Congress is taking drug company Allergan to task for a bizarre legal scheme that involves using a Native American tribe as a shield against patent challenges. On Sept. 8, the pharmaceutical maker announced that it would be transferring disputed patents for Restasis, a dry-eye drug, to the Saint Regis Mohawk Tribe, which governs the American side of a reservation that straddles the U.S.-Canada border. In exchange for the $13.75 million that Allergan is providing, the tribe will invoke its right to sovereign immunity—a U.S. doctrine that says sovereign bodies cannot be subject to civil suits—to reject patent challenges. The tribe will then lease the patents back and rake in $15 million for every year the patents are still viable.
If Allergan manages to stick the landing on these legal acrobatics, then industry experts believe that we’ll start to see other drug companies attempt to do the same. The University of Florida was able to dismiss challenges to one of its patents from Covidien, a medical device manufacturer, also by invoking sovereign immunity, which leads Allergan’s lawyers to believe that they too will be successful in this case. The company has also defended the move against critics, claiming the decision is a product of the flawed patent review process.
The Mohawk tribe has also asserted that their cooperation with Allergan will provide them with funds for “unmet needs” and describes it as a move toward greater self-reliance. The tribe currently runs a casino, but wants to diversify its revenue streams.
The deal has recently drawn bipartisan scrutiny from both the House and Senate. In late September, four senators, led by New Hampshire Sen. Maggie Hassan, requested that the Judiciary Committee investigate the arrangement as "a blatantly anti-competitive attempt to shield its patents from review and keep drug prices high." And on Tuesday, four House members from the Committee on Oversight and Government Reform sent a letter to Allergan arguing that the maneuver “may impair competition across pharmaceutical industry and ultimately dissuade companies from pursuing less-costly generic alternatives to brand drugs.” The members of Congress, which include Democratic Maryland Rep. Elijah Cummings and Republican South Carolina Rep. Trey Gowdy among them, want the pharmaceutical company to disclose communications with the Mohawk tribe, agreements made regarding the patents, and a host of other info.
Derek Lowe, who writes the In The Pipeline blog on the pharma industry, wrote of the bargain, “Awful, as far as I’m concerned. Awful on several levels. … This has changed the balance of the system towards whoever has the cash to cut such a deal.”