Does Allergan's Saint Regis Mohawk Tribe transactional move "rip off consumers"?

Senator Sherrod Brown (D-OH)

On Friday, US Senator Sherrod Brown (Democrat-Ohio) said Allergan's transfer of six patents covering its medicinal product Restasis (for the treatment of dry-eyes) to the Saint Regis Mohawk Tribe "rips off consumers".

Earlier this month Allergan said it transferred all of its Orange Book listed patents to the Saint Regis Mohawk Tribe who would in turn exclusively licence back its patents to Allergan.  In exchange, the Tribe receives $13.75 million upon execution and is eligible to receive $15 million in annual royalties.  Those might seem like impressive figures, but not when compared to the annual income Restasis generates - a cool ~ $1.5 billion - which makes it Allergan's second biggest selling drug after Botox.  Those figures are expected to increase, with patent expiry in 2024.

Why this transactional dance?  Allergan's position is that by virtue of the Mowhawk Tribe's sovereign status, their ownership of the patents puts them beyond the reach of the Patent Trial and Appeal Board (PTAB).  This doesn't mean, argued Allergan, that their patents could not be challenged in federal court and it would have no effect on their pending abbreviated new drug application (ANDA) patent litigation (recently subject to a five day trial in the Eastern District of Texas).  

What it does mean is that the Mowhawk Tribe would be filing a motion to dismiss all on-going inter partes reviews (IPRs) against the Restasis patents on the basis of the tribe's sovereign immunity.

This move isn't new.  Recent cases involving universities' claims of sovereign immunity resulted in the successful dismissal of IPRs - see Neochord v University of Maryland (Case IPR2016-00208) and Covidien  v University of Florida Research Foundation (IPR2016-01274-6)

Living in rural New York State and Canada, the Mowhawk Tribe is a community of approximately 13,000 and is part of the Iroquois Nation (read about the tribe's culture and history here).  According to Allergan's press release, the Tribe and its counsel approached Allergan with the deal.  But according to this New York Times article, the Mowhawk Tribe's general counsel, Dale White, said it was a Dallas law firm called Shore Chan DePumpo that first approached the tribe with the proposal.  Shore Chan DePumpo also represented the University of Florida in its IPR sovereign immunity challenge.  It wasn't the tribe's first deal with technology patents, according to the New York Times, but it was their first with pharma patents.

Allergan's Chief Legal Officer, Bob Bailey, stated that

"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."

The Saint Regis Mowhawk Tribal Council commented that:

"This is a viable and sound opportunity for the Saint Regis Mohawk Tribe to enter into the patent, technology and research sector as part of our overall economic diversification strategy. 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."

Teva, who is challenging the patents, said that the move was

"a new an unusual way for a company to try to delay access to high quality and affordable generic alternatives".  

But Brent Saunders, the CEO of Allergan, explained in an interview with Fortune that the deal was a move to avoid the "double jeopardy" of concurrent venues (a problem that faces patentees in numerous jurisdictions, but arguably more so in the US with the introduction of IPRs following the America Invents Act in 2011).  And with the high percentage of invalidation in IPR proceedings, who wouldn't take the opportunity to shield their blockbuster patents from that venue?

Critics have said that the move should fail because a company should not be able to shield its patents from review.  The response, of course, being that they cannot completely shield their patents from any review - they will still be subject to federal court and the realm of Hatch-Waxman litigation (at least in this case).  So the patents are, for now, not completely immune to the attack as stated by Allergan's press release (although a different deal and parties could take a different position which could make the sovereign immunity v federal court position a bit murkier).

In the meantime, what seems clear is that this move is another flag to Congress that the IPR regime needs to be re-examined.  Senator Brown, however, stated that he would look into how Congress can "close loopholes that drug companies exploit to avoid competition".  But perhaps a more holistic view as to all the issues in play is in order...