Allergan was blasted for its unusual Mohawk patent license, and now it's a total flop

Allergan's move to transfer patents to the Saint Regis Mohawk Tribe and license them back has come up short. (Image: Allergan)

After months of criticism that even spilled into a judge's opinion in a separate case, Allergan's Restasis patent deal with the Saint Regis Mohawk Tribe just didn't work. Thanks to a Friday ruling, the blockbuster eye drug has to face the very patent challenge Allergan sought to prevent.

On Friday, the Patent Trial and Appeal Board struck down a motion by the tribe to dismiss the review. The tribe argued that sovereign immunity exempted it from the patent challenge at the Patent and Trademark Office, but the board didn't buy the argument. 

PTAB said the tribe failed to establish that immunity stretches to inter partes reviews. Plus, it concluded that because Allergan still has a commercial interest in Restasis, the review can proceed, according to a release from Mylan, which filed the challenge. The generic drugmaker said an oral hearing is set to take place on April 3. 

Allergan entered its tribal licensing agreement back in September and quickly generated backlash, though some market watchers thought the deal was an innovative way to shield brands from early competition—and, if successful, likely to spread. The company was open about its intentions; the deal was explicitly designed to protect against IPR patent challenges, a "flawed" review system that amounts to "double jeopardy." 

Currently, generic companies can challenge patents in federal courts and at the PTAB. Allergan's CEO Brent Saunders has been among the top critics of the system, and the company, along with others, has pushed for reform. 

The PTAB decision comes after Allergan already suffered a federal court defeat for its key eye med. In an October decision, U.S. District Judge William Bryson said he had "serious concerns about the legitimacy of the tactic that Allergan and the tribe have employed."

"What Allergan seeks is the right to continue to enjoy the considerable benefits of the U.S. patent system without accepting the limits that Congress has placed on those benefits through the administrative mechanism for canceling invalid patents," Judge William Bryson wrote at the time, striking down Restasis patents. Allergan has appealed that decision.

Due to the ongoing litigation, industry watchers aren't sure when Restasis generics will hit. On the company’s fourth-quarter conference call, former CFO Maria Teresa Hilado said the company is assuming generic entry between April and July. Bernstein analyst Ronny Gal and his team recently said they expect generic competition in 2018 and predicted the med will lose half its revenue this year.

Allergan declined to comment on the PTAB decision.