A Native American Tribe, a Drugmaker and an Unusual Patent Plan

Allergan P.L.C. has found an unusual way to shield one of its blockbuster drugs from generic competition.

The drug giant, which is defending its intellectual property on multiple fronts, said it will transfer the rights to Restasis to the Saint Regis Mohawk Tribe, in a move designed to quash challenges filed at the U.S. patent office by rival drugmakers. The medication, a treatment for chronic dry eye, brought in $1.49 billion in sales last year.

The pact, which will entitle the upstate New York tribe to a one-time $13.75 million payment and $15 million a year in royalties, could open up a new way for drugmakers to head off challenges to patents backing billions of dollars a year in sales. 

(Related: Pfizer, Allergan $160 Billion Deal Killed by U.S. Tax Rules)   

Several top drugmakers have recently reported slowing sales and shrinking profits due to the loss of exclusivity for top-selling medications, and the Trump administration has said it wants to drive down drug prices. At the same time, attacks on drug patents have been made easier under the patent office’s recently created fast-track legal review process. 

By moving key patents to a sovereign Native American group, Allergan says it may be able to protect itself. 

“I would expect it creates a playbook for other cases down the road both for us and for others,” said Bob Bailey, Allergan’s chief legal officer.

Shares of Allergan, which is based in the U.S., rose 1.8% to $232.13 at 2:24 p.m. in New York.

A Novel Idea

Allergan said it had been approached by the tribe with what it called a “sophisticated opportunity to strengthen the defense” of Restatis’s patents, which have been challenged under a process called inter partes review, or IPR. 

The tribe, which is a sovereign government entity, says that it is shielded from civil legal challenges over patents. State and foreign governments can’t be sued or subjected to federal government action except in certain circumstances.

“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,” Bailey said in a statement.

Mylan NV has filed petitions with the patent office to challenge Allergan’s patents under the IPR process. The agency previously determined that Mylan has established a “reasonable likelihood” of winning its arguments that the patents are invalid, though a hearing on the case is scheduled for next week in Alexandria, Virginia.

Drugmakers have long railed against the IPR process, which enables challenges before the Patent Trial and Appeal Board, because it means they have to defend their patents against assaults in two different forums. They have to win in both the court and before the agency.

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