Allergen (AGN) stock is down over 0.39% to close on Wednesday after lawmakers take aim at the company over a patent deal they made with a Native American tribe. The pharmaceutical company struck a deal with Saint Regis Mohawk Tribe in September.
The patent deal would transfer Allergen’s patent for Restasis, an eye drug, to the Native American tribe.
Lawmakers state that the deal is an attempt to leverage the advantages that tribes have with patent challenges. Sovereign immunity allows the tribe to maintain exclusive rights to the drug through 2024, shielding the company from generic competition.
Allergen – known for their Botox drug that is used for anti-aging purposes, hyperhidrosis, muscle stiffness, spasms, eye disorders, wrinkles and uncontrolled blinking – is accused of using the workaround to protect the drug from competition.
The company’s September press release states that it entered into a “sophisticated” opportunity. The deal, transferring the patent rights to the tribe, allows the company to protect 15% of their profits.
Botox helped the pharma company boost their revenue by 10% annually, offsetting the falling revenue of older drugs the company offers. Botox is also under pressure as alternative medicines, and treatments, like iontophoresis, continue to threaten the company’s blockbuster product.
Restasis accounts for $1.5 billion of the company’s sales. St. Regis’ deal allows the tribe to receive up to $15 million per year in royalties and a $13.75 million payment. Tribes, along with universities, have patent protection.
The tribe said that the deal was a way for them to diversify their income.
“We realize that we cannot depend solely on casino revenues and, in order for us to be self-reliant, we must enter into diverse business sectors to address the chronically unmet needs of the Akwesasne community; such as housing, employment, education, healthcare, cultural and language preservation,” states the tribe’s council.
Legal professionals and lawmakers state that anyone who cares about drug prices should be worried about the deal.
Allergen’s move will keep generic drugs from reaching the market, allowing the company to maintain no competition. The drug’s prices will remain unrivaled by competition.
The Hatch-Waxman Act, enacted in 1984, allows generic competition to enter the market faster. The generic version of drugs will go through FDA approval faster. Allergen’s attempt to safeguard their patents will keep the drug’s prices higher by keeping competition stagnant.
The Act allows the original drug maker, in this case Allergen, to be able to have exclusive rights to their drugs for a specified period of time. This right is an attempt to help manufacturers recuperate their research and development costs.
Generic drug makers can challenge these limits, not set in stone, and force companies to allow generic versions of their product on the market.
Tribes and universities are immune to these challenges, allowing Allergen to keep generics out of the market for an additional four years. Allergen is in the middle of a federal patent trial.
The judge ordered the company to file briefs by October 13 “addressing the question whether the Tribe should be joined as a co-plaintiff in this action, or whether the assignment of the patents to the Tribe should be disregarded as a sham.”