Pharmaceutical company abuse of an overtaxed U.S. Patent and Trademark Office has been credited for the meteoric rise in U.S. drug prices. Seeking to “evergreen” blockbuster products with additional patent protection, manufacturers push hard for patents that may be unmerited, or may be based on outright fraud. It is then up to potential generic manufacturers to challenge these patents through risky and expensive litigation, a process that itself is sometimes hijacked by manufacturers that pay off potential competitors. Meanwhile, these manufacturers continue to reap monopoly profits under cover of these patents.
However, a novel and outlandish tactic has recently thrust drug company shenanigans into the spotlight, and attracted Congressional attention. The story starts familiarly: Allergan’s eye medication, Restasis, was reaching the end of its patent protection. To stave off competition, Allergan obtained five follow-on patents, based upon evidence a court would later deem “misleading”. But to protect these patents from challenge before the USPTO, Allergan innovated: it transferred ownership of the patents to the Saint Regis Mohawk Tribe, while paying the Tribe millions. Allergan then claimed that its patents could not be challenged because the Tribe was immune from suit as a foreign sovereign.
This argument was ultimately rejected by the courts. But alarmed legislators have taken up the cause. Shortly after the transfer, then-Senator Claire McCaskill (D-Mo) sent a letter to the Pharmaceutical Research and Manufacturers of America calling the deal "one of the most brazen and absurd loopholes I've ever seen." This year, Senator Tom Cotton (R-Ark) introduced the Preserving Access to Cost Effective Drugs Act, to ban the assertion of tribal sovereign immunity in certain patent proceedings.
Last week, the Senate Judiciary Committee voted to advance the PACED Act to the Senate floor, moving the bill one step closer to law. However, what began as a bipartisan effort has now broken along party lines. While Republicans continue to support the bill, Democrats have voiced concerns that the Act is too vague, and could reach beyond the pharmaceutical sphere. Calling the Act “unnecessary” in light of the courts’ rejection of Allergan’s tactic, Sen. Dianne Feinstein (D-Calif.) voiced concerns that the new law “would . . . weaken sovereign immunity of every Native American tribe.” In a divided Congress, the fate of the Act is now unclear, perhaps inviting further variations on Allergan’s theme.
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About Adam Steinfeld
Adam Steinfeld is a Partner in Faruqi & Faruqi, LLP's New York office. He practices in the area of antitrust litigation with a focus on competition in the pharmaceutical industry. Mr. Steinfeld has litigated successfully with significant contributions in In re Buspirone Patent & Antitrust Litigation, MDL No. 1410 (S.D.N.Y.) ($220M settlement); In re Cardizem CD Antitrust Litigation, No. 99-MD-1278 (E.D. Mich.) ($110M settlement); In re Relafen Antitrust Litigation, No. 01-12239 (D. Mass.) ($175M settlement); In re Remeron Direct Purchaser Antitrust Litigation, No. 03-cv-0085 (D.N.J.) ($75M settlement); In re Terazosin Hydrochloride Antitrust Litigation, No. 99-MDL-1317 (S.D. Fla.) ($72.5M settlement); In re Tricor Direct Purchaser Antitrust Litig., No. 05-340 (D. Del.) ($250M settlement); and Mylan Pharms., Inc. v. Warner Chilcott, No. 12-cv-3824 (E.D. Pa.) ($12 million settlement).