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.
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.”
- Markets Insider