Drug Corporation Evades Patent Law to Sustain Profit, Stifle Democracy

October 2017

The big pharma corporation, Allergan, tried an ingenious way to put its patents where U.S. law couldn’t reach them. In early September, 2017, the company transferred patent rights for the dry eye medication, Restasis, to the sovereign Native American Saint Regis Mohawk Tribe.

You might ask: Why such a maneuver?  The shift puts the patent in the jurisdiction of a sovereign government entity and shields it from lawsuits by corporate competitors eager to put affordable generics on the market.  Allergan’s sales of Restasis brought $1.5 billion in revenue in 2016.1

An option to put liabilities beyond the law is not available to natural persons but corporations, granted generous property (including patent) protections by the courts throughout the nation’s history, are not similarly limited.

The patents for Restasis were first granted Allergan Corporation in 1994 and expired in 2014. Their extension is now being contested in federal court through a case brought by several corporations eager to be marketing generics. (See latest developments at end of this article.)

The tribe received the tidy sum of $14 million to seal the deal and will get $15 million annually in royalties for “licensing” the drug back to Allergan! This is a financial boon to the community of 13,000 located on the border of New York State and Canada.2

“We are impressed with the tribe’s thoughtful and enterprising approach, which will allow them to achieve their goals of self-reliance and help them address the most urgent needs in their community,” said Allergan’s chief legal officer, Bob Bailey.1

The arrangement was described as “innovative” by Wall Street, while others labeled it “sleazy,” “ugly,” “sneaky,” and “unscrupulous.” Although this step by Allergan violates no law, journalist Michael Kinsley, points to the real problem: “The scandal isn’t what’s illegal, it’s what’s legal.”

This move piqued the interest of other pharmaceutical corporations and stirred speculation that they may consider similar actions in order to nip in the bud patent challenges they especially abhor, those taken to an administration process within the U.S. Patent and Trademark Office. Patent challenges can also be brought before the federal courts. If Allergan’s approach is widely followed, generic drug companies and paying customers will lose ground to brand-name monopoly pricing.

The House Oversight and Government Committee communicated with the company warning that the arrangement “could impair competition across the pharmaceutical industry,” a warning utterly without teeth.3

Breaking News Update:

A federal judge in the Eastern District of Texas invalidated four Allergan patents associated with Restasis in a decision made on October 16, 2017. This does not mean the generics will be available soon as the Allergan Corporation intends to appeal the decision and the Food and Drug Administration has yet to approve generic versions of the drug. The judge included both the Allergan Corporation and the Saint Regis Mohawk Tribe in the decision, believing that patent rights should not be shielded by transfer to another sovereign .government.

“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,” the judge wrote.4

While the Mohawk tribe claimed its sovereign immunity shields the patents under the administrative panel proceeding within the U.S. Patent Office, it did not claim immunity in the federal court case.

The outcome of this corporate transfer of patent rights remains uncertain, but what is certain is that “We the People” should be in charge of defining the legal powers available to our corporate creations. Move to Amend’s mission is to turn that democratic principle into reality. Sign the petition at www.movetoamend/motion and put your energies into this critical grassroots work for real democracy.

Learn more:

1.     Bloomberg, A Native American Tribe, a Drugmaker, and an Unusual Patent Plan, ​9/8/2017 - https://www.bloomberg.com/news/articles/2017-09-08/allergan-makes-deal-with-native-american-tribe-over-drug-patents

2.     The New York Times, How to Protect a Drug Patent? Give It to a Native American Tribe, 9/8/2017 - https://www.nytimes.com/2017/09/08/health/allergan-patent-tribe.html

3.     Nasdaq, US House Committee Launches Probe of Allergan Patent Deal, 10/3/2017 - http://m.nasdaq.com/article/us-house-committee-launches-probe-of-allergan-patent-deal-20171003-01265

4.    The New York Times, Patents for Restasis Are Invalidated, Opening Door to Generics, 10/16/2017 - https://www.nytimes.com/2017/10/16/health/allergan-restasis-patent-.html

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