Hedge fund exec aims new legal weapon at Big Pharma's 'evergreened' patents

Kyle Bass

A new voice is joining the patent-fighting chorus. U.S. hedge fund manager Kyle Bass, best known for predicting the subprime mortgage crisis in 2008, said he plans to challenge "questionable" drug patents held by industry heavyweights.

Bass plans to challenge 15 drug companies' patents via an Inter Partes Review (IPR) process created by the America Invents Act in 2012, Reuters reports. He's focusing on the sort of patents criticized as "evergreening," where companies prolong their monopoly on a particular drug by filing a slew of minor patents.

"The companies that are expanding patents by simply changing the dosage or the way they are packaging something are going to get knee capped," Bass told investors during a recent presentation in Oslo, Norway (as quoted by Reuters).

The hedge fund manager is not naming names or revealing details about his investment positions. But Bass' move could undercut some drugmakers that use evergreening to protect their sales. Abbott Laboratories ($ABT) employed the tactic for years for its Tricor cholesterol drug, according to an Archives of Internal Medicine study, prolonging its brand-name sales with small formulation tweaks. A union health plan sued Warner Chilcott (now part of Actavis ($ACT)) and two would-be generics rivals, saying Warner used similar patent shenanigans on its Loesterin contraceptives, and the copycat drugmakers only backed off an infringement fight because Warner offered cash settlements.

Bass is far from alone in his discontent with the pharma industry's patent protections. South Africa in 2013 proposed legislation that would outlaw evergreening, touching off a fiery battle with the pharma industry there. Outspoken Express Scripts ($ESRX) exec Steve Miller is suggesting that the U.S. take similar steps, saying evergreening costs the health system a lot of money, and "violates one of the industry's own principles, which is to contribute medicines that add value to patients and providers."

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