Allergan's much-maligned tribal licensing deal wins reprieve at appeals court

Allergan took all kinds of flak last year for an unusual tribal licensing deal designed to protect its blockbuster eye drug Restasis from early generics. But after a recent setback at an administrative court, the strategy has new life. 

A U.S. appeals court on Wednesday stayed proceedings at the U.S. Patent Trial and Appeal Board until it can hear oral arguments from both sides in June. The PTAB had set a final hearing for the patent reviews on April 3. Generics makers Mylan, Teva and Akorn are challenging patents on the blockbuster eye med, according to PTAB records. 

Back in September, Allergan transferred Restasis patents to the Saint Regis Mohawk Tribe and licensed them back to sidestep an inter partes review at the PTAB. Allergan paid the tribe $13.75 million up front, plus up to $15 million in royalties per year, believing the tribe's sovereign immunity would shield the patents from attack. 

The deal immediately drew criticism, and some industry watchers said it would give pharma a black eye during a relatively quiet period. Allergan defended its arrangement by calling the IPR patent review system "flawed." The relatively new IPR challenge forces drugmakers to defend their intellectual property twice—in federal courts and at the PTAB, CEO Brent Saunders said, calling for reform.

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

Since that licensing deal, however, Allergan suffered an intellectual property loss in federal court. A judge in October invalidated key patents for the blockbuster eye med on grounds of obviousness. In issuing his decision, Judge William Bryson wrote that he had "serious concerns about the legitimacy of the tactic that Allergan and the tribe have employed." 

No generics have won FDA approval, but if they do—and pending an appeal of that case—knockoffs could launch this year.

Allergan and Teva declined to comment on the new decision. A Mylan spokesperson said it's "important to note that the Restasis patents have already been found invalid" in the federal court case.

"Allergan’s appeal of that invalidity decision is pending and is not affected by the recently granted stay," she added.

Restasis, a key contributor for Allergan, brought in $1.4 billion in the U.S. last year. It's among a group of meds that company execs say could face 2018 competition.

RELATED: Allergan loses Restasis patent protections in federal court decision  

Meanwhile, Congress hasn't forgotten about the tribal licensing strategy. Just this month, a bipartisan group of senators introduced legislation to prevent companies from "renting" sovereign immunity, according to a press release from Sen. Claire McCaskill, who previously blasted the Allergan deal. 

In a statement, the senator said such an arrangement "should be illegal, and our bipartisan bill would make it so by ending this astounding assertion of sovereign immunity to avoid patent review, before any other companies follow suit." 

Editor's note: This story was updated with a statement from Mylan.