What Has Industry Learned From Allergan's Creative Approach to Avoiding IPRs?

Kelly Davio

In an interview with The Center for Biosimilars®, Imron Aly, JD, partner at Schiff Hardin LLP, explained that this long-running case to invoke sovereign immunity from inter partes review (IPR) carries important lessons for innovator product sponsors and generic and biosimilar developers as they consider IPR proceedings and the patent landscape as a whole.

In one of the most creative gambits in recent years to protect a brand-name drug from generic competition, Allergan last year announced that it had transferred its patents for the dry-eye drug Restasis to the Saint Regis Mohawk Tribe.

The deal involved a bulk payout, plus the promise of annual royalties, in exchange for invoking sovereign immunity from inter partes review (IPR) challenges. While the United States Court of Appeals ruled in July 2018 that sovereign immunity does not extend to IPRs, and Allergan and the Tribe’s petition for a rehearing was denied in October 2018, Allergan has said that it now plans to file a petition with the Supreme Court of the United States on the matter.

In an interview with The Center for Biosimilars®, Imron Aly, JD, partner at Schiff Hardin LLP, explained that this long-running case carries important lessons for innovator product sponsors and generic and biosimilar developers as they consider IPR proceedings and the patent landscape as a whole.

First, said Aly, “There’s still an inconsistency, or at least a perceived inconsistency, in approach between tribes as sovereign states and individual states of the country as sovereign states. One takeaway so far is that there’s still room for debate about the difference between applying sovereignty to tribes versus applying it to states.”

Aly explained that, because tribal sovereignty is statutory in nature, it may prove to be harder to preserve than state sovereignty, which is constitutional in nature. Public university systems that hold patents on drugs, for example, are treated as arms of US states, and may attempt to claim immunity from IPRs. An important case to watch in this context, he said, is a pending IPR filed by the private Baylor College of Medicine against the public University of Texas. A decision in this case, which Aly's firm is involved in, will be the first opportunity since the decision against Allergan to demonstrate whether there will be distinctions applied to claims of immunity by tribes and states.

However, in terms of facing an IPR proceeding itself, Aly said, a key takeaway for innovator product sponsors is to “be prepared to challenge the IPR on the merits. From a patent owner's point of view, the numbers are shifting,” he said, with petitions for IPRs now instituted only approximately 60% of the time. “It’s not so unfavorable to the brand or favorable to the generic…maybe going forward in the [Patent Trial and Appeal Board] proceeding is worthwhile even for the brand company to try to leverage something early in terms of merits arguments.”

Another takeaway, he explained, is that brands should become more creative in terms of thinking about settlements to end litigation rather than avoiding patent challenges altogether. “If a brand company is showing that they’re willing to pay a tribe to take on a patent and then pay them to license it going forward maybe there are ways to sublicense to generics…and still make it a money-making machine, but come up with alternatives.” Royalty payment settlements, he said, could keep brand companies “with a finger in the market” even after competitors enter the with their products.

“If I were a brand company,” he said, “if [an IPR] is instituted, [I'd] maybe reach a settlement that has a launch date in the future plus a royalty provision.”

That strategy is similar to that of AbbVie with its recent spate of settlements over adalimumab biosimilars referencing Humira. While those settlements have drawn scorn from many stakeholders, including some lawmakers, Aly does not see them as running afoul of pay-for-delay laws.

In fact, he said, despite some congressional attempts to encourage the Federal Trade Commission to look into AbbVie’s settlements as potential pay-for-delay tactics, such criticism may misunderstand the nature of these settlements by grouping them together with other, impermissible types of settlements.

“Stakeholders are “assuming that because Humira’s such an expensive drug currently, and the [biosimilars] are being delayed because of the settlement, that it automatically falls within the same bucket as some of the other things that have gone under scrutiny lately, like the EpiPen, for example…In my eyes, that’s a misunderstanding,” he said.