Brand-name drug companies have engaged in all sorts of strategies to block generic competition and prolong their monopolies on various medicines. But this new strategy is the most blatant yet. The drug company Allergan, which makes the popular eye drug Restasis, announced last week that it has transferred its patents to the St. Regis Mohawk tribe in upstate New York. This is a bold attempt to prevent Restasis's patent from expiring and to prevent generic drugs from coming to market. It is also further evidence that these drug companies don't care about safety concerns or innovation; they simply want to maintain their monopoly as long as possible.
The drug in question, Restasis, is a dry-eye treatment that costs $465 per month and is immensely profitable. Allergan earned $336.4 million in revenue from this medicine during the second quarter of 2017, and it is their second highest-selling product. The original patent on Restasis expired in 2014 but Allergan managed to get new patents on the drug that extended until 2024. However, these weak patents are being challenged in court and before the Patent and Trademark Office, and both entities were soon expected to make a decision.
But this news changes that. Allergan has given the patents to the Mohawk tribe, and has agreed to pay them $13.75 million. In exchange, the Mohawk tribe will claim sovereign immunity as grounds to dismiss the patent challenge through the Patent and Trademark Office. They will lease the patent back to Allergan, and Allergan will give them $15 million in royalties per year as long as the patent remains valid.
Generic drugs are a huge benefit to consumers. When they come onto the market, their prices are far lower than brand drugs, sometimes as much as 80% lower. We have already written about brand companies and their efforts to prevent generic drugs from entering markets, but this attempt is the most outrageous one yet. The Mohawk tribe has played absolutely no role in developing Restasis, there are no concerns about the safety of generic versions of the drug, there are no claims that ending the patents will harm research or innovation, and there aren't even any real arguments that the patent should be extended. Allergan's transfer of the patent is a glaring attempt to evade the law and preserve its profits while costing consumers and taxpayers billions of dollars.
The stakes in this scenario are very high. If regulators allow this evasion to go unchallenged, other drug companies may adopt similar strategies. The tribe is already considering similar deals with other drug companies. If this becomes a widespread strategy, generic competition will be badly hurt, and consumers, businesses, and all Americans will pay the price. Prescription drugs are already far too expensive, and this attack on competition would make them more so. Regulators should not let this move go unchallenged.