By Jonathan D. Rockoff
Allergan PLC has taken a novel step to protect top-selling drug
Restasis from generic competition: the company has sold the drug's
patents to an Indian tribe in upstate New York to block rivals from
challenging the patents at the U.S. Patent and Trademark
Office.
The St. Regis Mohawk Tribe, which operates a casino on its
reservation near the Canadian border, asked the patent office on
Friday to drop patent challenges filed by Akorn Inc., Mylan NV and
Teva Pharmaceutical Industries Ltd. due to the tribe's special
legal status as a sovereign government, which the tribe says gives
it immunity from patent-office review.
If its moves succeed, Allergan will be able to avoid a pending
hearing before a patent-office panel on the patents for its
Restasis dry-eye drug, a key product for the company. A separate
review of the Restasis patents, by a federal court in Texas, will
continue.
"We are completely open to having these patents adjudicated in
the federal courts. But we don't think, going through that, we
should be subject to a second review" at the patent office,
Allergan CEO Brent Saunders said in an interview.
Teva said it would keep pursuing its patent challenges, while
criticizing Allergan's tactic as "new and unusual way for a company
to try to delay access to high quality and affordable generic
alternatives."
Akorn and Mylan didn't respond immediately to requests for
comment.
The agreement entitles the tribe to a $13.75 million initial
payment and $15 million in annual royalties, starting next year,
until the Restasis patents expire or are no longer valid. Allergan
retains the rest of the revenue from Restasis, Allergan's
second-biggest seller after Botox with $1.4 billion in sales last
year.
Dale White, general counsel for the 13,000-member tribe, said it
would use the proceeds to diversify revenue beyond its casino and
address "unmet needs" in areas such as housing, health care and
education.
"Even though the casino has been good for us, we can't rely on
it long term. We have to diversify," he said.
The legal maneuvering is a new twist on drug companies' longtime
fight to protect their lucrative products from lower-priced
generics, whose introduction usually cuts into and then largely
eliminates sales of the brand-name drug within months.
Allergan has been trying to shield the drug from competition on
many fronts, including from a new dry-eye drug, called Xiidra, from
rival Shire PLC. Allergan also is fending off lower-price generics,
suing potential manufacturers in the federal court in Texas for
patent infringement.
The federal court in Texas held a trial on the claims last week,
and Allergan expects a decision within the next few months,
according to Bob Bailey, the company's chief legal officer.
Allergan took out the Restasis patents in 2013 as the company
began facing generic threats. The company says the Restasis patents
don't expire until 2024, while generic rivals argue the patents
shouldn't have been granted in the first place and should be ruled
invalid.
To invalidate the patents, Akorn, Mylan and Teva asked the U.S.
Patent and Trademark Office under a process known as inter partes
review.
The IPR process was established six years ago as a quicker,
cheaper path to determine the validity of patents, compared with
the process in federal courts. But critics, including drug
companies, say it has been exploited by so-called patent trolls,
hedge funds and others.
The Supreme Court is weighing the constitutionality of the
patent-office challenge process.
Allergan still faces a potential loss in the case it initiated
in federal court. It is unclear if tribal sovereign immunity could
protect drug patents in federal court.
But patent-law experts say Allergan seems to have found a way --
under a web of court and patent-office decisions -- to at least
avoid the risk of setback at the patent office.
"Barring some radical change in the law, it looks like Allergan
just checkmated everybody," said Jacob Sherkow, an associate
professor at New York Law School's Innovation Center for Law and
Technology.
Michael Carrier, an intellectual-property specialist at Rutgers
University Law School, said such an outcome would remove a valuable
tool for keeping down drug costs. "This is an ominous development
because there will be a lot of cases, unlike this case, that will
only be challenged through IPR" because the cumbersome federal
court process may deter generic-drug makers from challenging the
patents for some expensive drugs, Mr. Carrier said.
There is precedent for sovereign immunity in patent-office
cases. In January, the Patent Trial and Appeal Board, the
patent-office panel that hears intellectual-property challenges,
dropped a case against the University of Florida citing its
sovereign immunity as a state institution.
After that ruling, Michael Shore, a lawyer at Shore Chan DePumpo
LLP in Dallas that represented the university, said the firm began
looking for an Indian tribe that was interested in taking advantage
of the "arbitrage opportunity."
After signing on the St. Regis Mohawk Tribe as a client, Mr.
Shore said, they pored over patent-office cases and identified
Allergan "as a company that looked like their needs were acute."
The tribe proposed the deal in early August and is trying to reach
more, he said.
Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com
(END) Dow Jones Newswires
September 08, 2017 16:44 ET (20:44 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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