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Biologic dispute finds federal law pre-empts California state law claims
HELENA BEREZOWSKY
SALIM HASAN
Law Bulletin columnists
Published: January 17, 2018
In our prior article, “Sandoz v. Amgen: A landmark ruling, but state law claims still undecided” (Dec. 13), we discussed the recent U.S. Supreme Court decision relating to the Biologics Price Competition and Innovation Act and certain state law issues that were remanded to the U.S. Court of Appeals for the Federal Circuit. The Federal Circuit proceeded to issue its decision concerning the state law claims on Dec. 14.
Specifically, the Federal Circuit was asked to address whether California law would treat noncompliance with the act’s Section 262(l)(2)(A) as “unlawful.” The Supreme Court also asked the Federal Circuit to determine whether the act pre-empts any additional remedy available for Amgen under state law and whether Sandoz had forfeited any pre-emption defense.
Amgen had argued in its supplemental brief to the Federal Circuit that Sandoz waived its pre-emption defense; the act does not pre-empt state law remedies for failure to comply with 42 U.S.C Section 262(l)(2)(A) and failure to comply with Section 262(l)(2)(A) is both “unlawful” under California’s Unfair Competition Law and an act of conversion.
Sandoz responded in its supplemental brief that the Federal Circuit has discretion to address pre-emption now; both field and conflict pre-emption bar Amgen’s state law claims; Amgen’s state law claims fail under California law; and Amgen abandoned its conversion claim.
In its opinion, the Federal Circuit addressed the arguments concerning Sandoz’s waiver of pre-emption first. While neither the district court nor the Federal Circuit in its prior decision addressed pre-emption on the merits and, as a general rule, a federal appellate court does not consider an issue not at issue below, the Federal Circuit has discretion to decide when to deviate from this general waiver rule. Such a deviation may be justified when “the interest of substantial justice is at stake.”
In this case, the Federal Circuit considered the issue of pre-emption to be a significant question regarding the interpretation of the act. The Federal Circuit noted that even if it declined to decide pre-emption on appeal, Sandoz could raise the defense on remand before the district court because Sandoz timely raised the defense in its answer.
As such, the Federal Circuit discerned no prejudice to Amgen by resolving the pre-emption issue on remand. From the foregoing, the Federal Circuit determined that it had discretion to address pre-emption and that Sandoz had not forfeited its pre-emption defense.
In turning to whether Amgen’s state law claims were pre-empted by the act, the Federal Circuit first concluded that field pre-emption was present. As the act is such a comprehensive complex scheme of federal regulation that establishes processes both for obtaining FDA approval of “biosimilars” and for resolving patent disputes with “a full set of standards governing” the exchange of information in biosimilar patent litigation, the Federal Circuit determined it is reasonable to infer that Congress left no room for the states to supplement it.
Additionally, as the act provides the exclusive federal remedy for failure to comply with Section 262(l)(2)(A), federal law does not permit the injunctive relief or damages Amgen sought through California law.
“Permitting the state to impose its own penalties for the [alleged violation of federal law] here would conflict with the careful framework Congress adopted.”
The Federal Circuit also held that conflict pre-emption bars Amgen’s state law claims. The Federal Circuit found that Amgen’s state law claims clash with the act and the differences in remedies between the federal scheme and state law claims support concluding that those claims are pre-empted.
Compliance with the act’s “detailed regulatory regime in the shadow of 50 states’ tort regimes,” and unfair competition standards, could “dramatically increase the burdens” on biosimilar applicants beyond those contemplated by Congress in its approval of the act.
It is assumed that Congress acted intentionally when it did not provide an injunctive remedy for the breach of Section 262(l)(2)(A)’s disclosure requirements, and where, as here, “Congress made a deliberate choice not to impose certain penalties for noncompliance with federal law, state laws imposing those penalties would interfere with the careful balance struck by Congress.”
The Federal Circuit affirmed the dismissal of Amgen’s unfair competition and conversion claims and further held that Amgen’s state law claims were pre-empted on both field and conflict grounds.
As the Federal Circuit concluded that Sandoz did not waive its pre-emption defense and Amgen’s state law claims were pre-empted, the Federal Circuit did not have any need to reach the parties’ arguments relating to whether failure to comply with Section 262(l)(2)(A) is “unlawful” under California’s Unfair Competition Law or an act of conversion, if preserved by Amgen.
Helena Berezowskyj is an associate at Leydig, Voit & Mayer Ltd. who practices intellectual property law and focuses her practice primarily on patent litigation. Salim Hasan is a shareholder at Leydig, Voit & Mayer who practices entirely in the field of intellectual property law with a particular emphasis on patent litigation, patent prosecution, trade secrets and unfair competition matters.