Cost-cutting generics and biosimilars stuck in legal limbo

As policymakers on the Hill place their hopes in generics and biosimilars to address the nation’s drug pricing crisis, attorneys and advocates for generic and biosimilar companies nervously await a decision in GSK v. Teva. The case could upend their ability to market for unpatented indications without infringing brand drugs’ broader portfolio of patents, thus reversing decades-old practice.

On July 13, generic and biosimilar advocates from the Association of Accessible Medicines (AAM) urged the Senate subcommittee on Competition Policy, Antitrust and Consumer Rights to take action that would protect generic and biosimilar companies’ rights under the Hatch-Waxman Amendments of 1984. That law allows these companies to bring lower-cost alternatives to market even if the brand-name drug manufacturer still holds patents on select methods of using a drug, a process commonly referred to as “skinny labeling.”

The advocates’ testimony echoed President Biden’s July 9 executive order on competition, where he championed the use of skinny labels for drugs with multiple indications. He asked Congress to protect a patent challenger’s ability to “carve out” one potential use from a thicket of patents to help that drug come to market in a timely manner.

“Such carve-outs or ‘skinny labels’ can be an effective way for generics to bypass weak or limited patents that brand-name companies may add near the end of a drug’s patent term in the hopes of holding onto its exclusive market position for all uses of a drug,” argued UC Hastings Law professors Robin Feldman and Evan Frondorf in their article published in the Harvard Review of Legislation.

However, this tool is currently under fire in the Federal Circuit in GSK v. Teva, where claimants await a potentially industry-defining decision.

How GSK v. Teva could impact generic and biosimilar competition

In October 2020, the Federal Circuit affirmed a $234 million jury ruling against Teva that said the Israeli company had “induced infringement” of GSK’s patent by saying its generic version of Coreg (carvedilol) was chemically equivalent to GSK’s drug and referencing the still-patented use in a press release. That had been enough, GSK argued, to lead doctors to prescribe their generic drug off-label for the still-patented use of treating mild-to-severe chronic heart failure hypertension (CHF).

The circuit is presently deciding whether, and how, to potentially narrow its own October 2020 decision, having agreed to rehear the case in February. If it doesn’t, some attorneys worry that just by saying a drug was “AB-rated” (meaning as safe and effective as its reference drug), a generic or biosimilar company in the market with a skinny label could be accused of inducing infringement of a still-active patent on a different indication.

The court’s original and now-vacated 2-1 decision was delivered with a blistering dissent from Chief Judge Prost — and a chorus of concern from generics stakeholders, including the co-author of the Hatch-Waxman Act, himself.

In an amicus curiae brief, former U.S. Rep. Henry Waxman said the majority’s October decision “threatens to decimate the compromise at the heart of the Hatch-Waxman Act, which in turns threatens to undermine the generic pharmaceutical industry.”

In its own brief, AAM argued the court had overstepped, saying: “If Hatch-Waxman and inducement law are to be rewritten, that is a job for Congress.

GSK disputed these concerns in its January response brief, arguing: “As long as generics fully carve out the patented use, they can continue to enjoy the carve-out statute’s protection.

The panel considered arguments on both sides and took a middle path: It agreed to rehear the narrower issue of whether Teva enticed doctors to infringe GSK’s patent during three years where GSK had re-upped its protection for the drug’s one patented indication on slightly different grounds. Oral argument took place February 23.

AAM counsel suggested to the Senate Judiciary subcommittee addressing pharmaceutical competition on July 13 that this period of indecision has created confusion and prompted further litigation.

“Indeed, at least five cases have since been filed where brand-name pharmaceutical companies have asserted patent infringement based on a carved-out label,” AAM wrote in a statement to the committee.

The court’s decision to rehear the case leaves some intellectual property attorneys cautiously optimistic that generic and biosimilar medicines will come out safe to compete on narrower indications.

“The original decision certainly had a chilling effect on the biosimilar and generic industries,” said Chad Landmon, partner at Axinn Veltrop, in a video interview.

“It’s highly unusual to have a rehearing with the same panel and have them reverse themselves and change their decision — it’s usually en banc,” he noted. “But a lot of Teva’s arguments upon rehearing were about congressional intent, and it would be helpful for the courts and Congress to be clearly aligned on this.”

The panel might be able to avoid addressing whether claiming equivalent quality to a name-brand drug that still holds any level of patent protection is sufficient evidence of generic infringement, however.

“Perhaps the court scheduled a rehearing so further argument could help the panel draft an opinion that made clear that an AB rating plus knowledge of patented activity is not enough for inducement,” Dmitry Karshtedt, a George Washington University professor, said in an email.

An even bigger deal for biosimilars

While the drug at issue in GSK v. Teva is a small-molecule medication, advocates for biosimilar companies argue it will have an even greater impact on that nascent but explosively high-growth market.

According to Quintiles, biologics sales increased by 70% in the last five years to reach $232 billion. A March IQVIA report found spending on biologically derived medicines increasing at a compound annual growth rate (CAGR) of 14.6% since 2014, notably higher than the 1.6% CAGR for small molecules. With a number of big-ticket biologic patents expiring, biosimilars could take an $80 million chunk of that growing pie over the coming five years, IQVIA reasoned. 

Biosimilars are non-branded versions of monoclonal antibodies and other large-molecule medications, which have comparable quality, safety and efficacy to a licensed biological medicine (also referred to as the “reference” medicine).

While Europe developed guidance for approval of these drugs in 2005, the United States took until 2015 to develop its own guidelines, which were last updated in November 2020. 

Though the U.S. had a slow start, IQVIA analyst Elyse Muñoz has hope for the future of biosimilar adoption in the coming years based on the current growth in biosimilar uptake, saying all evidence signifies “a healthier competitive market is on the horizon.”

However, first, a biosimilar has to receive market approval, which is a significant hurdle.

Under the Biologics Price Competition and Innovation Act (BPCIA) passed as part of the Affordable Care Act, biologics receive 12 years total of market protection per indication. This means that if a drug can treat multiple sclerosis, narcolepsy and arthritis, the patent for each of these indications gets 12 years, competition-free. If a company staggers its patents, this can result in a long tail of market exclusivity, keeping drug prices up and biosimilar competition down.

This is why AAM wrote to Congress saying that skinny labels are “even more important in the biologics context — brands frequently obtain many indications for diseases such as cancer, and a patent on any one such indication should not preclude competition on unpatented indications.”

The strategy is not without its risks, though. Because small-molecule generic drugs regulated under Hatch-Waxman are considered interchangeable with their reference products, and state substitution laws mandate their use when available, companies have little need to market them.

Biosimilars, on the other hand, will need a great deal of marketing, especially because none yet has been deemed interchangeable with its predecessor. This leaves them more at risk of a suit accusing them of inducing infringement with a skinny label, according to a number of biosimilar law experts, including Landmon.

Unlike small-molecule generics regulated under Hatch-Waxman, biosimilar drugs require marketing campaigns and physician detailing to drive adoption. These activities open a Pandora’s Box of infringement risk, according to Landmon:

“If a biosimilar company is sued for inducement of infringement on indications that are not in the biosimilar label, courts will look more broadly at the company’s statements made in marketing their products to see whether they say anything that could be considered inducement of infringement of the claimed method of use.”

Landmon reasons this issue might require a legislative fix: “Congress could expressly say that if as a biosimilar applicant, if you remove the indication and have a skinny label, you do not infringe.”

Karshtedt is less concerned about the GSK decision’s fallout on biosimilars than he is with other factors at play: the challenge in establishing clinical similarity and non-patent means of market exclusivity enjoyed by innovator biologics companies.

“But perhaps inducement of infringement could become a bigger problem depending on what claims are at stake (specific patents have to be chosen for the patent dance) and how the GSK opinion is ultimately drafted,” Karshtedt said.

A hopeful road for biosimilars?

President Biden signed two bipartisan bills to promote biosimilar use on April 23: the Ensuring Innovation Act (which aligns biosimilar law with the Hatch-Waxman act in key, pro-competitive ways) and the Advancing Education on Biosimilars Act (which promotes public knowledge about biosimilar safety and efficacy). The Ensuring Innovation Act motivates biologic companies to be highly specific in obtaining FDA exclusivity, aiming to limit market protection to truly innovative products. 

In his July 9 executive order, he called for a drug pricing report within 45 days that would delineate ways to curb high prescription drug prices in the U.S. through promoting generic and biosimilar competition, allowing Medicare to negotiate drug costs and more.

Biden ordered agencies to take swift action to support biosimilar competition. He told the FDA to fully implement agency plans issued in 2017 and 2018 to clarify the drug approval process, advised FDA to implement recent legislation to prevent brand manufacturers from limiting competitors’ access to drug samples needed to test new generic products, and pushed the FDA and Patent and Trademark Office to collaborate and prevent patent extensions designed to delay competition from generics and biosimilars.

Time will tell how much of this country’s drug pricing conundrum will be solved in the halls of Congress and what will be decided by the judicial bench. But one thing is for sure: Someone, somewhere needs to provide this industry much-needed clarity.

Photo: cagkansayin, Getty Images