Eyes on Senate Bill to Nip Allergan’s Tribal Immunity Tactic

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By Greg Langlois

Critics of Allergan Plc’s controversial “renting” of tribal sovereign immunity to avoid administrative review of patents covering its Restasis dry eye drug agree Congress shouldn’t wait for the courts to address it.

The Patent Trial and Appeal Board (PTAB) ruled last month Indian tribes may not invoke sovereign immunity to shield themselves from patent preview proceedings known as inter partes review. Supporters of a Senate bill that would thwart what Allergan did—transfer patents to a tribe to avoid an IPR challenge—say Congress is right to act now and not wait for an appeal to run its course.

“Allergan’s abuse of the patent system in a really unique and first-of-its-kind deal warrants congressional oversight and action,” Association for Accessible Medicines (AAS) Vice President of Federal Affairs Erik Komendant told Bloomberg Law in an interview. “The decision by the company to appeal the recent PTAB decision justifies that continued oversight and a legislative solution because there is going to continue to be an attempt to delay generic competition.”

Spiking ‘Sham’ Transactions

Sen. Tom Cotton (R-Ark.), Sen. Claire McCaskill (D-Mo.), and three other Republican senators introduced a bill March 7 that would prevent patent holders from invoking tribal sovereign immunity to avoid PTAB-related proceedings, including IPR proceedings and PTAB decision appeals. The bill (S. 2514), called the Preserving Access to Cost Effective Drugs (PACED) Act, received support from a number of groups, including AAS, which represents generic drugmakers.

“What is occurring unfortunately is Allergan is attempting to circumvent the IPR review process and that is done with strictly one purpose, and that is to delay competition,” Komendant said. The bill was referred to the Senate Judiciary Committee.

Allergan caused an uproar last fall when, just before oral arguments in a PTAB challenge to four of its Restasis patents, it transferred them to the Saint Regis Mohawk Tribe in upstate New York. The tribe in turn moved to terminate the proceedings, citing its sovereign immunity. The PTAB rejected that argument in a Feb. 23 ruling, which Allergan and the tribe have appealed.

"[T]his bill came to fruition because Big Pharma continues to exploit a broken system for their financial gain,” Cathryn Donaldson, America’s Health Insurance Plans director of communications and public affairs, told Bloomberg Law in an email. "[T]ransferring a drug patent to an American Indian tribe to maintain a monopoly just demonstrates the lengths to which Big Pharma will go in order to prop up drug prices. These transactions are a sham and can be devastating to the patients who need these medications most.”

Restasis (cyclosporine) generated $1.4 billion in U.S. sales in 2016, according to Allergan’s latest annual report.

“We were outraged” when Allergan announced its move, Patients for Affordable Drugs President David Mitchell told Bloomberg Law in an interview.

“You have these men running this company who are figuring out how to defeat our laws. That’s what they’re doing,” Mitchell said. “They are figuring out a way to defeat our patent system and celebrating their brilliance at doing so. This isn’t a game. These actions hurt patients.”

Allergan declined to comment. The Saint Regis Mohawk Tribe didn’t immediately respond to a Bloomberg Law request for comment.

Issue Off the Courts’ Docket?

Even though the district court and PTAB decisions are “positive developments” from the AAS’s viewpoint, Allergan and the tribe’s appeals are “extending the legal process, if nothing else, just to delay further competition,” Komendant said.

“The legal proceedings take time to review and administer and for a decision to be made,” Komendant said. “We expect this legal review to continue through 2019 and possibly into 2020,” depending on whether an appeal reaches the Supreme Court, he said.

Separately, a Texas district court judge held the Restasis patents invalid. By doing so, the judge didn’t need to address the sovereign immunity issue but nonetheless “excoriated Allergan” in his ruling, calling it a “rental of sovereign immunity,” Affordable Drugs’ Mitchell said.

“We do not have resolution of this issue, and I believe that Congress should act to make it clear to everybody involved that this is not acceptable behavior,” Mitchell said.

But a pharmaceutical industry group said multiple patent review venues—in the courts and with the PTAB—is unfair and requires reform.

“The current IPR process requires our members to defend patents in multiple venues under different standards,” Pharmaceutical Research and Manufacturers of America senior manager of public affairs Nicole Longo told Bloomberg Law in an email. “This creates significant business uncertainty for biopharmaceutical companies that rely on predictable intellectual property protection to justify long-term investments needed to discover new treatments and cures.”

The group also said the Hatch-Waxman Act framework governing generic drug approval “should be the sole framework for resolving applicable patent disputes concerning generic medicines” and that it “will defend that framework against assertions of tribal sovereign immunity, should any such assertions arise.”

Will It Pass?

“I think it’s very likely” the bill will pass, McDonnell Boehnen Hulbert & Berghoff LLP partner Kevin Noonan told Bloomberg Law in an interview.

“[T]he folks in Congress who are going to do the populist line about drug prices, they’re going to be all for it,” he said. “And I think those that would be less likely to do that have the excuse, the political cover if you will, to be able to say ‘Well this is misuse, this is shenanigans, this is a sham.’”

Although patent transfer arrangements like the one between Allergan and the Saint Regis Mohawk Tribe can help financially struggling tribes, “even those people who would take the position that as a disadvantaged minority they deserve some protection, at the end of the day, who wins? Allergan,” Noonan said.

“At the end of the day, a big pharma company gets more money for their drug, and so it’s not a very comfortable place for anybody to be against this bill politically,” he said.

To contact the reporter on this story: Greg Langlois in Washington at glanglois@bloomberglaw.com

To contact the editor responsible for this story: Randy Kubetin at rkubetin@bloomberglaw.com

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The bill is available at http://src.bna.com/w2a.

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