Indian Tribe Joins Big Pharma at the Supreme Court, Defending a Lucrative Deal

WASHINGTON — When a pharmaceutical company sold its patent rights for a blockbuster drug to an Indian tribe 16 months ago, stymied competitors and consumer groups condemned the move as a flagrant abuse of the patent system.

This month, the company, Allergan, doubled down, asking the Supreme Court to rule that the Saint Regis Mohawk Tribe can use its sovereign immunity to fend off challenges by makers of low-cost generic copies of the best-selling prescription eyedrops, Restasis.

Congress is gearing up for what promises to be a yearlong investigation of drug prices, with House and Senate committees planning to hold hearings on Tuesday. The deal between Allergan and the Saint Regis Mohawks promises to be front and center when lawmakers in both parties examine the use of patents to delay competition and keep prices high.

Restasis, a treatment of chronic dry eye disease, had sales of nearly $1.5 billion in 2017 — Allergan’s best seller after Botox.

In September 2017, Allergan transferred patents for the eye drug to the tribe in upstate New York near the Canadian border. Allergan paid the tribe $13.75 million up front and agreed to pay up to $15 million a year in royalties as long as the patents remained valid. At the same time, the tribe gave Allergan “the sole and exclusive right” to manufacture and market the drug in the United States for uses approved by the Food and Drug Administration.

The company says it is trying to protect its “intellectual property.” The tribe says it needs the money to provide health, education, welfare, housing and other services for its members.

But Michael A. Carrier, a law professor at Rutgers University and an expert on pharmaceutical patents, said, “This has nothing to do with the purpose of tribal immunity and everything to do with evading the patent system.”

“Drug companies should not be able to use this shell game of transferring patents to Native American tribes just so they can escape review at the patent office,” Mr. Carrier said.

Generic drug companies, eager to sell low-cost copies of Restasis, have challenged the validity of the patents.

And so far, the tribe has struck out in its efforts to use sovereign immunity as a shield for the patents.

Judge William C. Bryson of the United States Court of Appeals for the Federal Circuit said he had “serious concerns about the legitimacy of the tactic that Allergan and the tribe have employed.”

“The essence of the matter is this,” he said, “Allergan purports to have sold the patents to the tribe, but in reality” it is trying to “rent the tribe’s sovereign immunity” to protect the patents and forestall competition. He found that four of the Restasis patents were invalid.

Restasis sells in pharmacies for an average cash price of about $657 for a month’s supply, according to the drug price website GoodRx.

The Trump administration, siding with the generic drug companies, said the evident purpose of Allergan’s deal with the tribe “was to allow Allergan to retain and enforce its patents.”

Allergan is still the “effective owner” of the patents, “for which the tribe paid nothing,” the Justice Department said. “In no real-world sense do these patents belong to the Saint Regis Mohawk Tribe.”

Allergan and the tribe are now asking the Supreme Court to rule that the tribe can assert sovereign immunity in proceedings at the Patent and Trademark Office, and the move has attracted attention in Congress.

Senator Tom Cotton, Republican of Arkansas, said he had drafted a bill to prevent Indian tribes from using sovereign immunity to block the review of patents by federal courts and the patent office.

“By transferring the patents to a tribe that had no part in the development of the drug, Allergan attempted to purchase sovereign immunity to rip off consumers,” Mr. Cotton said. “Allergan’s transfer of the Restasis patents to the Mohawk tribe was a sham.”

Representative Jerrold Nadler, Democrat of New York and the chairman of the House Judiciary Committee, has described Allergan’s deal as a “cynical ploy to shield its patents on a lucrative drug from review at the U.S. Patent and Trademark Office.”

In 2011, Congress created a special procedure under which an independent arm of the patent office — the Patent Trial and Appeal Board — can cancel patents if it finds that they were granted in error. Brand-name drug companies say these proceedings are often stacked against them and their patents.

Allergan is not the only company facing criticism on Capitol Hill.

In a Twitter post this past week, Representative Ro Khanna, Democrat of California, singled out AbbVie: “They filed 247 patents for Humira, a single drug for arthritis. They received over 132 patents for that drug and are blocking competition for 39 years. They have increased prices 144% since 2012. This is a racket!”

Jillian Griffin, a spokeswoman for AbbVie, declined to comment about Mr. Khanna’s criticism. Global sales of Humira totaled $19.9 billion last year, the company reported on Friday.

A Republican, Senator Susan Collins of Maine, the chairwoman of the Special Committee on Aging, said some drug makers were trying to stave off competitors by surrounding their products with a web of overlapping patents — a “patent thicket.”

Consumer advocates, insurers and generic drug makers joined together this month in a new group, the Coalition Against Patent Abuse, to expose the ways in which brand-name drug companies try to extend their government-granted monopolies.

Representative Frank Pallone Jr., Democrat of New Jersey and the chairman of the Energy and Commerce Committee, endorsed the effort, saying, “Brand-name companies take actions that make it difficult for generics to enter the market.”

The tribe defended its novel arrangement with Allergan. While the tribe has a casino on its reservation, it said it could not depend solely on casino revenues to address the community’s “chronically unmet needs.”

The tribe tried to block review of the Restasis patents by citing its sovereign immunity, but the patent appeal board rejected this argument, as did the Court of Appeals for the Federal Circuit.

The Supreme Court appears to be its last chance, at least for now.

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