Federal judges ban Allergan’s sovereign immunity scheme in a slapdown that will bolster inter partes review for years to come
Allergan execs had thought they had found a clever way to dodge the threat of inter partes review of the patents for their big blockbuster Restasis. In the end, they $AGN paid a pretty price to bolster IPR, shutting and locking the door to the path they took — all while stewing in some intense public indignation over the effort.
A federal appeals court published their ruling Friday, concluding that the legal argument adopted by Allergan and its allies at the St Regis Mohawk tribe that the tribe’s sovereign immunity protected it from IPR didn’t apply here. Rather than a private dispute, the three-judge court concluded, IPR was more of an “agency enforcement action than a civil suit brought by a private party, and we conclude that tribal immunity is not implicated.”
The lengthy ruling spelled out in exacting detail all the earlier legal decisions that influenced their decision, reviewed Mylan’s assertion that the tribe was simply renting out their immunity, and reached a simple bottom line that may as well be written in neon: No pharma company can skirt IPR through the tribal sovereign immunity scheme.
It was unlikely anybody else would give it a try, though.
The moment Allergan CEO Brent Saunders stepped forward as the company’s champion for this, complaining of the double jeopardy presented by IPR on top of a conventional patent challenge after paying the tribe $13.5 million to take the Restasis patents — and then essentially leasing them back for $15 million a year — they guaranteed themselves a prolonged public beating.
It had every element of a clever lawyer’s trick aimed solely at guarding the franchise’s $1.5 billion in annual revenue. Saunders’ decision to act as the company’s chief spokesperson, talking up their role in funneling badly needed cash to a poor Indian tribe, was a disastrous PR move. And it was all so obvious. The fact that the Mohawk tribe operates a gambling casino in upstate New York simply offered a bit of color no writer could ignore.
It all smelled of cynicism and greed — exactly what the industry needs to avoid as it confronts a direct challenge over pricing power. If the industry wants to justify relatively high prices for new drugs, then the leaders have to show that they can relinquish their aging blockbusters in favor of cheap knockoffs. Here, we get another example of wanting it both ways.
Allergan has now been handed repeated slap downs over this issue, along with the prospect of lengthy and costly litigation. The Patent Trial and Appeal Board shrugged off the tribal claims last February. US District Judge William Bryson said last fall he had some major concerns about the whole thing. Four giant US retailers sued Allergan in May, claiming the company’s “anticompetitive” legal strategy had prevented generic competition for the past 4 years already. And Senator Claire McCaskill, a Democrat from Missouri, joined Republicans in branding it all as a sham attempt to exploit a legal loophole.
Allergan representatives aren’t commenting on the ruling, preferring too late to stay mum about what they call continuing litigation. But this fight is over, and Allergan lost. Generic competition is likely to eviscerate the franchise in a matter of months.
Biopharma companies that market branded drugs hate IPR. But they can thank Allergan for clarifying its legal foundation in a way that guarantees the review process will remain a powerful weapon in the hands of generics companies.