Kyle Bass Says So What If He Challenges Drug Patents for Profits

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Kyle Bass
Hedge fund manager Kyle Bass. Photographer: Timothy Fadek/Bloomberg

Hedge fund manager Kyle Bass said he challenges drug patents for profit -- but so does everyone else.

Responding to claims by Celgene Corp. that he’s abusing a process set up to review issued patents, Bass said a profit motive is at the heart of every patent and every patent challenge. Betting on a company’s stock price falling is legal, and the public stands to gain if fewer patents stood in the way of cheap copycat medicines, he said in a filing Tuesday.

The motivations of Bass’s Coalition for Affordable Drugs “do not change the social value of its activities,” the filing with the U.S. Patent and Trademark Office said. “Poor quality patents enable pharmaceutical companies to maintain artificially high drug prices and reap unjust monopoly profits paid for by consumers and taxpayers.”

Celgene is trying to persuade the patent office not to consider Bass’s claims that patents on the blood-cancer drug Revlimid are invalid. The drugmaker contends the petitions should be dismissed as a sanction for the stock shorting and the actions of his coalition partner Erich Spangenberg in demanding money to not file earlier challenges.

The drug industry also is lobbying Congress to exclude drug patents from the review process that’s been called a “death squad” for the high number of patents invalidated.

The idea he’s seeking to profit off the challenges is “a truthful irrelevancy,” Bass said in the filing. He countered that Celgene’s motives aren’t altruistic either -- Revlimid sales were almost $5 billion last year and can cost more than $200,000 for a single treatment.

Celgene did not respond to a request for comment.

Low-Quality Patents

The review process was created under a 2011 law, designed to weed out low-quality patents and give the agency a chance to take a second look at its work. While Silicon Valley companies were primarily pushing for the reviews, patents also have been challenged in other industries, including auto parts, tools, consumer products and even bottle caps.

The idea was to have a lower-cost alternative to court and the challenges are often filed by defendants in lawsuits. Groups not involved in litigation -- including some firms funded by the tech industry -- also have filed petitions at the agency.

It’s unlikely that the Patent Trial and Appeal Board would sanction the coalition while the pharmaceutical issue has yet to be resolved by politicians, said Scott Kamholz of Foley Hoag in Washington, a former judge with the appeal board.

‘No White Knight’

While Bass is “not exactly the white knight riding to the rescue,” Kamholz said, “the statute allows anybody to challenge any patent.”

“If they got a patent they shouldn’t have gotten, it’s in the public interest that the patent be revoked,” Kamholz said of Celgene. “I don’t see any reason why pharmaceutical companies should be insulated from the process.”

Celgene claims Spangenberg sent draft petitions, saying he’d file them unless given cash. Bass said there’s no evidence that money was demanded and in any event it happened a year before the coalition was founded.

In all, Bass’s coalition has filed 18 different petitions, some on different patents for a single drug. On Wednesday, he filed his latest challenge to a patent for the arthritic medicine Vimovo, sold by Horizon Pharma Plc.

The filing estimates that the costs to complete a challenge for a single drug are about $1 million. The coalition said few people could afford to spend that kind of money without expecting some sort of reward.

“Celgene is not giving Revlimid or its profits away,” the coalition said. “It should be axiomatic that people do not undertake socially valuable activity for free -- not Celgene, not generics, not shareholders, and not investment funds.”

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