Editor’s note: This post is part of a series stemming from the Fifth Annual Health Law Year in P/Review event held at Harvard Law School on Monday, January 23rd, 2017. The conference brought together leading experts to review major developments in health law over the previous year, and preview what is to come.

Believe it or not, the Patient Protection and Affordable Care Act (Obamacare, or here, ACA) has intellectual property provisions. In addition to establishing mandates, subsidies and insurance exchanges, the ACA also created a new pathway for the approval of biosimilar drugs, which are akin to generic drugs. That pathway appears in a corner of the ACA that has its own title: the Biologics Price Competition and Innovation Act (BPCIA). The BPCIA is rich with intellectual property (IP) provisions that are now the subject of litigation in the Supreme Court.

Background: Generic Drugs And Biosimilars

Many of us take generic drugs for granted, but we have them only because the Hatch-Waxman Act (1984) provided an abbreviated pathway by which FDA could approve them. Under this pathway, a generic drug could be approved based on the safety and efficacy of the branded drug, plus a showing by the generic that it was essentially identical to the branded drug. This pathway also included provisions by which generic drug manufacturers could challenge the validity of patents protecting the branded drug.

This abbreviated pathway did not apply to biologic drugs, however. Biologics are large, complex molecules that are synthesized in bioreactors filled with living cells. Biologics also have a different approval pathway from small molecule drugs: a “Biologics License Application” (BLA). Until passage of the BPCIA in 2010, however, there was no abbreviated pathway for biosimilars, which are generic equivalents of biologic drugs.

The term “biosimilar” reflects the fact that generic versions of biologics will not be precisely identical to the branded biologic – only similar – because the biosimilar manufacturer will not be using the branded company’s proprietary line of living cells or its manufacturing processes. Even slight differences in the cells or the bioreactor conditions used to produce a biologic will result in differences in the final product.

BPCIA Creates A Pathway For Approval Of Biosimilars And Adjudication Of Patent Disputes

The BPCIA creates a pathway to approve biosimilars: an “abbreviated Biologics License Application,” or aBLA. In following this pathway, a biosimilar applicant must show, among other things, that its product is “highly similar” to the branded biologic and that there are “no clinically meaningful differences between the biological product and the reference product in terms of safety, purity and potency.” The BPCIA does not permit FDA to approve any aBLA earlier than 12 years after the branded biologic is approved.

In addition to creating an approval pathway, the BPCIA also sets up a mechanism by which the branded drug company can assert its patents before market entry of the biosimilar. This mechanism differs from the comparable mechanism applicable for small-molecule drugs and was the subject of intense negotiation between branded companies, generic drug companies, research institutions, and other stakeholders. Like most heavily negotiated legislative provisions, it is extremely complex. Indeed, it is referred to in the pharmaceutical industry as the “patent dance” — and it’s closer to a tango than a two-step.

The ‘Patent Dance’ And The 180-Day Notice Provision

To kick off the patent dance, the biosimilar applicant “shall provide” the branded drug company “a copy of the [aBLA] … and such other information that describes the process or processes used to manufacture the biological product.” The disclosure is made in confidence and on a limited basis. The branded company can use the confidential information to determine which patents it may wish to assert to block the biosimilar applicant. This disclosure is followed by a complex exchange of patent information, including contentions about why the proposed biosimilar does or does not infringe the patents and contentions about the validity of the patents. Ultimately, after a negotiation process, the BPCIA provides for pre-launch litigation of a pared-down set of patents. The patent tango also has a coda: the biosimilar applicant “shall provide notice to the [branded company] not later than 180 days before the date of the first commercial marketing of the biological product licensed under [an aBLA].” Once the branded company receives this notice, it can bring a second wave of patent litigation to enforce patents not on the pared-down list and can seek a preliminary injunction to prevent the biosimilar from being marketed before the patent issues are resolved.

In a twist not anticipated by the branded drug companies, though, biosimilar applicants have taken the position that the patent dance is optional, relying on the following provision that also appears in the law: “If a [biosimilar] applicant fails to [initiate the patent dance], the [branded company] … may bring an action” to enforce its patents. The biosimilar companies reason that the BPCIA would not contain a provision outlining consequences for opting out of the patent dance if the patent dance were required. This argument struck many on the branded side as akin to an argument that compliance with criminal laws is optional because they specify consequences, such as imprisonment, for noncompliance.

The biosimilar companies had their turn at outrage when certain branded companies argued that the 180-day notice could only be provided after the biosimilar was already licensed — which could only occur 12 years after the branded drug was approved. This interpretation of the 180-notice requirement effectively extends the branded biologic’s exclusivity period by 180 days, to 12-and-a-half years — a result the biosimilar manufacturers have argued is inconsistent both with the statutory language and the legislative history.

In a controversial ruling, the Court of Appeals for the Federal Circuit, which is the appeals court for patent disputes, decided not only that the patent dance was optional, but also that the 180-day notice could only be given after the 12-year exclusivity period ended. The Supreme Court has granted certiorari to decide both of these questions this term, and we will have a definitive ruling by July.

The Importance of Trade Secrets

The case’s march to the Supreme Court leaves an important question unaddressed. Why do biosimilar manufacturers want to opt out of the patent dance, which was choreographed with their input and provides them with patent-related disclosures by the branded company? One possible explanation is that they simply do not want to disclose their manufacturing information to the branded company, even on the limited and confidential basis prescribed by the patent dance provisions of the BPCIA. If so, they exemplify an important trend: the increased reliance on trade secrets as a protection for intellectual property.

As it happens, even Congress has jumped on the trade secrets bandwagon. In a departure from the partisan gridlock that has gripped Washington for many years, Congress passed, and President Obama signed, sweeping new legislation to protect trade secrets in 2016: the Defend Trade Secrets Act. While this legislation does not address biosimilars specifically, it reflects the increasing importance of trade secrets as a bulwark to protect intellectual property. Given the turmoil now pervading the patent world—more on that turmoil appears here—it may be that companies will increasingly turn to trade secret laws when they can do so to protect inventions on valuable and confidential manufacturing processes.