Drug Maker Finds Patent Loophole In Sovereignty Laws

In a bold and surprising move, Big Pharma giant Allergan transferred all of its patents for prescription eye medication Restasis to the Saint Regis Mohawk [native] tribe. Immediately following this, though, the drug company leased back the rights to sell the drug.

While this might not necessarily sound like a bad thing—after all, if the tribe owns the drug it could be a source of revenue for the sovereign nation—you have to look at all the angles.

You see, this “sovereignty” provides Native American tribes with immunity from regulatory reviews in the patent system. Basically, then, this means that as long as the tribe owns the drug, generic drug makers cannot challenge the company in order to make and sell a cheaper version.

Sure, the Allergan is, in fact, paying the tribe $13.75 million—and $15 million more in royalties—for exclusive rights, so the tribe stands to make a good deal of profit. But is it right?

Many Washington lawmakers, of course, argue that this equates to nothing more than exploiting sovereignty laws in the United States in order to monopolize the drug market. If, critics argue, this deal is allowed to stand as it is, other drug companies could—and probably will—quickly—and very quickly—adopt the same strategy. And, that of course, would kill off all competition.

For example, Sen. Maggie Hassan comments, “The deal Allergan struck with the Tribe extends Allergan’s market monopoly on its prescription medication while patients are forced to pay higher and higher prices for their treatments.”

Sen. Claire McCaskill quickly sent a complaint to the president of the Pharmaceutical Research and Manufacturers of America (PhRMA). In her letter she pleaded: “This is one of the most brazen and absurd loopholes I’ve ever seen, and it should be illegal. 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.”

Of course, stockholders don’t seem to mind the ethical dilemma, as Allergan shares skyrocketed upon the announcement of the deal. At the same time, Saint Regis Mohawk Tribe is seeking to dismiss the challenges.

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