I. Introduction
When Congress enacted the Drug Price Competition and Patent Term Restoration Act of 1984 — known universally as the Hatch-Waxman Act — it solved a problem that had frustrated generic drug manufacturers for the better part of two decades: how to permit a competitor to seek regulatory approval for a copy of a previously approved drug without infringing the patents that cover it. The solution was ingenious in its simplicity. The statute created a new form of patent infringement by filing, permitted an abbreviated application that relied on the innovator’s safety and efficacy data, established a four-category certification scheme that defined the relationship between generic approval and pending patents, and provided a 30-month stay of approval to allow patent disputes to be resolved before a generic entered the market. Over the following quarter-century, the generic drug industry grew into a substantial competitive force, and the average generic drug launched at 15 to 80 percent of the branded price.
The question that has occupied health policy analysts for much of the past two decades is whether a comparable framework could be constructed for biological products. Biologics — therapeutic proteins, monoclonal antibodies, vaccines, and blood-derived products — represent the fastest-growing segment of the pharmaceutical market and include some of the most expensive drugs ever marketed. Enbrel, Remicade, Rituxan, Herceptin, and Avastin are biologics; together, the top-selling biologics represent hundreds of billions of dollars in annual global sales. The potential savings from biosimilar competition are correspondingly large. A 2007 Federal Trade Commission report estimated that biosimilar entry could reduce prices by 10 to 30 percent, substantially less than the 80-plus percent reductions achievable with small-molecule generics, but still sufficient to produce billions of dollars in savings annually if the market developed at scale.
Congress addressed the question in 2010 when it enacted the Biologics Price Competition and Innovation Act as Title VII of the Patient Protection and Affordable Care Act. The BPCIA established an abbreviated licensure pathway for biosimilar biological products and, for the first time in United States law, a separate pathway for products meeting the higher standard of “interchangeability.” The statute also created a patent resolution mechanism that superficially resembles the Hatch-Waxman certification and litigation procedure but diverges from it in ways that reflect the structural differences between biological products and small-molecule drugs. Two years after enactment, with the FDA still working to issue implementing guidance and no biosimilar applications yet approved under the new pathway, the BPCIA’s patent provisions remain largely untested. This Note examines the statute’s framework, compares it with Hatch-Waxman, and identifies the interpretive questions that are likely to drive early litigation.
II. Biological Products and the Limits of Generic Drug Regulation
A biological product, for purposes of the Public Health Service Act, is defined as a “virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, protein (except any chemically synthesized polypeptide), or analogous product” applicable to the prevention, treatment, or cure of a disease or condition in humans. 42 U.S.C. § 262(i)(1). The definition is broad, but the characteristic that most distinguishes biologic drugs from small-molecule pharmaceuticals is not the statutory category but the manufacturing process: biologics are produced in and by living cells — bacteria, yeast, mammalian cell lines — and their structure, activity, and stability depend on the biological context in which they are made.
Small-molecule drugs are defined by their chemical structure. Aspirin is aspirin: a molecule with a fixed atomic composition and geometry that can be synthesized by any competent chemist following a published procedure. The generic version of aspirin, if there were one, would be chemically identical to the branded version, and the FDA’s bioequivalence standard for generic drug approval rests on this chemical identity. Two products that contain the same active moiety in the same form, delivered to the systemic circulation at statistically equivalent rates and extents, are bioequivalent regardless of how they were manufactured or by whom.
Biologics cannot be characterized this way. A monoclonal antibody therapeutic is a protein of approximately 150,000 daltons — roughly a thousand times larger than a typical small-molecule drug — whose biological activity depends not just on its amino acid sequence but on how that sequence is folded into a three-dimensional structure, and on post-translational modifications — glycosylation patterns, disulfide bond formation, phosphorylation — that are determined by the specific cell line used to produce it, the culture conditions, and the downstream purification process. Two manufacturers using the same amino acid sequence but different cell lines and manufacturing processes will produce proteins that are structurally similar but not chemically identical. Whether those structural differences are clinically meaningful depends on the biological activity of the specific product, the target disease, and the patient population.
The consequence for regulatory law is that the ANDA model cannot simply be transposed onto biologics. An ANDA applicant for a small-molecule generic does not conduct new clinical trials; it conducts bioequivalence studies, which are pharmacokinetic measurements requiring a fraction of the time and cost of full clinical development. A biosimilar applicant cannot demonstrate biosimilarity through pharmacokinetics alone. The FDA must evaluate “analytical studies demonstrating that the biological product is highly similar to the reference product,” “animal studies” where appropriate, and “a clinical study or studies (including the assessment of immunogenicity and pharmacokinetics or pharmacodynamics) that are sufficient to demonstrate safety, purity, and potency.” 42 U.S.C. § 262(k)(2). The result is a pathway that is abbreviated compared to a full BLA but substantially more expensive and time-consuming than ANDA approval.
III. The BPCIA Approval Framework
A. Biosimilarity
The BPCIA establishes two tiers of approval for follow-on biologics. The first tier, biosimilarity, requires the applicant to demonstrate that the proposed product is “highly similar to the reference product notwithstanding minor differences in clinically inactive components” and that “there are no clinically meaningful differences between the biological product and the reference product in terms of the safety, purity, and potency of the product.” 42 U.S.C. § 262(i)(2). The biosimilarity standard is designed to permit approval based on a showing that the proposed product performs equivalently to the reference product in clinical use, not that it is structurally identical.
The statute specifies the types of data the FDA may consider: analytical studies, animal studies, and clinical studies. The FDA has indicated that it intends to apply a “totality of the evidence” approach, under which each element of the data package is weighted in light of the overall showing. Where analytical characterization is highly advanced and demonstrates near-identical structural and functional profiles, less clinical data may be required. Where analytical methods are unable to fully characterize the product or where there are structural differences that cannot be evaluated through bench methods alone, more clinical data will be needed. The statute gives the FDA considerable discretion in this determination, and the implementing guidance that the agency has begun to develop will be critical in defining what a biosimilar data package must contain in practice.
The statute also addresses extrapolation: the FDA may approve a biosimilar for a condition of use for which the reference product is licensed even if the biosimilar applicant has not conducted clinical studies specifically in that indication, if the applicant can provide “scientific justification” for the extrapolation. 42 U.S.C. § 262(k)(4). Extrapolation is common in the EU biosimilar framework and reflects the principle that biosimilarity, once demonstrated for one indication, can be extended to others if the mechanism of action, the clinical pharmacology, and the safety profile are consistent across indications. How broadly the FDA will permit extrapolation remains to be seen; it is likely to be among the most contested issues in early biosimilar approvals.
B. Interchangeability
The BPCIA’s second tier has no analogue in the Hatch-Waxman framework. A product designated as “interchangeable” with a reference product may be substituted for that product in a dispensing transaction — the pharmacist may substitute the interchangeable biosimilar without first consulting the prescribing physician — in states whose pharmacy laws permit such substitution. 42 U.S.C. § 262(i)(3). The interchangeability designation thus has practical commercial significance beyond the biosimilarity designation: it enables the same competitive dynamic that drives generic drug substitution at the pharmacy counter, where the pharmacist’s selection among therapeutically equivalent products is the primary mechanism by which generic products gain market share.
To obtain an interchangeability designation, the applicant must demonstrate not only biosimilarity but also that the proposed product “can be expected to produce the same clinical result as the reference product in any given patient” and, for products administered more than once, that “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 switching.” 42 U.S.C. § 262(k)(4)(B). This is a demanding standard. The concern is immunogenicity: a patient who has been stabilized on a reference biologic may develop antibodies against the biosimilar if switched, or vice versa, and the clinical consequences can be severe in some indications. Demonstrating that switching does not increase immunogenicity risk requires switching studies, adding to the data package and the development cost.
The interchangeability standard is also more likely to be contested in litigation than biosimilarity. The statutory language — “in any given patient” — is more demanding than the biosimilarity standard, which permits minor differences in clinically inactive components. Whether the FDA will interpret “in any given patient” as requiring demonstration of interchangeability across all patient subgroups or merely in representative populations is an open question that the agency has not yet definitively resolved.
IV. The Twelve-Year Exclusivity Period
The most significant departure from the Hatch-Waxman model is the length of the exclusivity period granted to reference biological products. Under the Hatch-Waxman Act, a new chemical entity receives five years of data exclusivity during which no ANDA may be submitted. Under the BPCIA, a reference biological product receives twelve years of exclusivity, measured from the date of first licensure, during which no biosimilar application relying on the reference product sponsor’s data may be approved. 42 U.S.C. § 262(k)(7). A biosimilar application may be submitted after four years, but FDA approval cannot occur for twelve years. There is no period of exclusivity for the interchangeability designation itself, though the first interchangeable biosimilar approved for a given reference product receives one year of exclusivity against subsequent interchangeable biosimilars — a provision modeled loosely on the 180-day exclusivity for first-filers under Hatch-Waxman.
The twelve-year period was among the most contested provisions of the BPCIA during the legislative process. The Obama Administration proposed seven years in its healthcare reform framework, arguing that twelve years exceeded what was necessary to provide adequate investment returns and would impose unnecessary costs on patients and payers. Industry groups representing biologic manufacturers argued for fourteen or more years, pointing to the costs and risks of biologic development and the difficulty of relying on patent protection alone given the speed of patent term consumption during the approval process. The generic drug industry and consumer advocacy organizations argued that the exclusivity period should track the Hatch-Waxman model, at five years, on the ground that the additional patent protection already available to biologics provided sufficient return on investment.
The empirical basis for any of these positions is uncertain. The economics of biologic development are poorly documented in the public record, and the counterfactual question — what exclusivity period is necessary to ensure adequate investment in biologic innovation — cannot be resolved without data that pharmaceutical companies treat as proprietary. What is clear is that twelve years is substantially longer than the periods adopted by other major markets. The European Union’s reference medicinal product framework provides ten years of data exclusivity. Canada provides eight years. Japan’s biological data exclusivity period is eight years. The United States’ twelve-year period will affect the competitive position of biosimilars entering U.S. markets for years to come, and the question of whether it appropriately balances innovation incentives against access is not one the BPCIA resolves.
V. The Patent Resolution Mechanism
A. Structure of the Patent Dance
The BPCIA’s patent resolution procedure, codified at 42 U.S.C. § 262(l), is a multi-step information exchange and litigation sequencing mechanism that has no direct predecessor in pharmaceutical patent law. The procedure begins when the FDA accepts a biosimilar application for review: within twenty days, the applicant must provide the reference product sponsor with a copy of the application and all information describing the manufacturing process that is relevant to making the biosimilarity determination. 42 U.S.C. § 262(l)(2)(A). This is a substantial disclosure: a biosimilar application may contain thousands of pages of manufacturing and characterization data, the bulk of which would be a trade secret in any other context. The statute creates a limited exception to the ordinary trade secret protections to enable the patent resolution process to function.
Within sixty days of receiving the application, the reference product sponsor must identify, in a patent list provided to the biosimilar applicant, each patent it believes would be infringed by the commercial marketing of the biosimilar product. 42 U.S.C. § 262(l)(3)(A). The biosimilar applicant then has sixty days to provide a detailed statement of the factual and legal basis for its belief that each listed patent is invalid, unenforceable, or will not be infringed. 42 U.S.C. § 262(l)(3)(B). The reference product sponsor has sixty days to respond with a detailed statement supporting the validity and enforceability of each patent and the infringement position. 42 U.S.C. § 262(l)(3)(C).
Following this initial exchange, the parties enter a negotiation period to agree on which patents will be the subject of immediate infringement litigation. 42 U.S.C. § 262(l)(4). If the parties agree, the reference product sponsor has thirty days to bring suit on the agreed patents. If the parties cannot agree within fifteen days of the start of the negotiation period, each party may identify a list of patents for immediate litigation: the reference product sponsor may list up to the greater of five patents or one-half of the total patents listed in the initial exchange, and the biosimilar applicant may list any number. 42 U.S.C. § 262(l)(5). The reference product sponsor then has thirty days to bring suit on the identified patents.
Patents not selected for immediate litigation in the first round are not abandoned; the reference product sponsor may bring suit on them at any time before the date of first commercial marketing of the biosimilar, and the biosimilar applicant must provide 180 days’ notice before first commercial marketing. 42 U.S.C. § 262(l)(8)(A). This 180-day notice period creates a second window in which the reference product sponsor may seek a preliminary injunction against commercial marketing based on patents not included in the first-round litigation.
B. Comparison with Hatch-Waxman
The structural differences between the BPCIA’s patent dance and the Hatch-Waxman certification procedure are significant. Under Hatch-Waxman, the generic applicant certifies, in a formal paragraph attached to the ANDA, that each patent listed in the Orange Book for the reference listed drug is invalid, unenforceable, or will not be infringed. The certification triggers a 30-month stay of generic approval if the reference listed drug sponsor brings a timely infringement action. The entire procedure is driven by the generic applicant’s filing and requires no advance disclosure of the ANDA to the innovator; the first the innovator learns of the ANDA is when it receives notice of the paragraph IV certification.
The BPCIA reverses this structure in several important respects. The biosimilar applicant must proactively disclose its application and manufacturing information to the reference product sponsor rather than simply notifying the sponsor of a certification. The parties then engage in a formal exchange of technical positions before any litigation begins. The statute specifies in considerable detail how patents are selected for litigation, constraining the reference product sponsor’s ability to bring serial patent suits on patents not included in the initial exchange. And the 180-day notice requirement before commercial marketing has no counterpart in Hatch-Waxman, where the 30-month stay is the primary timing mechanism.
Whether the BPCIA’s more elaborate structure will prove more efficient than Hatch-Waxman in resolving patent disputes before commercial marketing begins is uncertain. The Hatch-Waxman framework has generated a substantial volume of litigation, including recurring concerns about “evergreening” — the practice of listing additional patents in the Orange Book to trigger serial 30-month stays — and reverse payment settlements that have attracted antitrust scrutiny. The BPCIA’s limits on the number of patents that can be selected for immediate litigation address the evergreening concern directly, but the two-stage structure creates its own opportunities for strategic patent timing.
C. Mandatory or Optional Participation
Among the questions the BPCIA leaves unresolved is whether participation in the patent dance is mandatory. The statute provides that the biosimilar applicant “shall provide” its application to the reference product sponsor, and that the reference product sponsor “shall provide” its patent list, and so on through the various stages. The use of mandatory language suggests that the procedure is not optional. But the statute does not specify what happens if either party fails to comply, and the legislative history provides limited guidance.
A reference product sponsor that does not receive the biosimilar application because the applicant has refused to provide it could presumably seek an order compelling compliance. Conversely, a biosimilar applicant that wants to skip the patent dance and proceed directly to the 180-day notice might argue that the mandatory language creates a procedural framework but not a jurisdictional prerequisite for patent litigation. Under this reading, the consequences of non-compliance are the elimination of the patent dance’s procedural protections but not a bar to market entry. Whether courts will accept this reading — and whether the FDA will treat participation in the patent dance as a condition of approval — is among the key questions that early BPCIA litigation will resolve.
VI. Early Implementation Challenges
At the time of this writing, the FDA has issued draft guidance documents addressing the general framework for demonstrating biosimilarity but has not yet approved a biosimilar application under the BPCIA pathway. Several applications are expected to be filed in the near term for products whose reference biologics face expiring or expired patent protection. The first applications are likely to be for relatively well-characterized biologics — filgrastim, perhaps, or some of the earlier erythropoiesis-stimulating agents — where the analytical characterization tools are most advanced and the clinical data requirements most tractable.
The EU provides an instructive model. The European Medicines Agency approved the first biosimilar in 2006 — a somatropin product — and by 2012 had approved approximately twenty biosimilar products across several therapeutic classes. The EU experience demonstrates that a biosimilar pathway can function and that biosimilar products can be approved to a standard that satisfies regulators in major markets. It also demonstrates that biosimilar price discounts are smaller than generic price discounts: EU biosimilars have typically launched at 20 to 30 percent below the reference product price, reflecting the higher cost of biosimilar development and manufacture. The BPCIA’s twelve-year exclusivity period will delay the entry of biosimilar competition into the U.S. market for many currently approved biologics, meaning that the near-term market for U.S. biosimilars will be concentrated in products whose reference biologics were approved before 2010.
The state pharmacy substitution landscape presents an additional implementation challenge. An interchangeability designation from the FDA does not automatically authorize pharmacists in every state to substitute an interchangeable biosimilar without physician consultation; state pharmacy laws govern the substitution decision, and state legislatures have been active in passing laws that impose additional notification and record-keeping requirements on biosimilar substitutions. By mid-2012, at least a dozen states had enacted or were considering biosimilar substitution statutes, most of which require pharmacists to notify prescribers within a defined period after substituting an interchangeable biosimilar. The variation among state substitution laws creates complexity for manufacturers seeking to market interchangeable biosimilars nationally and may dampen the competitive pressure that pharmacy substitution is expected to exert.
VII. Conclusion
The BPCIA’s patent resolution mechanism is more complex than Hatch-Waxman, and whether that complexity is a feature or a defect depends on which interests one is advancing. For reference product sponsors, the patent dance provides an orderly mechanism for asserting patent rights before biosimilar market entry and limits the ability of biosimilar applicants to proceed to market on 180 days’ notice without first resolving patent disputes. For biosimilar applicants, the required disclosure of application data creates risks — trade secret exposure, strategic disadvantage — that the statute attempts to address through confidentiality provisions but does not entirely eliminate. For patients and payers who stand to benefit from biosimilar competition, the twelve-year exclusivity period and the complexity of the patent dance create barriers to market entry that are higher than their Hatch-Waxman analogues.
The ultimate test of the BPCIA is whether it produces a functioning biosimilar market at a scale that meaningfully reduces the cost of biologic therapies while sustaining investment in new biologic development. That test will not be administered for years. The statute is new, the implementing guidance is incomplete, and no biosimilar has yet been approved through the BPCIA pathway. What the statute has done is create a legal architecture within which the biologic and biosimilar industries will maneuver for the foreseeable future — and the interpretive questions that architecture leaves open will, in the meantime, fill the dockets of federal district courts and the Federal Circuit.
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Frequently Asked Questions
What is the difference between a biosimilar and a generic drug?
A generic drug is chemically identical to its reference listed drug and is approved by demonstrating bioequivalence — that it delivers the same active ingredient to the bloodstream at the same rate and extent as the brand-name product. A biosimilar is not chemically identical to its reference biological product. Biologics are large, complex molecules manufactured through living cell systems, and batch-to-batch variability is inherent in the process. A biosimilar applicant must demonstrate that the proposed product is “highly similar” to the reference product notwithstanding minor differences in clinically inactive components, and that there are no clinically meaningful differences in safety, purity, and potency. The higher approval standard reflects the structural complexity of biologics and the limits of current analytical techniques for characterizing large molecules.
What is the BPCIA patent dance?
The patent dance is the colloquial name for the multi-step patent resolution procedure under 42 U.S.C. § 262(l). After the FDA accepts a biosimilar application, the applicant must share the application and manufacturing data with the reference product sponsor. The parties exchange lists of patents, provide detailed infringement and invalidity contentions, negotiate which patents to litigate immediately, and if they cannot agree, each may designate patents for a first round of litigation. A 180-day notice before commercial marketing creates a second window for patent litigation. The procedure is designed to resolve patent disputes before the biosimilar enters the market but imposes disclosure obligations on the biosimilar applicant that have no counterpart in the Hatch-Waxman ANDA framework.
Why does the BPCIA provide twelve years of exclusivity rather than five?
The twelve-year data exclusivity period reflects the substantially greater investment required to develop a biologic compared to a small-molecule drug. A biologic may require over a billion dollars and a decade of development before approval; the manufacturing process is itself a trade secret of considerable commercial value. The Obama Administration proposed seven years as sufficient; industry sought fourteen or more. Congress chose twelve years, the longest exclusivity period among major pharmaceutical markets at the time of enactment. The European Union provides ten years, Canada eight, Japan eight. Whether twelve years appropriately balances innovation incentives against patient access is an empirical question the statute does not resolve.