Friday brought news of a drug-company maneuver that I had never heard of, and didn’t even realize was possible. First, a bit of background; the stage needs to be set properly.
One of Allergan’s products is Restasis, used for dry eyes, which is an opthalmic formulation of cyclosporine. It’s a valuable part of their portfolio (net revenues of more than a billion dollars per year), but it’s under threat from a patent challenge. Mylan and Teva are both trying to force the drug off patent before its appointed time (which is about 2024). Last December, the US Patent Office granted an inter partes review of the relevant patents, a decision that did not go down well with Allergan or its investors. That form of patent review has been around since 2011 and the America Invents Act, and its purpose is specifically for prior art objections to a granted patent. I’m going to pass on offering an opinion on whether Mylan’s challenge is justified or its chances for success, noting only that getting to the IPR stage does mean that it’s a serious one.
There things stood, as of Friday. Generic challenges to lucrative patented drugs are a regular feature of life in the business, but what happened next wasn’t (or not yet). Allergan announced that they had transferred the patent rights for Restasis to the St. Regis Mohawk Indian Nation, for an up-front payment and continuing annual payments to the tribe. Why would one do such a thing? Well, it turns out that whatever patented IP owned by the tribe is protected from inter partes review challenges by their sovereign immunity. The Mohawks are, then, immediately moving to dismiss the PTO’s actions. Let me tell you, on Friday afternoon the sound of people all over the biopharma world slapping their foreheads was echoing through the boardrooms, office suites, and hallways.
Is this going to hold up? I Am Not A Patent Lawyer, in this question even more than usual, but the opinions I’ve seen so far are that yes, it very likely is. There are apparently several relevant legal precedents, and clearly both Allergan and the St. Regis Mohawk Nation have received expensive legal counsel that it’s a worthwhile effort. I’m going to assume, for the sake of argument, that they’re going to get away with this one as the law stands. So the next question is, should they? Is this a good thing or a bad one?
Awful, as far as I’m concerned. Awful on several levels. For one, this is not how the patent system (for all its flaws) is supposed to work. “The validity of your patents is subject to review, unless you pay off some Indian tribe” does not seem like a good way to run an intellectual property system. This has changed the balance of the system towards whoever has the cash to cut such a deal. At the very least, the whole Hatch-Waxman framework has probably taken a hit. Second, this absolutely cannot help but look like a slimy legal trick, an association the drug industry absolutely does not need any more of. You don’t have to go into the nuances of prior art or the inter partes review system for people to think this deal smells. That fragrance, needless to say, will not stick just to Allergan; the whole industry gets to wear it, as far as the public’s concerned. And third, God help us, this sets a precedent. When CNBC asked the tribe’s lawyer if they were open to doing more deals like this, he asked them to be sure to print his phone number. And this will no doubt engage the attention of other tribes and other lawyers, compounding the damage done in reference to those first two points.
Is there anything that can be done about this? From what I understand, the answer is “Yes, but it’s a matter for Congress”. The law can be changed, and Congress has every right to do so. But think about what Allergan has done for us: now the drug industry is in a situation where it looks bad, once again, and only thing that can be done about it is to bring Congress’ attention to drug patent law and pricing. Probably just in time for the 2018 midterm election. What a clever idea! Thanks so much.
Update: I should note that Allergan is also in Federal court in Texas, arguing that generic companies are infringing its Restasis patents. Casting the Sovereign Immunity Spell doesn’t (as I understand it) affect this, but I await clarification.