Allergan,
the drugmaker behind Botox, just had the patents on one of its key drugs
invalidated.
The
case was regarding Restasis, a blockbuster eye drug whose patents Allergan had
in September given to the Saint Regis Mohawk Tribe. The unusual move gave
Restasis sovereign immunity.
But on
Monday, a judge from the district court of Eastern Texas found the patents
related to Restasis invalid, paving the way for competing drugmakers to
bring generic version to market. Allergan's stock dropped 6% on the
ruling.
The
court also had concerns about the deal with the St. Regis tribe.
"The
Court has serious concerns about the legitimacy of the tactic that Allergan and
the Tribe have employed," Judge William Bryson said in a memorandum
opinion accompanying his decision.
Lawmakers weren't exactly happy
about the deal either, prompting the introduction of bills
that would make such a maneuver illegal.
"We
are disappointed by the Federal District Court’s decision on the Restasis
patents. We are carefully reviewing the decision and are considering all
options," Allergan’s chief legal officer Robert Bailey said in a
statement. "Allergan remains committed to vigorously defending the
intellectual property of our products, which allows us to continue to invest in
developing and bringing forward new medicines for millions of patients."
How the St. Regis
tribe deal came to be
In September,
Allergan put out a press release announcing that it had made the deal, calling
it a "sophisticated" opportunity. Restasis, the drug in question
that's used to treat chronic dry eye, was approved in 2003 and has patents
protecting it until 2024.
In
2016, the drug made $1.5 billion in sales, making up about 15% of
Allergan's profits, according to Reuters. Out of the deal, St.
Regis got $13.75 million from Allergan and can receive up to $15 million in
annual royalties.
Native
American tribes, along with institutions like universities, have sovereign immunity
that protects patents from certain challenges to their validity.
The
tribe, in the Allergan press
release, said it viewed the agreement as a way to diversify its
income.
"We
realize that we cannot depend solely on casino revenues and, in order for us to
be self-reliant, we must enter into diverse business sectors to address the
chronically unmet needs of the Akwesasne community; such as housing,
employment, education, healthcare, cultural and language
preservation," the tribe's
council said in the release.
Dale White, general
counsel for the tribe, told CNBC's Meg
Tirrell in September that he'd be interested in doing similar
deals, asking Tirrell if she would put his phone number in an
article.
But
outside the two parties involved in the deal, the move almost immediately
sparked a negative reaction. "Anyone who cares about drug pricing should
be very, very concerned about the potential impact of Allergan’s actions
here," Rachel Sachs, a professor of law at Washington University in St.
Louis wrote in a blog
post.
Facing generic
competition
Generic
competition to branded drugs like Restasis can get on the market easier
thanks to a law from 1984 known as the Hatch-Waxman Act,
which gives the generic drugmakers a shorter process leading up to an FDA
approval than a first-of-its-kind branded drug might experience. This helped
get more generic drugs on the market and drove prescription drug prices
down.
The act
also set up a way for branded drugmakers to have a certain period of
exclusivity where their drug was the only one on the market. During that time,
drugmakers can recoup the investment they made in developing the drug. Once a
drug goes off patent and generics come on the market, the price of the drug
drops dramatically. It's through this act that the court ruled Allergan's
patents invalid on Monday.
The
timelines for this market exclusivity aren't set in stone, though. Generic
drugmakers are able to challenge the validity of the branded drugmaker's
patents, through both the Hatch-Waxman Act and a newer law called the America
Invents Act.
What
Allergan is trying to avoid is a procedure that
lets parties challenge the validity of patents called inter
partes review that's part of the America Invents Act, which
could also invalidate the Restasis patents. Allergan's CEO Brent Saunders
referred to this process as "double jeopardy"
in a Wall Street Journal opinion piece. St. Regis has sovereign immunity
over the IPR process. Saunders said in a letter to senators that should
the district court ruling in Texas come out against Allergan and a generic drug
is approved, "that product could enter the market many years in advance of
the listed patent expiry dates."
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