Why Biosimilar Companies Should Pay More Attention To U.S. State Governments

By Nicolas Arkells, CEO, Manticore Consulting Group

This article assumes interchangeability will inevitably happen in the United States at the federal level. This inference is based on the direct efforts of FDA Commissioner Scott Gottlieb to increase access for patients to biosimilars, along with other actions by the FDA, such as writing interchangeability guidelines to facilitate approval. Additionally, U.S. courts have generally signaled a great deal of favorability towards biosimilars because of their potential to increase patient access, as judges generally see a parallel to generic drugs.^1,2,3,4 The Biologics Price Competition and Innovation Act (BPCIA) also grants the ability for biosimilars to achieve expedited approval.⁵ Further, in Sandoz v. Amgen, the Supreme Court found biosimilars would not have to wait the additional six months for commercialization.¹ Due to these trends, I believe it’s rational to infer interchangeability is inevitable at the federal level.

However, a critical mechanism in the U.S. constitutional framework is often overlooked in a larger public affairs strategy — the right of a state to govern itself in most aspects. For evidence of this subtle oversight, look no further than the emergence of the so called “blocking statutes.” These statutes may largely be a reactive measure by state governments because they may feel left out of the decision process. Effective communication is always critical to preventing or resolving conflict. I hope to convey the importance of shifting resources from the federal campaign efforts to a more local effort to ensure biosimilar success.    

Understanding The U.S. Federalist System And Misperceptions Regarding “Blocking Statutes”

Referring to state statutes addressing biosimilars as “blocking statutes” is misleading and counterproductive. This depiction creates a polarizing narrative of “state versus federal” that will not serve any stakeholder’s interests. The so-called blocking statutes are actually common practice for state legislatures when the federal government engages in a major regulatory and/or statutory shift. These statutes are simply a state’s means of rendering an interpretation of how the new federal law will operate within its legal apparatus. These statutes are most likely states proactively trying to prevent a local version of the legal nightmare the BPCIA continues to cause for the federal courts. Local laws and regulations to implement federal statutes are, in fact, commonplace throughout our healthcare system — for example, shared authority for programs like Medicare, Medicaid, etc.    

Further, it’s misleading to refer to these legislative acts as blocking statutes, as many states have statutes that expand on or are generally more favorable towards biosimilar interchangeability than originally envisioned by the federal government. The BPCIA itself is a relatively short statute nested within the Affordable Care Act, which only offers a relatively vague pathway for biosimilars, thus inevitably requiring the states to address implementation. For example, unlike the BPCIA, some states like New York require a pharmacist to dispense an interchangeable biological product if it is less expensive than a prescribed biologic.⁶ With the right engagement, states can be partners to significantly expand the scope of the BPCIA, as they have considerable interest in helping patients obtain more affordable healthcare.

Local governments also tend to consider more potential issues than Congress due to their direct proximity to stakeholders. For example, in Delaware the local legislature included a provision to protect the pharmacist from being liable for substituting a biosimilar for a biologic.⁶ Yet this is unfairly labeled by many news media as a blocking statute.⁶ Legal liability is likely a major factor governing the decision to substitute — look no further than the historical precedent of “defensive medicine.” Medical malpractice is part of tort law, and thus is an area of law almost completely controlled by the states. The federal government would have a great deal of difficulty intervening in malpractice liability, even if it wanted to, because of the U.S. federalist system and longstanding legal precedent. Ultimately, given how much of healthcare is regulated by shared state and federal authority, the states cannot be neglected as partners. This is especially important for biosimilars because most of the conditions treated by biologics are life threatening or severely debilitating!

Don’t Rely On Federal Statutes And Exclusively Lobby The Federal Government To Override State Restrictions

The approach of using federal preemption like a battering ram to override local statutes is unlikely to succeed, at least within the next decade or so. Most of what was decided in Amgen v. Sandoz focused on the patent dance, only one piece of the commercialization puzzle.¹ Further, the issue regarding whether federal statute preempted state “unfair competition” laws was not addressed by the Supreme Cour.¹ The Supreme Court wanted nothing to do with interpreting the state statute; thus, it kicked this part down (remanded) to the Ninth Circuit to decide. This is significant because the authority of the Ninth Circuit’s opinions is not binding on the whole country. The Ninth Circuit only controls eight of the 50 states. This holding was also limited in scope as to whether state unfair competition laws could intervene. It gets a bit attenuated to draw a parallel between unfair competition statutes only meant to address state commerce to the long-standing precedent of implementation statutes. To say the least, this holding isn’t likely to be strong enough to serve as a battering ram.

Further, any decent constitutional law attorney will point to the Tenth Amendment: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” This is the never-ending state versus federal government argument, which is always evolving. This type of constitutional challenge can take a very long time to resolve.

Use of the interstate commerce clause may also encounter issues as it recently experienced mixed results, especially given that the current Supreme Court composition is majority federalist (i.e., favorable to state rights). Recent examples include a federal court deciding the BPCIA could not circumvent civil procedure.⁷ Another held the contract licensing issues relating to the patents supposedly addressed in Sandoz v. Amgen would still be addressed through state law. This was decided even though patents themselves are exclusively under federal authority. Contracts licensing patents are thus still subject to local law. These contracts are incredibly significant because they are one of the only ways to profit from a patent; otherwise, a patent is itself just a right to exclude others.⁴ Further, through something known as the “Eerie Doctrine,” even when a federal court hears a case, state law and local court precedents are generally to be followed to the fullest extent possible. This is a long-standing doctrine from which courts will not deviate without risking being overturned. If there are any doubts as to local authority, look no further than “right-to-try” statutes for a prime example of how states have means to rapidly can circumvent the FDA. In the U.S., state governments literally hold the power of life and death.

Conclusion

A carefully coordinated strategy is needed to engage local political leadership and patients as both stakeholders and voters to put pressure on the local governments to adopt statutes supportive of biosimilars. This must be done by engaging the states as partners rather than exclusively relying on federal lobbying. States should not be thought of as “blocking entities” —instead they should be strategic partners that can improve and expand upon the framework set forth by the BPCIA. In the next article, I lay out a pathway with general guidelines to help move forward with local engagement, keeping in mind biosimilar success means saving lives!   

References:

1. Sandoz Inc. v. Amgen Inc., 13¹7 S. Ct. 1664, 1666, 198 L. Ed. 2d 114 (2017).
2. Amgen Inc. v. Apotex Inc., 712 F. App'x 985, 991 (Fed. Cir. 2017).
3. Amgen, Inc. v. Genentech, Inc., No. CV 17-7349-GW(AGRX), 2018 WL 718418, at *1 (C.D. Cal. Feb. 2, 2018).
4. Janssen Biotech, Inc. v. Celltrion Healthcare Co., No. 17-11008-MLW, 2017 WL 4927666, at *1 (D. Mass. Oct. 31, 2017).
5. Ventola CL. Evaluation of Biosimilars for Formulary Inclusion: Factors for Consideration by P&T Committees. Pharmacy and Therapeutics. 2015;40(10):680-689.
6. Richard Cauchi, State Laws and Legislation Related to Biologic Medications and Substitution of Biosimilars, National Conference of State Legislatures, http://www.ncsl.org/research/health/state-laws-and-legislation-related-to-biologic-medications-and-substitution-of-biosimilars.aspx, 4/10/2018, 4/4/2018.
7. Amgen Inc. v. Hospira, Inc., 866 F.3d 1355, 1360 (Fed. Cir. 2017).

About The Author:

Nicolas Arkells, JD, MBA, is the CEO at Manticore Consulting Group, a global health economics and outcomes consulting firm. He has over 15 years of leadership experience focusing on ensuring organizational commitment to statistical analysis and implementation. His law and science juris doctorate concentration in intellectual property allowed him to focus his research on biotechnology, market access, policy, regulatory strategy, and patent law. He is certified in medical devices and pharmaceuticals by the Regulatory Affairs Professionals Society, Lean Six Sigma Black Belt trained in the healthcare industry, agile certified as a PSM and PSPO, and advanced certified in global human capital through Columbia University. He has been recognized for excellence in legal research, alternative dispute resolution, and leadership. You can reach him via email or connect with him on LinkedIn.