[Infowarrior] - Be Very, Very Concerned About What Allergan Just Did

[Richard Forno]

(c/o KM)

Be Very, Very Concerned About What Allergan Just Did

Posted on September 9, 2017 by rachelsachs

http://blogs.harvard.edu/billofhealth/2017/09/09/be-very-very-concerned-about-what-allergan-just-did/

Yesterday, it was announced that Allergan had transferred the ownership of the patents on its billion-dollar drug Restasis, used for the treatment of chronic dry eye, to the Saint Regis Mohawk Tribe. The Tribe then exclusively licensed the drug back to Allergan, in exchange for tens of millions of dollars in both licensing and royalty fees. Although it may not sound like it, this transfer is potentially huge news in the drug pricing world. It is also extremely complex, and its full implications have yet to be determined.

Enormous caveat before we begin: I am by no means an expert on tribal sovereign immunity. I may well be wrong here. (In fact, I would very much like to be wrong here.) There is little (any?) case law on sovereign immunity’s impact in the Hatch-Waxman area, and much of what follows is extrapolated from case law on tribal sovereign immunity both in IP and in other contexts, state sovereign immunity in the IP area, and discussions with other law professors. Please let me know if this is your area of expertise and you believe I’ve gotten the analysis wrong!

In short, if repeated and taken to its logical conclusion, this transfer has the potential to prevent any invalidity challenges to any drug patents. Would-be generic competitors could not seek to initiate inter partes review (IPR) actions before the Patent and Trademark Office (PTO). They could not bring declaratory judgment actions in federal court. And – both most importantly and most unclear – they could not bring Paragraph IV claims under Hatch-Waxman, preventing generic companies from challenging patents’ invalidity and requiring us all to wait until the very end of patent expiration to experience generic competition.

Here’s why: tribal sovereign immunity claims will bar these suits. Let’s take them one at a time. First, Allergan’s stated reason for the transfer is to insulate it from the ongoing IPR action against its patents. Allergan does not want to allow the PTO to find its patents to be invalid, and a newly asserted sovereign immunity argument seems likely to allow Allergan to dismiss the IPR. State universities whose patents end up in IPRs have successfully used this argument, and there is no reason to think it would not work here. This is also the reason that declaratory judgment actions of invalidity in federal court will be dismissed. As Professor Mike Carrier states in the New York Times’ coverage of Allergan’s transfer, there are reasons to be concerned about this set of implications. (Some might also remember that BIO and PhRMA have lobbied for legislation that would insulate their patents from IPR challenges. They have been unsuccessful so far, and we might see Allergan’s actions here as one strategy to accomplish what they were otherwise unable to do.)

But it gets worse. Because it seems likely that tribal sovereign immunity would also insulate the tribe from a counterclaim of invalidity as part of a Hatch-Waxman Paragraph IV suit. Recall that the usual posture of a Paragraph IV suit is as follows: a generic drug company has filed a Paragraph IV ANDA alleging that the innovator company’s patents are invalid (for example). The innovator company then sues the generic for patent infringement, as permitted by the statute. The generic drug company may then counterclaim for invalidity. If they succeed in invalidating the innovator company’s patents, then the generic can come to market earlier than anticipated and help bring down drug prices more quickly.

Except that tribal sovereign immunity should insulate an innovator company from that counterclaim for invalidity. This may not be the case for state universities, who have been held to waive sovereign immunity for counterclaims by initiating the infringement suit in the first instance. But in a range of contexts, courts have held or reaffirmed that even tribes initiating lawsuits are immune from counterclaims. And it does not appear (on its face) that Hatch-Waxman has abrogated this sovereign immunity. Allergan has said that the transfer “has no impact on” an ongoing ANDA proceeding for its Restasis patents. But as a matter of law, it is not clear why that would be so. (For more, see Jake Sherkow’s great Tweetstorm here.)

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http://blogs.harvard.edu/billofhealth/2017/09/09/be-very-very-concerned-about-what-allergan-just-did/