The Allergan plant in Waco produces a product called Restasis that fetched the international company $1.4 billion in sales last year, behind only Botox in the pharmaceutical giant's drug portfolio.
Allergan has transferred its patents on the drug, used to treat dry eyes, to the Saint Regis Mohawk Tribe in upstate New York, according to an Allergan press release. It hopes the tribe's sovereign status will extend the company's ability to maintain its monopoly over Restasis and prevent production of cheaper generic brands.
Allergan has exclusive license in the drug's patents and will pay the tribe $13.75 million upfront, then up to $15 million annually in royalties.
"Allergan is doing all of this in order to try to escape a pending inter partes review of the Restasis patents that could potentially lead to the invalidity of those patents, which would result in Restasis rapidly becoming available in a cheaper generic form by generic drug manufacturers like Teva," Waco attorney Andy Powell wrote in an email response to questions.
The review process carried out by the U.S. Patent Trial & Appeal Board was meant to streamline the procedure for contesting patents, said Powell, a patent attorney with the Waco firm Naman, Howell, Smith & Lee. But many patent holders consider its function unfair and unnecessary because federal courts already review patent challenges, he said.
Allergan's six Restasis patents are set to expire in 2024 and are in the midst of an inter partes review.
"This is really a novel way of trying to escape this review process, which is being challenged in the U.S. Supreme Court," Powell said in an interview. "To Allergan, as well as other pharmaceutical companies and patent holders, the system is not equitable."
If Allergan is successful, other pharmaceutical manufacturers may try the same tactic, Powell said in his email.
"It is possible this strategy could be used not only with regard to inter partes review proceedings, but potentially could also be used in federal court cases where patents are challenged," he wrote. "Ultimately, Congress may be forced to intervene if this practice becomes widespread."
Some pharmaceutical companies have called the patent board the "patent death squad," and questioned its authority to take away patents without a court ruling, Powell said. Others say the companies that hold the patents "are getting what they deserve," because of the prices they charge for patented medicines.
Some investors may take advantage of the process by challenging all or most of the valuable patents in a company's portfolio, possibly driving down the company's stock price, he said. This creates a short-selling investment opportunity, "allowing investors who claim to be doing good by taking on big pharma to pocket millions."
Allergan CEO Brent Saunders told the New York Times the company made the deal with the Saint Regis Mohawk Tribe to prevent the issue from being heard in two venues, the federal courts and the Patent Trial and Appeal Board.
Allergan's chief legal officer, A. Robert D. Bailey, told the New York Times for the same article that the Supreme Court may eventually strike down the review process, but Allergan could not afford to delay action on Restasis because "It's one of our most valuable products."