California's Anticompetitive Legislation Is Scrutinized at ACI

Recent attempts at reform across the biosimilar and generic drug landscape have not had unanimous support, legal experts noted at the American Conference Institute’s 11th Summit on Biosimilars & Innovator Biologics.

Last year, for example, California, enacted Assembly Bill (AB) 824, which enabled it to evaluate “pay for delay” settlements between biosimilar developers and reference product companies and bring enforcement actions for what it perceives as anticompetitive terms.

“That legislation is doing what the Supreme Court declined to do, which is impose a presumption that an agreement that includes certain terms has an anticompetitive effect,” said ACI panelist Karin Hessler, assistant general counsel for the Association for Accessible Medicines (AAM). The AAM has filed a series of court actions designed to overturn AB 824, but has thus far been unsuccessful.

The AAM represents many large biosimilar developers and contends that California has improperly assumed the right to reject corporate settlements reached outside the state and also given itself leeway to impose excessive fines on individual companies (minimum of $20 million).

Another reason the pharmaceutical industry opposes this law is that it gives California the ability to review and evaluate all individual past settlements between drug companies, not just new settlements, said panelist David Korn, vice president of Intellectual Property and Law with the Pharmaceutical Research and Manufacturers of America.

If other states join in with regulations of their own, the operational environment for pharmaceutical companies could become far too restrictive, he said. “This should be left up to Congress, because if you have multiple state-based frameworks, it could create a patchwork [of laws] that would be harder to comply with.”

Hessler said there’s potential that patent settlements between companies will be “stifled” by this legislation. “If you have that sort of impact, then you may see generic and biosimilar companies not as frequently challenging patents, which ultimately could result in higher rather than lower drug prices,” she said.

In addition, California Governor Gavin Newsom has until the end of this month to sign or veto AB 852, a bill that would enable the state to contract for the manufacture of generic and biosimilar drugs. One of the driving thoughts behind this bill is that “there has to be a more viable pathway for producing an affordable insulin,” Hessler said.

The legal and pharmaceutical industries are watching this bill closely, the panel said.

“There are certainly provisions in the bill that talk about sales to California payers, but I think the assumption is that (drugs) would be distributed potentially nationally,” Hessler said.

Reference

Brand M, Korn D, Hessler K, Pearson M. Biosimilars state of the union: regulatory and legislative developments impacting the biopharmaceutical industry. Presented at: ACI 11th Summit on Biosimilars & Innovator Biologics; September 23, 2020.