Allergen is using an unprecedented tactic to protect its valuable patents, including the ones for its more than $4 billion-grossing Botox, the popular wrinkle-erasing injectable. The clever legal move that is being employed by the Irish-domiciled pharmaceutical giant that is the business of developing, manufacturing, and marketing brand name drugs and medical devices has been angering lawyers and politicians, alike, and keeping the price of its sweeping roster of medicines high.
An existing debate over patents and the rights of indigenous peoples, one that has focused on the ethics of the exploitation of indigenous traditional knowledge, has taken a bizarre new twist in recent months. It started when Allergan transferred the ownership of the patents for one of its most valuable medicines – Restasis, a treatment for chronic dry eyes that had $1.5 billion in sales in 2016, alone – to the Saint Regis Mohawk Tribe of New York State. Shortly after the formal assignment of rights, the pharma giant revealed plans to lease back the rights to the drug from the Saint Regis Mohawk Tribe.
The debate over patents and the rights of indigenous peoples has taken a bizarre new twist in recent months. It started when Allergan transferred the ownership of the patents for one of its most valuable medicines – Restasis, a treatment for chronic dry eyes that had $1.5 billion in sales in 2016, alone – to the Saint Regis Mohawk Tribe of New York State. Shortly after the formal assignment of rights, the pharma giant revealed plans to lease back the rights to the drug from the Saint Regis Mohawk Tribe.
While this may seem like a case of the pharmaceutical industry seeking to right historical wrongs by giving something back to an indigenous group that has long suffered from discrimination and dispossession, it is anything but that. In reality, it is a sly maneuver by a leader in big pharma to protect its valuable intellectual property rights.
So, how did the deal come about? Well, U.S. law grants Native American tribes “sovereign immunity” in relation to their reservations, shielding them from some U.S. federal laws. Since 2012, there has also been a system of challenging patents at the U.S. Patent and Trademarks Office (“USPTO”), a process known as “Inter-partes Review” (“IPR”). IPR proceedings enable companies (oftentimes, a patent holder’s competitors) to initiate legal action on the basis that a granted patent should to be invalidated because it actually fails to meet the prerequisites for patentability, namely, it is not novel, useful, or non-obvious. The IPR process – which was enacted on September 16, 2012 as part of the America Invents Act, and applies to any patent issued before, on, or after that date – is quicker and more cost-effective than challenging a patent in court.
With such an accessible and relatively less expensive system in mind, and given the high stakes nature of the pharmaceutical industry, the IPR process has been used to invalidate many pharmaceutical patents. By transferring their patents to the Saint Regis Mohawk Tribe and leasing them back from for an annual fee of up to $15 million, Allergan is effectively paying the tribe to take advantage of its sovereign immunity, which also shields the patents from IPR challenges. As for the Saint Regis Mohawk Tribe, it is quoted in the relevant Allergan press release, saying that it views the deal as a way to benefit from the patent system, and asserting that it would use the money for good causes in the community.
If this unprecedented legal strategy succeeds, it could prolong Allergan’s limited patent-created monopoly on its various drugs.
Unsurprisingly, there has been a great deal of opposition to this tactic. Shortly after the deal was announced in September 2017, several U.S. senators asked the senate judiciary committee to investigate Allergan’s alleged “anti-competitive attempt to shield its patents from review and keep drug prices high.” All the while, there is also an ongoing court challenge that may yet lead to a ruling that this strategy is an abuse of the sovereign immunity process. Yet if the Allergan-Saint Regis agreement survives legal challenge it will encourage further deals between U.S. Native American tribes and pharmaceutical companies.
There’s no doubt that Allergan’s ownership move is an ingenious one. Yet, even if we consider it a good thing that the tribe has found a new source of revenue, the deal should give us all pause for thought. In addition to the competition concerns, this tactic arguably subverts the protection given to Native American tribes under U.S. law, in part to account for their historical dispossession. In other words, it uses the tribe’s status to boost corporate power and control of patented medicines.
It also, of course, does nothing to help other indigenous groups around the world, particularly those in developing countries, all while turning the classic debate over patents and indigenous peoples on its head in something of a previously unimaginable way.
UPDATED (April 15, 2019): The U.S. Supreme Court has sided against Allergen in connection with its scheme to shield patents from IPR by transferring them to a Native American tribe. The nation’s highest court “left in place a lower court ruling upholding the authority of a U.S. Patent and Trademark Office tribunal to decide the validity of patents covering Allergan’s dry eye drug Restasis, refusing to hear the company’s appeal,” Reuters reports. “Allergan had argued that the tribe’s sovereign status under federal law made the patents immune from administrative review by the agency.”
The USPTO’s Patent Trial and Appeal Board has previously rejected Allergan’s maneuver, determining that tribal sovereign immunity does not apply to its patent review proceedings. The U.S. Court of Appeals for the Federal Circuit, which specializes in patent law, affirmed that decision five months later, promoting Allergan to seek Supreme Court intervention.
Luke McDonagh is a Senior Lecturer in Law at City University of London. (Edits/additions courtesy of TFL)