Among Increasing Outcries for Justice, Pharma Giant Allergan Remains Firm in its Decision to Ignite Change to the IPR System

Among Increasing Outcries for Justice, Pharma Giant Allergan Remains Firm in its Decision to Ignite Change to the IPR System

Is a pharmaceutical company that is transferring its patents on a drug to a Native American tribe with sovereign immunity unjust or exceptionally strategic?

On September 8, Allergan announced that the Saint Regis Mohawk Tribe will now own all patents for its drug, Restasis.^[1] Allergan’s Restasis, a drug used to treat dry-eyes,^[2] was first approved by the U.S. Food and Drug Administration 15 years ago and its original patent was set to expire in 2014.^[3] However, Allergan won a new series of patents that could potentially extend until 2024.^[4] Currently, competitors are trying to void these new patents, but Allergan may have found a way to get around this.

In 2011, The America Invents Act was passed, and since its enactment, it has become faster and easier for patent challengers to bring inter partes review (IPR) actions before the United States Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB).^[5] In an IPR, a third party can challenge the validity of an existing patent before a PTAB.^[6] In other words, the process to invalidate patents is now cheaper and much quicker than challenges in federal district court.^[7]

Allergan, on the other hand, has seemed to find a loophole in this painstaking process. Allergan decided to transfer its six patents associated with Restasis to the Saint Regis Mohawk Tribe.^[8] In return, the tribe will exclusively license the patent back to Allergan.^[9] Allergan paid the tribe $13.75 million dollars for this deal, plus it will continue to pay an additional $15 million a year in royalties for licensing Restasis to them.^[10] Essentially, the tribe just has a hold of the patents on paper, but Allergan still has authority over the production and activity of the Restasis, exactly how it has before this transference.^[11]

Why, might you ask, is Allergan doing all of this? For Allergan, this deal means that its patents are owned by a sovereign entity^[12] and therefore, potential generic competitors trying to overturn Restasis’s patents at the PTAB will be blocked from doing so.^[13] After this deal is complete, the tribe will file a motion to dismiss those proceedings for the reason that the patent office has no jurisdiction over a tribe.^[14] Ultimately, the tribe can protect the patents from validity challenges by claiming sovereign immunity.

Although it has yet to be confirmed whether this deal will in fact be successful, it seems likely. Earlier this year, in a case involving patents held by the University of Florida,^[15] the PTAB already ruled that assertions of sovereign immunity can block IPRs.^[16] This precedent will be hard to reverse without Congress passing legislation.^[17] Regardless, even if Allergan is victorious, a favorable precedent would only protect the company from IPR challenges.^[18] Patent challenges in the federal court system would not be affected by this maneuver.^[19]

In the past few weeks, four U.S. Senators have criticized Allergan’s patent deal by suggesting that Allergan can maintain a monopoly over the price of its drug if IPR proceedings are dismissed.^[20] The arrangement would close down one route used by generic drug makers — which are trying to launch cheaper copycat versions of Restasis — to invalidate Allergan’s patents.^[21] The Senators described Allergan’s deal with the Saint Regis Mohawk Tribe as an “anti-competitive attempt” to protect its patents from review and also keep drug prices high.^[22] As of October 5th, a fifth Senator, Senator Claire McCaskill, D-Mo., has drafted a bill stating that tribal sovereign immunity cannot be used to block the PTAB review of a patent.^[23] She has called for an investigation into this “brazen loophole” that she insists should be illegal.^[24]

In defense of its actions, Allergan’s CEO, Brent Saunders, claims that Allergan is not trying to artificially extend these patents, but instead is just trying to protect its property against a system that exposes it to double jeopardy.^[25] The argument is that the IPR system creates an unnecessary and unfair burden because it opens up patents to “inconsistently adjudicated challenges” before both the federal courts and the PTAB.^[26] Saunders has asked a Senate committee to review the IPR process, which he believes has created negative consequences.^[27]

So, is this patent transfer blatantly unjust or a strategic plan to circumvent a flawed and/or unconstitutional IPR system?

For now, it makes sense that everyone, Senators included, take a step back. Instead of assuming Allergan’s motives are self-serving, the focus should be centered on the IPR system. The United States Supreme Court granted certiorari in Oil States Energy Services, LLC vs. Greene’s Energy Group, LLC^[28] to be heard during this October term.^[29] The specific issue presented in this case is whether IPR violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.^[30] If the IPR system is deemed unconstitutional, Allergan’s actions might be considered strategic since it effectively avoided an ineffective system. If deemed constitutional, Senators will then have the opportunity to draft bills and call for investigations to ensure that the pharmaceutical companies will follow ethical and proper protocol in regard to their consumers. In a nutshell, there is no need for continuing accusations. Perhaps the best course of action: Let’s just wait and see.