America’s pharmaceutical industry has a problem, and that problem is the rule of law. One can draw no other conclusion, based on the industry’s recent actions. I refer specifically to the pharmaceutical company Allergan’s recent optically baffling attempt to outright circumvent U.S. patent law by selling their patents straight to… a Native American tribe.
Yes, it seems that Native Americans can’t catch a break when it comes to hosting disfavored or questionably legal industries in their backyard. To be fair, this is hardly the tribes’ choice: Their more lenient legal status is a magnet for America’s seediest actors, and the tribes’ large scale poverty makes it easy for those actors to dangle the prospect of financial survival over their hosts’ heads. Pharma has a lot of money, and thus, a lot of survival to offer.
It’s why they’re offering it that should concern us. As with so much else pharma does, that reason involves avoiding the laws that force them to sell their products in a competitive market, rather than as a monopoly. In this case, the industry is seeking to kill two birds with one stone: legal scrutiny on its patents, and competition from generic drug manufacturers.
You see, Pharma is very unhappy with a particular legal procedure known as an Inter Partes Review, or IPR. What is an IPR? It’s a patent quality measure enshrined in the 2012 America Invents Act which permits a patent’s enforceability to be challenged before a special patent quality board called the Patent Trial and Appeal Board (PTAB), rather than through an onerous and costly court case. Unlike a court case, however, the point of an IPR is more limited, and designed only to ensure that the patent in question meets the basic standards for patentability — a live concern, given the U.S. Patent and Trademark Office’s (USPTO) “grant first and ask questions later” approach to patents. An IPR is where the “ask questions later” section comes in.
You wouldn’t think this sort of thing would worry Pharma at all. After all, they’re usually in the business of producing life-saving medicines whose patentability should be ironclad. And you’d be right, because not a single pharmaceutical patent has been invalidated by an IPR during the initial ten years of its patent shelf life. Where the industry runs into trouble, however, is when it seeks to extend those patents beyond their initial shelf life, regardless of whether the patents actually meet the standard for an extension — a process called “evergreening.” The industry does this to avoid competition from generic manufacturers, which would force them to lower the otherwise sky high monopoly-driven prices that their drugs enjoy during those first ten years. IPRs — obviously — throw a wrench in the gears by enabling those same generic manufacturers to call out where pharma patents have been incorrectly extended.
Now, IPRs are legally controversial in some circles, and will soon have their constitutionality decided decisively by the U.S. Supreme Court. Pharma presumably could offer arguments to sway the court against the procedure, if their concern was whether the law was being applied fairly. Until the court decided, yes, they’d have to deal with IPRs, but that’s how the law works. You have to follow it until it gets changed or invalidated. Besides, if their patents were valid, surely they could make short work of frivolous IPR challenges.
That is what reasonable companies with an interest in both protecting their bottom line and following the law would do. But apparently Allergan is not such a company. So rather than obey the law like everyone else, they literally sold their patents to people who weren’t covered by the law so they could go on licensing them and charging the same monopoly prices. In other words, they don’t care what the law is.
This is dangerous for more reasons than just this particular evasion of the law. There are numerous laws designed to enforce competition and keep prices down that pharmaceutical companies could seek to circumvent through this particular Native American loophole. How long before a company decides that it would rather avoid the voluntary 340B drug discount program by selling drugs “licensed” from Indian tribes to the Medicare Part B market? How long before a company decides that in order to get around laws that protect generic manufacturers from spurious denials of their clinical trials, like the forthcoming CREATES Act, they’ll just license all their most profitable drugs to Indian tribes? Allergan’s maneuver could literally act as a get-out-of-jail-free card for such actions.
Furthermore, the decision to use Indian tribes as the vehicle for this particular kind of abuse is especially distasteful. Indian tribes are disproportionately poor and likely to suffer from cancer, relative to the general population. Given that cancer drugs are some of Pharma’s most profitable (i.e., expensive) products, as well as the ones they are most eager to protect from competition, they are transforming the tribes into the instruments of their own destruction. Combine this with the fact that the people most likely to suffer from Big Pharma price gouging are located deep in the heart of Trump Country, and you have an abuse that everyone, from white working class Trumpists to identity politics-focused Leftists, should be ready and eager to end.