Why is a Pharmaceutical Company Partnering with a Native American Tribe?
The St. Regis Mohawk Tribe has acquired a major new source of revenue, and it’s not from a casino. Allergan, the company that makes the dry-eye drug Restasis, has employed a strategic maneuver to protect its $1.5 billion market by selling its Restasis patents to the Tribe.[1] Why? Allergan’s goal is to shield its patents from federal challenges through tribal sovereign immunity.
Sovereign immunity is the legal doctrine that the sovereign cannot be sued without their consent by submitting to the authority and jurisdiction of the court.[2] Indian tribes possess inherent sovereignty stemming from their sovereign status.[3] Thus, it has generally been held that these “sovereign powers … possess immunity from suit,” although only “to the extent that Congress has not abrogated that immunity and the tribe has clearly not waived its immunity.”[4]
Back up to 2011. The America Invents Act was passed, creating a streamlined procedure, known as inter partes review (IPR), for the adjudication of patent challenges by the United States Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB).[5] Streamlining this process encourages many more challenges of the validity and patentability of patents. Currently, patent holders are challenging the process, asserting that it violates the Constitution as a taking of personal property rights without a jury; the Supreme Court of the United States has agreed to hear the case, Oil States Energy Services LLC v. Greene’s Energy Group LLC.[6]
In the meantime, Allergan, like other patent holders, are using the PTAB’s tendency to favor patent challengers as the driving force behind finding creative ways to shield their patents from losing their property rights. For the first time, patent owners are essentially buying sovereign immunity from Indian tribes.[7] Allergan, whose patents for its drug Restasis were being challenged by companies hoping to manufacture generic versions, stood to lose a monopoly worth more than $1 billion. Now, their strategy is just the latest in a long line of legal tricks used by pharmaceutical companies to extend the periods of their monopolies.
In purported response to six petitions for inter partes review by Mylan Pharmaceuticals, on September 8, 2017, Allergan assigned its patents associated with Restasis to the St. Regis Mohawk Tribe.[8] Immediately after acquiring the patents, the Tribe moved to dismiss the IPRs for lack of jurisdiction based on tribal sovereign immunity.[9] In transferring its patents to the Tribe, Allergan has effectively halted review before PTAB.
What’s in it for the tribe? In the deal, the Saint Regis Tribe agreed to exclusively license the patents back to Allergan for a fee of $15 million a year, plus $13.75 million up front.[10] What do they have to do to make that money? Essentially, the Tribe does not have to do anything more than hold the papers that say they own the patents to Restasis.[11] Allergan will continue to conduct business as usual, except it will continue to pay the Tribe to hold the patents as long as long as they are valid.[12] While the price just to have the St. Regis Mohawk Tribe hold the patents on paper seems steep, with Restasis ranking in over $1 billion a year, it’s only a fraction of what Allergan stands to lose if patents on the drug are invalidated.
How will the PTAB rule on Saint Regis’ motion to dismiss the IPRs on the grounds of sovereign immunity? It is undisputable that as domestic independent nations, Indian tribes possess inherent sovereign immunity and such power may not be limited or qualified absent Congressional legislation or the tribe’s own waiver.[13] However, there are a number of people who are skeptical of tribal sovereign immunity being applied to commercial enterprises that are structured simply as shells to avoid legal consequences and that sovereign immunity should not be treated as a monetizable commodity. Alternatively, it is possible that the PTAB will grant the motion because it has dismissed IPRs against state universities on sovereign immunity grounds in prior cases.[14] At the end of the day, if this tactic is allowed, it’s a win for big brand name pharmaceutical companies who can prevent their monopolies from expiring. It’s also a win for the tribes. The losers? The everyday patients and consumers, who, without generic competition, will have to pay whatever price the companies want them to pay.
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