NATION – In the complex landscape of pharmaceutical patent law, a novel strategy emerged in recent years that intertwined the legal concepts of tribal sovereignty with corporate interests. Pharmaceutical companies, seeking to protect their lucrative drug patents from legal challenges, began transferring these patents to Native American tribes to leverage the tribes’ sovereign immunity. This alliance sparked intense debates over legal ethics, the integrity of the patent system, and the accessibility of affordable medications.
The pharmaceutical industry is heavily dependent on patents to secure exclusive rights to manufacture and sell medications, a critical factor in recouping the substantial costs associated with drug development. Patents typically last for 20 years, but the effective patent life after clinical trials and regulatory approvals is often significantly shorter. Once patents expire, generic drug manufacturers can produce cheaper versions, leading to dramatic price reductions and wider access for patients.
Native American tribes, recognized as sovereign nations within the United States, possess certain legal immunities, including protection from lawsuits and administrative proceedings unless Congress unequivocally abrogates that immunity. This sovereign immunity can shield tribes from various legal challenges, presenting an attractive option for companies looking to protect their patents.
In a groundbreaking move in 2017, Allergan PLC transferred its patents for Restasis—a blockbuster drug used to treat chronic dry eye generating over $1.5 billion annually—to the Saint Regis Mohawk Tribe. Under the terms of the agreement, the tribe received an initial payment of $13.75 million and annual royalties of $15 million. Allergan retained an exclusive license to manufacture and market the drug.
This strategic partnership aimed to use the tribe’s sovereign immunity to shield the Restasis patents from inter partes review (IPR) proceedings at the Patent Trial and Appeal Board (PTAB). The IPR process, established by the America Invents Act of 2011, allows third parties to challenge the validity of patents post-grant. It provides a faster and more cost-effective alternative to traditional litigation, and has become a popular avenue for generic manufacturers to contest pharmaceutical patents.
Allergan’s CEO, Brent Saunders, defended the move as a necessary response to what he described as ”double jeopardy” in the patent system, where patents could be challenged both in federal court and at the PTAB under different standards. However, critics saw the arrangement as a blatant attempt to circumvent patent laws and maintain high drug prices by delaying generic competition.
The agreement immediately drew legal challenges from generic drug manufacturers, including Mylan Pharmaceuticals, Teva Pharmaceuticals, and Akorn Inc. They argued that the transfer was a sham transaction designed solely to evade IPR proceedings, undermining the integrity of the patent system and harming consumers by keeping drug prices high.
In February 2018, the PTAB ruled that tribal sovereign immunity does not apply to IPR proceedings, allowing the challenges to proceed. The PTAB characterized IPR as an administrative process akin to a federal agency reconsidering its own decisions, rather than a lawsuit from which the tribe could claim immunity.
Allergan and the Saint Regis Mohawk Tribe appealed the decision. In July 2018, the United States Court of Appeals for the Federal Circuit upheld the PTAB’s ruling. The court determined that IPR proceedings are more like agency enforcement actions, which sovereign immunity does not bar. The court emphasized that allowing sovereign immunity in this context would obstruct the patent review process established by Congress.
In April 2019, the Supreme Court declined to hear the case, effectively affirming the lower court’s decision. The patents for Restasis were invalidated, paving the way for generic versions to enter the market.
The court’s decisions had far-reaching implications for the pharmaceutical industry and patent law. By closing off the possibility of using tribal sovereign immunity to shield patents from IPR, the rulings reinforced the PTAB’s role in maintaining patent quality and preventing the extension of monopolies through questionable patents.
Pharmaceutical companies had been increasingly concerned about the IPR process, which they argued was biased against patent holders and detrimental to innovation. The industry criticized the PTAB as a ”patent death squad” due to its high rate of patent invalidations. However, consumer advocates and generic manufacturers viewed the IPR process as essential for eliminating weak patents that hinder competition and keep drug prices high.
The Allergan case highlighted the tension between protecting intellectual property to incentivize innovation and ensuring that the patent system is not abused to unjustly prolong monopolies.
While the attempt to use tribal sovereign immunity in patent law was unsuccessful, Native American tribes have asserted themselves as significant legal forces in other areas, most notably in litigation related to the opioid crisis.
The opioid epidemic has disproportionately affected tribal communities, exacerbating issues of poverty, unemployment, and inadequate healthcare. Recognizing the devastating impact, tribes banded together to take legal action against pharmaceutical companies and distributors accused of fueling the crisis through aggressive marketing and lax oversight.
In February 2022, a landmark tentative settlement was reached in which Johnson & Johnson and the nation’s three largest drug distributors agreed to pay $590 million to Native American tribes. This settlement acknowledged the unique harms suffered by tribal communities and represented a significant victory in their efforts to hold corporations accountable.
Matthew Fletcher, a member of the Grand Traverse Band of Ottawa and Chippewa Indians and a professor of Indian Law at Michigan State University, noted that the legal standing of tribes was initially questioned. However, the collective action of approximately 170 tribes, with support from hundreds more, demonstrated their capacity to mobilize and advocate effectively for their rights.
The settlements from opioid litigation are expected to provide much-needed funds for addiction treatment, prevention programs, and other community services, contributing to the recovery and resilience of tribal nations.
For Native American tribes, partnerships with corporations can offer opportunities for economic development, helping to address chronic underfunding and poverty. Revenue from such agreements can support critical infrastructure, healthcare, education, and other social programs.
However, the use of tribal sovereign immunity in corporate strategies raises ethical questions. Critics argue that such arrangements could exploit tribal sovereignty for corporate gain, potentially damaging the reputation of tribes and complicating their relationships with the federal government and the public.
In the case of the Allergan agreement, some viewed the tribe’s involvement as a form of ”rent-a-tribe” scheme, trivializing the sovereignty of Native American nations. Others defended the tribe’s right to engage in legal and economic activities that benefit their communities.
Dale White, general counsel for the Saint Regis Mohawk Tribe, emphasized that the deal with Allergan was a legitimate business transaction aimed at supporting the tribe’s economic development and self-sufficiency.
The Allergan case prompted legislative scrutiny and calls for reform. Lawmakers introduced bills to prevent the use of sovereign immunity as a shield in patent reviews. In October 2017, Senator Claire McCaskill introduced legislation to abrogate tribal sovereign immunity in IPR proceedings, stating that companies should not be allowed to ”undermine the system of patent review.”
These legislative efforts reflect broader concerns about potential abuses of the patent system and the need to balance intellectual property rights with public interests. The debate continues over how to ensure that the patent system promotes genuine innovation without enabling monopolistic practices that can harm consumers.
The PTAB’s role in reviewing and invalidating patents has been a contentious issue. While some argue that the PTAB undermines patent rights and deters investment in innovation, others contend that it serves a critical function in eliminating weak or overly broad patents that stifle competition.
The PTAB’s inter partes review process has been particularly significant in the pharmaceutical industry, where the stakes are high due to the substantial revenues generated by blockbuster drugs. The ability to challenge patents efficiently is crucial for generic manufacturers seeking to bring affordable medications to market.
In the wake of the Allergan case, the PTAB’s authority has been reinforced, but the debate over its impact on innovation and the economy persists.
As the pharmaceutical industry and legal landscape continue to evolve, the challenges of balancing innovation, corporate interests, and public health remain at the forefront. The lessons from the Allergan case and the opioid settlements emphasize the importance of integrity in legal strategies and the need for systems that promote both innovation and accessibility.
—Stephen Lightman
