For weeks now Allergan has been hammered by a growing legion of critics in and out of Congress for its recent decision to shift control of its patents for Restasis to the Saint Regis Mohawk Tribe in an attempt to shield them from an administrative review.
But that may have been all for naught.
A federal judge in Texas today ruled that Allergan’s Restasis patents, the last line of protection from generics which aim to steal away their $1.5 billion franchise, are invalid. But the tribal rights had nothing to do with that decision. The judge centered his decision on his belief that the ideas the patents sought to protect were too obvious to protect, according to Reuters.
Allergan’s stock tanked on the news, falling 5% on the prospect that it would lose patent protection.
Mylan was gunning against Allergan’s Mohawk deal from the start, calling it a “sham” as lawmakers in the Senate and House vowed to pass new legislation that would make any such transfers illegal.
By shifting the patents to the tribe, and then essentially leasing back rights to the drug through a multimillion-dollar deal, Allergan had hoped to guard one flank exposed by inter partes reviews, or the IPR process. Allergan CEO Brent Saunders also vigorously defended the deal, which was widely criticized at a time the drug industry in general finds itself fighting back against attacks for circling the legal wagons around high-priced branded therapies.
The federal court, though, had other arguments than the Mohawk ploy to work with.
While the Mohawk deal might be moot, the judge also joined the chorus of critics who saw it as nothing but a scheme to escape IPR. In a note out from EvercoreISI’s Umer Raffat, the analyst quotes the judge:
The Court has serious concerns about the legitimacy of the tactic that Allergan and the Tribe have employed. The essence of the matter is this: Allergan purports to have sold the patents to the Tribe, but in reality it has paid the Tribe to allow Allergan to purchase—or perhaps more precisely, to rent—the Tribe’s sovereign immunity.
If that ploy succeeds, any patentee facing IPR proceedings would presumably be able to defeat. But sovereign immunity should not be treated as a monetizable commodity that can be purchased by private entities as part of a scheme to evade their legal responsibilities.
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