Section 351 of the PHS Act: Licensing, Biosimilars, and Exclusivity

Section 351 of the Public Health Service Act, codified at 42 U.S.C. § 262, requires every biological product to hold a federal license from the Food and Drug Administration before it can be sold across state lines.¹ The license covers both the product and the facility where it is made, and it stays valid only so long as the manufacturer continues to meet the standards the FDA approved. The same section creates an abbreviated pathway for biosimilars, sets out a mandatory process for resolving patent disputes with the reference product’s sponsor, and grants exclusivity periods that determine how soon competitors can reach the market.

What Section 351 Covers

The statute defines a biological product broadly: any virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, or protein used to prevent, treat, or cure a disease or condition in humans.¹ These products come from living sources — human tissue, animals, or microorganisms — and tend to be large, complex molecules. That complexity separates them from traditional chemical drugs, whose small, well-defined structures can be replicated exactly through synthesis. Because a biologic’s manufacturing process shapes what the finished molecule actually looks like, the FDA treats the process itself as inseparable from the product.

Every licensed biologic also receives a nonproprietary name consisting of a core name plus a hyphenated four-letter lowercase suffix. The suffix carries no meaning; it exists only to distinguish one manufacturer’s version from another.²

How a Biologic Gets Licensed

The Investigational New Drug Step

Before any biologic can be tested in a human subject, the sponsor must file an Investigational New Drug (IND) application. The FDA has 30 days to review the preclinical data and proposed trial design and to notify the sponsor whether the study is safe to proceed.³ Trials cannot begin until the IND clears.

The Biologics License Application

Once clinical trials are complete, the manufacturer files a Biologics License Application (BLA). The BLA is a large filing. It must include results from both laboratory studies and human clinical trials, a full description of manufacturing methods, stability data covering the product’s shelf life, representative samples, test results from submitted lots, and proposed labeling.⁴ The FDA does not consider a BLA officially filed until every required piece has been received.

The agency evaluates the application against three statutory standards. Safety means the product is relatively free from harmful effects when used as directed. Purity means the finished product is relatively free from contaminants. Potency means the product can produce its intended therapeutic result, confirmed through lab testing or clinical data.¹ All three must be satisfied before a license issues.

Facility Standards and Manufacturing Changes

A biologics license covers both the product and the plant that produces it. The FDA will not approve a BLA unless the manufacturing facility meets the standards designed to keep the finished biologic safe, pure, and potent.¹ Those standards are codified as Current Good Manufacturing Practice regulations, setting minimum requirements for processing methods, facility conditions, and quality controls. Before a license issues, the FDA conducts a pre-licensure inspection of the operating facility, and it continues periodic inspections afterward.⁵ Any deviation from CGMP or from established specifications that could affect safety, purity, or potency must be reported.

Manufacturers cannot freely change their production process after licensure. Major changes with substantial potential to affect product quality require a Prior Approval Supplement, which the FDA must approve before any product made using the new process ships.⁶ Changes that trigger prior approval include adding or removing manufacturing steps, switching to a different type of bioreactor, changing the source of starting materials, creating a new master cell bank, and modifying virus removal methods. Even changes to release specifications or container closure systems can require it.

Ongoing Obligations After a License Issues

Adverse Event Reporting

A licensed manufacturer that learns of a serious and unexpected adverse reaction — whether the report comes from the United States or abroad — must notify the FDA within 15 calendar days of first receiving the information. Follow-up reports covering new details are due within another 15 calendar days.⁷ Third parties who receive adverse event information about a licensed biologic must forward it to the manufacturer within five calendar days.

Recalls and Revocation

If the FDA determines that a particular batch or lot poses an imminent or substantial hazard to public health, the Secretary of Health and Human Services can order an immediate recall.¹

A license can also be revoked. A manufacturer may voluntarily surrender its license by notifying the FDA that it is stopping production. Involuntary revocation requires notice and an opportunity for a hearing. Grounds include blocking FDA inspectors from accessing the facility, failing to report required manufacturing changes, falling out of compliance with the approved license, and distributing a product that is no longer safe and effective for its intended uses.⁸

Criminal Penalties

Violating the biologics licensing requirements carries criminal exposure. A first offense can result in up to one year of imprisonment, a fine of up to $1,000, or both. A repeat violation, or a first violation committed with intent to defraud, raises the maximum to three years of imprisonment and a $10,000 fine. Knowingly adulterating a drug in a way that creates a reasonable probability of serious harm or death carries up to 20 years in prison and a fine of up to $1,000,000.⁹

The Biosimilar Pathway Under Section 351(k)

The Biologics Price Competition and Innovation Act added subsection (k), which creates an abbreviated licensure route. Instead of running the full clinical program required for a new BLA, a biosimilar applicant shows that its product is highly similar to an already-licensed reference product, with no clinically meaningful differences in safety, purity, or potency despite minor differences in inactive components.¹⁰ The applicant still submits analytical, animal, and clinical data, but the scope is far narrower than proving a new biologic from scratch. Since the BPCIA took effect, the FDA has approved more than 80 biosimilars covering 20 different reference products.

Interchangeable Products

An interchangeable biologic meets a higher bar. Beyond biosimilarity, the applicant must show that the product can be expected to produce the same clinical result as the reference product in any given patient. For products administered more than once, the applicant must also show that switching back and forth between the biosimilar and the reference product carries no greater risk, either in safety or reduced effectiveness, than staying on the reference product.¹⁰ The practical effect is that a pharmacist can substitute an interchangeable product for the reference product without asking the prescriber. Most states still require notification after the switch, with deadlines ranging from 24 hours to 10 business days.

Patent Resolution Under Section 351(l)

Section 351(l) sets out a mandatory process, sometimes called the patent dance, for resolving patent disputes between a biosimilar applicant and the reference product sponsor. Within 20 days of the FDA accepting the biosimilar application, the applicant must provide the sponsor with a copy of the application and information describing how the biosimilar is manufactured. The sponsor then has 60 days to identify patents it believes could be infringed and which of those it would license. The applicant has another 60 days to explain, claim by claim, why each listed patent is invalid, unenforceable, or would not be infringed. The two sides then negotiate which patents to litigate immediately and which to defer to a later phase.¹

Before commercial launch, the applicant must give the sponsor at least 180 days’ notice. That notice triggers the sponsor’s right to seek a preliminary injunction on any patents held back from the first litigation phase. Information exchanged during the process is confidential, restricted to outside counsel and a single in-house attorney who does not work on patent prosecution.¹

Exclusivity Periods

Section 351 protects reference product sponsors for a defined window. No biosimilar application can be submitted until four years after the reference product was first licensed, and the FDA cannot approve a biosimilar until 12 years after that original licensure date.¹ That 12-year window is substantially longer than the five-year exclusivity period for most new small-molecule drugs.

The first biosimilar to earn an interchangeable designation for a given reference product also gets its own exclusivity. No second interchangeable product for the same reference biologic can be approved until the earliest of: one year after the first interchangeable product begins commercial sales, 18 months after final resolution of patent litigation against the first interchangeable applicant, or 42 months after approval if litigation is still pending.¹

Reference product sponsors can also earn an additional six months of exclusivity by conducting pediatric studies at the FDA’s request.¹¹

The March 2020 Protein Product Transition

When the BPCIA passed in 2010, certain protein products, most notably insulin and human growth hormone, were still regulated as drugs under the Federal Food, Drug, and Cosmetic Act rather than as biologics under Section 351. The BPCIA set a transition date. On March 23, 2020, approved applications for those products were automatically deemed to be biologics licenses under Section 351.¹² A 2019 amendment broadened the transition further by removing the statutory exception for chemically synthesized polypeptides from the definition of “protein.” Follow-on versions of these transitioned products must now go through the biosimilar pathway under Section 351(k), not the generic drug pathway, which changes both the timeline and the cost of bringing a competing version to market.

1
Office of the Law Revision Counsel. 42 USC 262 – Regulation of Biological Products
2
Food and Drug Administration. Nonproprietary Naming of Biological Products Guidance for Industry
3
Food and Drug Administration. Investigational New Drug Applications (INDs) for CBER-Regulated Products
4
eCFR. 21 CFR 601.2 – Applications for Biologics Licenses; Procedures for Filing
5
eCFR. 21 CFR Part 600 – Biological Products: General
6
Food and Drug Administration. Chemistry, Manufacturing, and Controls Changes to an Approved Application: Certain Biological Products
7
eCFR. 21 CFR Part 600, Subpart D – Reporting of Adverse Experiences
8
eCFR. 21 CFR 601.5 – Revocation of License
9
Office of the Law Revision Counsel. 21 USC 333 – Penalties
10
Food and Drug Administration. Questions and Answers on Biosimilar Development and the BPCI Act
11
Office of the Law Revision Counsel. 21 USC 355a – Pediatric Studies of Drugs
12
Food and Drug Administration. List of Approved NDAs for Biological Products That Were Deemed to Be a License