Allergan Patent Deal May Hurt Competition, Lawmakers Say

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  • Reps. Gowdy, Cummings seek detail on Restasis patent transfer
  • Lawmakers say deal ‘may impair competition’ in drug industry

What’s got a tax address in Ireland, headquarters in New Jersey, a blockbuster drug on a Native American reservation, and new trouble in Washington?

If you guessed Allergan Plc, you’re right.

Last month, Allergan said it would transfer the rights to Restasis, a blockbuster treatment for chronic dry eye that had $1.49 billion in sales last year, to the Saint Regis Mohawk Tribe. The unusual agreement could allow the drugmaker to use the tribe’s status as a sovereign nation to shield its Restasis patents from attack by rival drugmakers.

House Committee on Oversight and Government Reform Chairman Trey Gowdy, a South Carolina Republican, and ranking member Elijah Cummings, a Maryland Democrat, wrote Allergan Chief Executive Officer Brent Saunders on Tuesday about what the letter referred to as the “unconventional maneuver.”

“The implications of Allergan’s patent transfer raise questions for Congress as the exchange may impair competition across the pharmaceutical industry and ultimately dissuade companies from pursuing less-costly generic alternatives to brand drugs,” Gowdy and Cummings wrote.

Allergan said in a statement that it would comply with the committee’s request for documents and other information.

Seeking Documents

The Food and Drug Administration approved Restasis in 2003 and it was Allergan’s second-best-selling drug last year, according to the company’s 2016 annual report. The drug’s most recent patents expire in 2024, according to an FDA patent database.

In relation to the deal, the lawmakers asked Allergan for communications, market-share projections and documents presented to the company’s board of directors. They also sought documents and communications regarding consideration of future such deals. 

Gowdy and Cummings gave Allergan until Oct. 17 to answer their questions.

Allergan shares ended the trading day in New York down 0.6% at $209.80, after falling as much as 1.2 percent earlier in the day. Allergan’s tax domicile is in Dublin and its headquarters are in Parsippany, New Jersey.

Senate Letter

The move to strike an agreement with the tribe was a defense against being held hostage “by entities such as hedge funds” seeking to profit from pharmaceutical companies “by demanding financial payment” in exchange for not filing challenges with the U.S. Patent and Trademark Office, Saunders wrote in a letter on Tuesday to Senate Judiciary Chairman Charles Grassley, a Republican from Iowa, and Ranking Member Dianne Feinstein, a Democrat from California.

The letter was in response to a Sept. 27 letter from other senators asking for the committee to investigate the Restasis agreement. The deal would “have no impact” on a challenge to Allergan’s patents for the drug awaiting a ruling in the Federal District Court in Texas, Saunders said in his letter.

“To be clear, if the District Court ruling is adverse to Allergan’s patent position, and there is an FDA approval of a generic version of Restasis, that product could enter the market many years in advance of the listed patent expiry dates,” Saunders wrote.

On Monday, Senator Claire McCaskill wrote the Pharmaceutical Research and Manufacturers of America asking if the lobby group approved of Allergan’s deal with the tribe.

“This is one of the most brazen and absurd loopholes I’ve ever seen, and it should be illegal,” McCaskill said in a separate statement. “Given its recent comments regarding corporate responsibility, PhRMA can and should play a role in telling its members that this action isn’t appropriate, and I hope they do that.”

PhRMA said in a statement that it can’t comment on decisions by specific companies but that the current patent-review process creates uncertainty for drug companies. The group said it supports changes that “better protect the rights of legitimate patent holders and will foster innovation.”

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