'; Biologic dispute finds federal law pre-empts California state law claims

Biologic dispute finds federal law pre-empts California state law claims

January 4, 2018 Chicago Daily Law Bulletin

In our prior column, Sandoz v. Amgen: A landmark ruling, but state law claims still undecided,” dated December 13, 2017, we discussed the recent U.S. Supreme Court decision relating to the Biologics Price Competition and Innovation Act (BPCIA) and certain state law issues which were remanded to the Court of Appeals for the Federal Circuit. The Federal Circuit proceeded to issue its decision concerning the state law claims on December 14, 2017. Specifically, the Federal Circuit was asked to address whether California law would treat noncompliance with § 262(l)(2)(A) of the BPCIA as “unlawful.” The Supreme Court also asked the Federal Circuit to determine whether the BPCIA preempts any additional remedy available for Amgen under state law and whether Sandoz had forfeited any preemption defense.

Amgen had argued in its supplemental brief to the Federal Circuit that Sandoz waived its preemption defense; the BPCIA does not preempt state law remedies for failure to comply with 42 U.S.C § 262(l)(2)(A); and failure to comply with § 262(l)(2)(A) is both “unlawful” under California’s Unfair Competition Law (“UCL”) and an act of conversion. Sandoz responded in its supplemental brief that the Federal Circuit has discretion to address preemption now; both field and conflict preemption 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 preemption first. While neither the district court nor the Federal Circuit in its prior decision addressed preemption 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 preemption to be a significant question regarding the interpretation of the BPCIA. The Federal Circuit noted that even if it declined to decide preemption 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 preemption issue on remand. From the foregoing, the Federal Circuit determined that it had discretion to address preemption and that Sandoz had not forfeited its preemption defense.

In turning to whether Amgen’s state law claims were preempted by the BPCIA, the Federal Circuit first concluded that field preemption was present. As the BPCIA 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 BPCIA provides the exclusive federal remedy for failure to comply with § 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 preemption bars Amgen’s state law claims. The Federal Circuit held that Amgen’s state law claims “clash” with the BPCIA, and the differences in remedies between the federal scheme and state law claims support concluding that those claims are preempted. Compliance with the BPCIA’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 enacting the BPCIA. It is assumed that Congress acted intentionally when it did not provide an injunctive remedy for the breach of § 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 preempted on both field and conflict grounds. As the Federal Circuit concluded that Sandoz did not waive its preemption defense and Amgen’s state law claims were preempted, the Federal Circuit did not have any need to reach the parties’ arguments relating to whether failure to comply with § 262(l)(2)(A) is “unlawful” under the UCL or an act of conversion, if preserved by Amgen.