Last year Brent Saunders, the chief executive of Allergan, told that the company on the big price increase to generate profit has gotten out of hands. He the vowed that the company would not raise the price more than 10% in a year, and described patience assistance program that would ensure no one would lack an Allergan medicine because of cost. Saunders called it a part of company’s social contract.
But eventually he showed his true colors, the company announced that the company would transfer the patent rights to its most important drug the eye remediation Restasis, to the Saint Regis Mohawk tribe. No pharmaceutical company has ever done it.
For the native American tribe, the deal will generate the nice chunk of change, 13.75$ million upfront fee and 15$ million a year in royalties for licensing Restasis to Allergan’s. In the news disclosing the deal, the tribe said its entry into patent business would help make it less dependant on its casino in New York.
For Allergan, the deal means that with the patents in the hands of a sovereign entity which is the legal status of any officially recognized Native American tribe potential generic competitors trying to overturn Restasis’s patents at the Patent Trial and Appeal Board will be stymied. Once the transfer takes place, the tribe plans to file a motion to dismiss those proceedings on the grounds that the patent office has no jurisdiction over a tribe. Assuming this is a winning argument and it will surely be contested Allergan’s Restasis monopoly, which reaps in the range of $1.5 billion a year, will continue.
The wall street journalist used to describe the deal as fair and innovative. In a fairly typical client note. Allergan insists that it isn’t completely trying to evade the effort to void its Restasis patent. According to a note sent to Allergan employees by Jag Dosanjh, the senior vice president for eye care, the company expects to win that lawsuit. It is only the proceedings in the patent office called the inter partes review that it wants to cut off. It says that having to defend the same patent in two different forums is kind of pharma jeopardy. The review process also moves faster than the court, and the bar for overturning the patent is considerably low.
This patent review process was passed by the congress in 2011, as a part of an overhaul of the U.S. patent system, precisely to do what Allergan doesn’t like: speed things up, and make it easier to overturn patents. Congress wanted to shorten a number of time companies could maintain monopoly prices on their drugs so that all Americans could reap the benefit of lower drug prices. Allergan has decided that because it doesn’t like the law it will simply evade it by using this too-clever-by-half maneuver. You can be sure that if Allergan gets away with this, every other drug company will follow its lead, and the patent review process will die.
The other reasons
The deal is offensive. The first is that Restasis was first approved by U.S.Food and Drug Administration 15 years ago. The original patent for its active ingredients was set to expire in 2014. In show transferring drug patent to a Tribe, is it right?it, the consumers would be getting profit at lower prices three years ago. Instead, allergen applied for and won a series of a patent that could extend the drug’s monopoly until 2024. It is the new patents that competitors are trying to void. I realize that every pharma company now routinely uses this tactic to hold on to their monopoly profits. And I also realize that Wall Street now demands this of pharma companies.
Finally, there’s that “social contract” Saunders likes to talk about. Piously announcing that you won’t raise your drug prices by more than 10 percent is pretty meaningless when you’re using absurd loopholes to prevent generic competition that could save the health-care system millions of dollars.