOBs”).

• Goal is similar to Hatch-Waxman: to lower prices by increasing competition and saving time and resources by relying on what is already known about a drug.

What is the new law?

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• Biologics are derived from living organisms, and are typically larger and more complex than traditional small molecule drugs.

• The Act defines “biologic” broadly as “a virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, or analogous product . . . applicable to the prevention, treatment, or cure of a disease or condition of human beings.’’

- 42 U.S.C. § 262(i).

• For new biologics, a Biological License Application (“BLA”) is filed with the FDA, which details the product’s chemistry, pharmacology, manufacturing process, and medical effects.

What is a “biologic”?

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• Biologics, especially cancer antibodies, are becoming the dominant drugs products on market.

• Recent analyses1 projects that:- 7 of the top 10 drugs in 2014 will be biologics, compared to just one in

2000.

- Biologics will account for 50% of the top 100 drugs in 2014, compared to just 11% in 2000.

- By 2014, annual sales of biologics will be $139B, nearly half as much as conventional pharmaceutical sales.

• There are several biologics on the market whose patents are set to expire in the next four years, including Epogen®, Procrit®, Rebif®, Avonex®, and Humalog®.

1 Datamonitor and EvaluatePharma, located at http://www.evaluatepharma.com/worldpreview2014.aspx

Why is the new law important?

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Why is the new law important?

Biologic class Branded biologic Patent expiration

hGH Genotropin, Humatrope Exp.

EpoetinEpogen, Procit/Eprex

Aranesp2013

Post-2017

Interferon-α

Intron ARoferon APeg Intron

Pegasys

Exp.Exp.20162017

Interferon-βBetaseron/Betaferon

AvonexRebif

Exp.20132013

TNF-α inhibitorEnbrel

RemicadeHumira

201220142016

Insulin analogues

Humalog Novolog/NovoMix

LantusLevemir

2014201420152015

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Why is the new law important?

Cumulative Biologics Off-patent

4 8 15 18 22 30 47

$96B

$111B$103B

$139B

$119B$126B

$134B

1 Datamonitor

Estimated Patent and Off-patent Biologics Market Value 2008-20141

$3 $6$15 $17

$26 $33

$63

$94$97

$96$102

$100$101

$76

0

40

80

120

160

2008 2009 2010 2011 2012 2013 2014

Annual Valueof Biologics

Marketin Billions

Patent Protected

Off-patent

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Abbreviated Biosimilar Approval Process

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There two types of follow-on biologics that qualify for an abbreviated biological license application (“ABLA”):

1. “Biosimilars”- Must be shown to have “no clinically meaningful

differences” with the reference product in terms of “safety, purity, and potency.”

- Requires analytical data, animal testing, and clinical studies, unless the FDA deems such info unnecessary.

- 42 U.S.C. § 262(b), (k)(2)(A)

Biosimilar vs. Interchangeable

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Establishing biosimilarity will not be easy:

“For some . . . products, the primary mode of action of the product is not well understood and its role in treatment was derived, in part, by trial and error. In such cases, even very extensive structural and functional comparisons between a follow-on and a comparable innovator product may not be sufficient to allow broad reliance on conclusions regarding a prior product.”

- Follow-on Protein Products: Hearing Before the House Committee on Oversight and Government Reform, 110th Cong. (Mar. 26, 2007) (statement of Janet Woodcock, Deputy Commissioner & Chief Medical Officer of the FDA).

Biosimilar vs. Interchangeable

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2. “Interchangeables”- These are biosimilars that can be “substituted for the

reference product without the intervention” of the prescribing doctor.

- Requires evidence that the biosimilar will “produce the same clinical result as the reference product in any given patient” and that it presents no additional risk if the patient is switched between products.

- 42 U.S.C. § 262(e) (k)(2)(B), (k)(4)

Biosimilar vs. Interchangeable

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Establishing interchangeability will be even harder:

“[The applicant] would have to demonstrate through additional clinical data that repeated switches from the follow-on product to the referenced product (and vice versa) would have no negative effect on the safety and/or effectiveness of the products as a result of immunogenicity. For many follow-on protein product – and in particular, the more complex proteins . . . the ability to make determinations of substitutability for follow-on protein products may be limited.”

- Janet Woodcock, et al., “The FDA's assessment of follow-on protein products: a historical perspective,” in Nature (June 2007).

Biosimilar vs. Interchangeable

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• The Act provides that the FDA may issue general or specific “guidance documents” that establish the criteria for determining biosimilarity and interchangeability.

• It may take several years for the FDA to issue guidance documents for biosimilarity and interchangeability.

• In the interim, determinations of biosimilarity and interchangeability will be case-by-case.

- 42 U.S.C. § 262(k)(8)

FDA Guidance Documents

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• 4-Year Data Exclusivity- No ABLA can be filed until four years after the reference

product BLA was approved.

• 12-Year Market Exclusivity - No ABLA can be approved until 12 years after the reference

product BLA was approved.

• 6-Month Pediatric Exclusivity- Available where RPS completes requested pediatric studies

and FDA deems the product may be beneficial in children.

- 42 U.S.C. § 262(k)(7), (m)

Reference Product Exclusivity

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• Exclusivity will not be granted for subsequent BLAs filed by the RPS for:1. A change that results in a new indication, administration route,

dosing schedule, dosage form, delivery system, delivery device, or strength; or

2. A change in the structure of the biologic that does not result in a change in safety, purity, or potency

- 42 U.S.C. § 262(k)(7)(C)

• But this leaves open the possibility of obtaining a new 12-year exclusivity period for a structurally-altered biologic with improved safety, purity, or potency.

No Exclusivity for Supplemental BLAs

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• No exclusivity for biosimilars.

• Limited exclusivity for first approved interchangeable –

FDA cannot approve subsequent interchangeable until earlier of:

- 1 year after first interchangeable product is marketed;

- 18 mos. after final court decision (or dismissal) on all patents in a suit initiated against first ABLA applicant;

- 42 mos. after first interchangeable product is approved if patent litigation still ongoing; or

- 18 mos. after approval if first ABLA applicant hasn’t been sued.-

42 U.S.C. § 262(k)(6)

Limited FOB Exclusivity

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Litigation Process:

Post-Filing

Phase 1 of Litigation

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The Act provides a step-wise procedure for identifying patents to be litigated:

1. ABLA applicant fully discloses its application to RPS;

2. Parties identify patents each believes are relevant;

3. Parties exchange detailed positions on the validity and/or infringement of the identified patents;

4. Parties “negotiate” which patents will actually be litigated;

5. Parties simultaneously exchange lists of patents designated for litigation.

- 42 U.S.C. § 262(l)(1)-(6)

Summary of Post-Filing Litigation Procedure

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• Within 20 days of FDA accepting its application for review, the ABLA applicant must provide the RPS with:1. A complete copy of the ABLA application; and

2. Information describing the process used to manufacture the biosimilar.

- 42 U.S.C. § 262(l)(2)

Para. 2 Disclosure by ABLA Applicant

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• This information is confidential, meaning that:- It is only given to designated counsel for the RPS to determine

whether a claim of infringement could be brought;- If the RPS chooses to share with the patent owner, it must

maintain the confidentiality of the information; and- Confidentiality persists until a protective order is entered.

- 42 U.S.C. § 262(l)(1)(B)-(D)

• If RPS violates this confidentiality, the court must issue an injunction.

- 42 U.S.C. § 262(l)(1)(H)

Para. 2 Disclosure is Confidential

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• Within 60 days of receiving the mandatory disclosure, the RPS must provide the ABLA applicant with:1. A list of patents it believes it could reasonably assert against

the applicant; and

2. A list of those patents on such list it would be willing to license to the applicant.

- 42 U.S.C. § 262(l)(3)(A)

Para. 3 List by RPS

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• Within 60 days of receiving RPS’s list of patents, the ABLA applicant must provide the RPS with:

1. For each patent the RPS identified, either:- A detailed, claim-by-claim invalidity, unenforceability and

infringement analysis; or- A statement that it will not market its biosimilar until after the

patent expires.

2. A response for each patent identified for possible licensing.

- 42 U.S.C. § 262(l)(3)(B)

Para. 3 Response by ABLA Applicant

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• Within 60 days of receiving ABLA applicant’s detailed claim charts, RPS must provide the applicant with:1. A detailed, claim-by-claim infringement analysis; and

2. A response to the applicant’s assertions of invalidity and/or unenforceability.

- 42 U.S.C. § 262(l)(3)(C)

Para. 3 Reply by RPS

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• Following RPS’s Reply:- Parties must negotiate in good faith which patents, if any,

listed by either party should be litigated.- Maximum 15 days of negotiations.

- 42 U.S.C. § 262(l)(4)

• If parties agree on the patents to be litigated, within 30 days of agreement RPS must sue on each such patent.

- 42 U.S.C. § 262(l)(6)(A)

Good Faith Negotiations

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• If parties cannot agree on the patents to be litigated:

- The ABLA applicant must disclose the number of patents it believes should be litigated;

- Within 5 days, the parties must simultaneously exchange a list of the patents each believes should be litigated;

- RPS cannot list more patents than the ABLA applicant, unless the applicant lists zero, in which case RPS can list 1 patent.

- 42 U.S.C. § 262(l)(5)

No Agreement – Para. 5 Lists

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• Within 30 days of the exchange of para. 5 lists, RPS must sue on each patent included on both lists.

- 42 U.S.C. § 262(l)(6)(B)

• Within 30 days of being sued, the ABLA applicant must notify the FDA of the lawsuit, which then publishes notice in the Federal Register.

- 42 U.S.C. § 262(l)(6)(C)

Notification of the Lawsuit

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• If a patent issues to, or is exclusively licensed by, RPS after the parties exchange patent lists, RPS has 30 days after such issuance or licensing to supplement its list of identified patents.

• Within 30 days of such supplementation, the ABLA applicant must supplement its invalidity, unenforceability, and non-infringement statements to reflect the newly issued or licensed patent.

- 42 U.S.C. § 262(l)(7)

Newly Issued or Licensed Patents

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Summary of Phase 1 Litigation Process

ABLA applicant provides copy of application to RPS

RPS provides ¶ 3(A) List

ABLA applicant provides ¶ 3(B) List

Negotiations regarding which patents to litigate

60 days 5 days

60 days

RPS provides ¶ 3(C) ListAfter receipt of RPS’s ¶ 3(C) List

ABLA applicant discloses no. of patents

Simultaneous exchange of ¶ 5(B) Lists

RPS files suit

15 days(no agreement)

30 days

60 days

FDA accepts ABLA application for review

20 days

RPS files suit

15 days (agreement)

RPS notifies FDA

30 days

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Litigation Process:

Pre-Launch

Phase 2 of Litigation

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• The ABLA applicant must notify RPS of impending commercial marketing at least 180 days prior to launch.

• After receiving such notice, but before launch, RPS may seek a preliminary injunction on any patent that was:

- Initially included on either party’s para. 3 patent list; and- Not included in the initial litigation.

- 42 U.S.C. § 262(l)(8)

Pre-launch Preliminary Injunction

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• Neither party can seek declaratory judgment against non-litigated patents, except that RPS can seek DJ on:

- Any relevant patent if the ABLA applicant fails to disclose its application and manufacturing process;

- Any patent included on its para. 3 list if the ABLA applicant fails to meet certain other of its statutory duties.

- 42 U.S.C. § 262(l)(9)

Applicant’s Failure to Comply—Declaratory Judgment

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• RPS’s exclusive remedy for patent infringement is limited to a reasonable royalty in cases where:

- RPS fails to timely sue on a para. 5-listed patent;

- Prior timely-filed action was dismissed without prejudice; or

- Action is “not prosecuted to judgment in good faith.”

- 35 U.S.C. § 271(e)(6)

RPS’s Failure to Comply—Reasonable Royalty

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Biosimilar Act vs. Hatch-Waxman

Provision Biosimilar Act Hatch-Waxman

Innovator exclusivity 12 years 5 years

First-filer exclusivityNone for Biosimilars;

At least 1 year for Interchangebles

6 months

“Orange Book” patent listing No Yes

Exchange of detailed litigation positions Yes No

Stay of approval pending litigation No Yes

Innovator-provided list of licensable patents Yes No

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Implications of the New Law

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Traditional Generics:• Sandoz is critical of having to share its confidential info with

competitors and will likely file full BLAs in the near future.1

• In November 2009, Teva filed a BLA for Neutroval®, a biosimilar version of Amgen’s neutrophil-stimulating Neupogen®.2 As for other biosimilars, Teva says it “will continue to evaluate what pathways we take on a protein-by-protein basis.”1

• Mylan announced in June 2009 a strategic alliance with Asian biosimilar company, Biocon, to develop biosimilars, which Mylan’s CEO called “the next great bolus of growth in the generic pharmaceutical industry.”3

1 The Pink Sheet, Sandoz Will Steer Clear of US Biosimilars Pathway, May 3, 2010.2 News Release, “Biosimilar” Neupogen Hits Approval Snag, Oct. 8, 2010.3 News Release, Biocon Announces Strategic Collaboration with Mylan to enter the Global Generic Biologics Market , June 29, 2009.

Initial Reactions from Industry

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Big Pharma:

• Merck has created a biosimilars unit and says that it “has either filed or is about to file its first biosimilar candidate”–a version of Neupogen®–“using the new regulatory pathway.”1

• Pfizer recently invested $200M in Biocon, announcing that “this collaboration supports our stated efforts to become a strong player in follow-on biologics.”2

• “Amgen believes biosimilars have a meaningful role to play in the health care system.”3

1 The Pink Sheet, Merck Prepares to Test Drive Biosimiliars Pathway in the US, July 5, 2010. 2 News Release, Biocon and Pfizer Enter Into Global Commercialization Agreement, Oct. 18, 2010. 3 News Release, Amgen To Provide Testimony At FDA Hearing On Biosimilars, Nov. 2, 2010.

Initial Reactions from Industry

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• FDA held a 2-day hearing earlier in November 2010 on the new law.

• All those who testified urged the FDA to use extreme caution

when approving biosimilars, though there was a clear divide between Big Pharma and generics:1

• Hospira and Teva favor extrapolating safety and efficacy data of a given biologic from one indication to another where there is proper scientific justification and the biologic’s mechanism of action is well understood.

• But Novo Nordisk said such extrapolation could be dangerous and that new clinical trials would be needed to judge whether a given biologic will have the same effect across different diseases and patient populations.

1 News Release, FDA Hears Comments on Biosimilar Approval Pathway, Nov. 2, 2010.

FDA Hearing on Biosimilars

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Clinical evidence required to establish biosimilarity will likely depend upon degree of similarity established:

Likely Criteria for Establishing Biosimilarity?

Preclinical and PK/PD

Biological characterization

Physicochemical characterization

Greater degree of similarity on a physicochemical and biological level should reduce the amount of clinical evidence required.

Clinical Trials

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• A threshold consideration for any biologic company is whether to seek an ABLA at all:- Given the high costs of manufacture and extensive analytical and

clinical work necessary to establish biosimilarity, an ABLA probably will not be much cheaper than a BLA.

- No “automatic substitution” for biosimilars, thus marketing costs will also be much higher than for generic pharmaceuticals.

- Physicians, payers, and patients likely to be very cautious until biosimilars have a proven track record of safety and efficacy.

- Biosimilars get no exclusivity, while a BLA gets 12 years.

- An ABLA applicant must hand over its confidential information (e.g., source material) to a competitor.

ABLA Applicant Checklist

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• Once the choice to file an ABLA is made, the applicant must prepare for litigation:

- Analyze RP patents and patent applications;- Determine which patents to litigate prior to launch;- Identify any potential design-arounds, as well as invalidity and

unenforceability arguments;- Anticipate infringement arguments; and- Consider confidentiality issues and impact of waiver.

ABLA Applicant Checklist (continued)

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• Maximize Exclusivity:

- Consider pursuing next-generation biologics or “biobetters”;

- Remember that a new 12-year exclusivity may be granted for a structurally-altered biologic with improved safety,

purity, or potency;

- Identify and pursue opportunities for pediatric extension;

- Prosecute patents in a manner that preserves patent term; and

- Seek Hatch-Waxman term extension, if applicable.

RPS Checklist

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• Prepare for Litigation:- Analyze and organize RPS-owned and in-licensed patents;- If RPS is exclusive licensee, consider notifying the patent

owner;- Consider whether any patents need remediation (i.e., reissue)

in view of recent case law (e.g., KSR, Gleave, Ariad, and Bilski);- Identify what info would be required to establish

infringement;- Anticipate invalidity and unenforceability arguments, as well

as potential design-arounds; and- Determine which patents to include on para. 3 list.

RPS Checklist (continued)

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• Biologics will become the dominant drug products on the market in the next 5-10 years.

• Biosimilars represent an important potential for cost savings, though not as much as traditional generics.

• The drawbacks of filing an ABLA – including development costs, lack of market exclusivity, and forced disclosure of confidential info – will discourage many companies from filing them.

• Biosimilar companies will face significant uncertainties in the near term as the FDA and district courts grapple with the new BPCIA law.

Closing Thoughts

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DAVID A. KELLY, ESQ.

DIR 404-888-4280TEL 404-888-4000FAX 404-602-867ddkelly@hunton.com

HUNTON & WILLIAMS LLPBANK OF AMERICA PLAZA, Suite 4100600 Peachtree Street, N.E.Atlanta, GA 30308www.hunton.com

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