Broad coalition expresses concerns over patent quality

Dear Chairman Grassley, Ranking Member Feinstein, Chairman Lee, and Ranking Member Klobuchar:

The undersigned organizations, representing healthcare providers, public health experts, people of faith, consumers, businesses, and taxpayers are committed to ensuring that the United States remains a leader in biomedical innovation while also expanding access to affordable medicines. We are deeply concerned by the recent news that Allergan Plc has entered into an anticompetitive agreement with the Saint Regis Mohawk Tribe, under which it is transferring its patents to the drug Restasis to the tribe and then licensing them back from the tribe, in an apparent ploy to prolong its patent exclusivity by inappropriately shielding its potentially weak patent claims for the drug from legitimate challenges through the inter partes review (IPR) system.

Seven years ago, bipartisan majorities in Congress passed by overwhelming margins (89-9 in the Senate; 304-117 in the House) and the President signed into law the America Invents Act (AIA). The AIA established the IPR system, in which third parties may challenge patent claims through the Patent Trial Advisory Board (PTAB) at the U.S. Patent and Trademark Office (USPTO).

Passage of the AIA and affirmation of the IPR system by the Supreme Court marked important steps towards limiting the harmful impacts of overly broad and dubious, low-quality patents, which inhibit innovation and impede the competition that is vital to a well-functioning marketplace that works for consumers.

Allergan Plc received approval for Restasis in 2002. But in anticipation of losing its patent exclusivity in May, 2014, Allergan filed six secondary, method-of-treatment patents, in effect extending its monopoly protection until August, 2024, delaying generic competition by an additional 10 years.

In December 2016, the USPTO approved Mylan’s request for review of the six patents under the IPR system, concluding that Mylan’s petitions met the threshold for initiating an IPR review by establishing that there is a reasonable likelihood that it will prevail with respect to at least one of Allergan’s vague and overly-broad patent claims challenged in the petitions.

With its Restasis monopoly profits under threat, Allergan has now moved to circumvent the bipartisan intent of Congress and evade legitimate challenge, with an anticompetitive deal with the Saint Regis Mohawk Tribe that, if it is allowed to stand, could cost U.S. consumers and taxpayers billions of dollars.

In the prescription drug context, low-quality patents not only hinder innovation, but keep prices higher for longer. Generic competition is a well-established, market-based solution to reduce medicine prices, bringing immense savings to consumers and taxpayers, and improving access. Products that attract meaningful generic competition can see prices fall to 20% of the brand-name price or even lower. The huge savings at stake is demonstrated by the numbers: Unbranded generics accounted for 84.6% of prescriptions dispensed in 2016, but only represented 15% of prescription drug spending.

U.S. sales of Restasis generated $1.4 billion for Allergan in 2016; and $645 million in the first two quarters of 2017. One observer estimates that the extended monopoly period for Restasis will cost American consumers and taxpayers $10.7 billion. A more conservative estimate suggests American consumers and taxpayers will pay greater than $7 billion more for Restasis from 2018 through 2024 than under a scenario where Allergan loses its monopoly to a legitimate patent challenge that is allowed to go forward.

We recognize that the asserted Restasis patents are also being challenged in court, and, at the district court level, have now been invalidated, subject to appeal. But the IPR process remains an important means of enabling expeditious, expert post-grant review of patents that are overly-broad and keep affordable generics from the marketplace. And we expect this will by no means be the last time that a brand name drug company seeks to use this anticompetitive scheme to block that process. We are concerned that lost competition will force Americans to pay many billions more, many will likely go without needed care, and our health care budgets will face an even heavier burden.

As Judge Bryson, who decided the U.S. District Court case, stated, in a related order joining the Saint Regis Mohawk Tribe as a party:

“What Allergan seeks is the right to continue to enjoy the considerable benefits of the U.S. patent system without accepting the limits that Congress has placed on those benefits through the administrative mechanism for canceling invalid patents. If that ploy succeeds, any patentee facing IPR proceedings would presumably be able to defeat those proceedings by employing the same artifice. In short, Allergan’s tactic, if successful, could spell the end of the PTO’s IPR program, which was a central component of the America Invents Act of 2011.”

We respectfully request the Senate Committee on the Judiciary to investigate the Allergan-Mohawk patent transfer-license-back deal and its implications for U.S. government healthcare budgets, consumers and taxpayers.

Sincerely,

Public Citizen
AFL-CIO
American Antitrust Institute
American Sustainable Business Council
Annie Appleseed Project
Association for Medical Ethics
Breast Cancer Consortium
Congregation of Sisters of St. Agnes Consumer Action
Consumers Union
Culinary Health Fund
Electronic Frontier Foundation
Families USA
Franciscan Sisters of Allegany, NY
Health GAP
Law Offices of David Balto
MedShadow Foundation
National Center for Health Research
National Women’s Health Network NETWORK Lobby for Catholic Social Justice Patients for Affordable Drugs
People of Faith for Access to Medicines Physicians for a National Health Program Protect All Children’s Environment
Public Knowledge
R Street
Social Security Works
The Society for Patient Centered Orthopedics United Church Funds
US PIRG