- Allergan plc on Tuesday fired back at lawmakers who questioned the legality of the company's decision to defend patents for its blockbuster eye drug by using to its advantage the sovereignty of a Native American tribe.
- In a letter to members of the Senate Committee on the Judiciary, CEO Brent Saunders asserted the decision wasn't an "attempt to shield" patents for Restasis — as other Senators had claimed — but rather a strategy to contend with an unfair process known as inter partes review (IPR).
- Legislators established IPRs back in 2012, aiming to make it easier to challenge weak or faulty patents. Though Allergan asserts that the biopharmaceutical industry has had issues with IPRs over the past several years, many drugmakers have also used them to knock down patents for rival therapies.
When Allergan announced in early September it would sell all the Orange Book-listed patents for Restasis (cyclosporine ophthalmic emulsion) to the Saint Regis Mohawk Tribe just to turn around and exclusively license them back, it caused an industry-wide double take.
Some called it genius, others criticized it as another skeezy pharma business move. Regardless of the reaction, the deal called into question how drugmakers could circumvent the IPR process.
Though the company's stock initially surged on the news, investors since haven't been particularly fond of the move. Congress was even less amused. On September 27, for instance, Sens. Maggie Hassan, D-NH, Sherrod Brown, D-OH, Bob Casey Jr., D-PA, and Richard Blumenthal, D-CT, sent a letter to the Committee on the Judiciary lambasting Allergan and calling for investigation into its agreement with the Tribe.
"It appears that Allergan's deal with the Tribe exploits the law to thwart review of the Restasis patents, protecting Allergan's market monopoly — and its profits — at the expense of patients who need the drug," the senators wrote.
The House of Representatives' Committee on Oversight and Government Reform then followed up in an Oct. 3 letter, agreeing with most of the points their fellow legislators had pointed out and requesting the company provide details about the Tribe deal and the rationale behind it.
"The implications of Allergan's patent transfer raise questions for Congress as the exchange may impair competition across the pharmaceutical industry and ultimately dissuade companies from pursuing less-costly generic alternatives to brand drugs," committee members wrote.
Conversely, Saunders noted that previous court rulings have favored educational institutions that asserted sovereign immunity. Going one step further, the executive's key message appeared to be that such tactics wouldn't even be necessary if the IPR process worked better.
"[T]he IPR process has created a situation where patents that have already have been upheld in the federal court system can be held hostage by entities such as hedge funds with no involvement in biopharmaceutical development. These 'reverse trolls' and hedge funds seek to profit from this system by demanding financial payment from biopharmaceutical innovators in exchange for not filing IPR challenges, or shorting biopharmaceutical company stock and then filing IPR cases to bring down the stock price," Saunders wrote in his letter.
"These are blatant forms of market manipulation facilitated by the IPR process and the [Patent Trial Appeal Board] approach to patents. Allergan itself was the subject of an extortion demand from a hedge fund that threatened to file an IPR case."
While the implications of Allergan's deal aren't fully fleshed out yet, more clarity should come soon, as the Supreme Court is set to hear a case on the constitutionality of IPRs.
"Allergan urges the Judiciary Committee to review the IPR process, particularly in light of the forthcoming Supreme Court review, to rectify its infirmities and protect the innovation that is the lifeblood of the biopharmaceutical industry and the U.S. economy," Saunders wrote.