Viatris has successfully held its ground in a pitched battle with the IRS over tens of millions of dollars. The case hinges on charges Viatris accrued in patent cases tied to its generic drug approvals early last decade.
While the IRS argued Viatris owed $50 million in taxes, the Third Circuit Court of Appeals late last week denied the agency’s appeal of a 2021 ruling in Viatris’ favor. The appeals court rejected the IRS’ argument that the company's litigation fees should be taxable.
In the case, Viatris was on the line for claiming patent litigation costs as deductions on its 2012, 2013 and 2014 tax returns. Viatris was born in 2020 from the union of Mylan and Pfizer’s Upjohn established medicines business.
While this represents a win for Viatris, it will presumably benefit other generic drug makers, who should be able to rely on this decision when preparing their future tax filings.
The appeals court win for Viatris follows a prior victory at the U.S. Tax Court, which found patent litigation was separate from the FDA approval process for generic drugs. The tax court said Mylan’s litigation fees should be deductible as ordinary business expenses.
“The Tax Court therefore correctly determined that litigation … is distinct from the FDA’s scientific review process and not actually facilitative of generic drug approval,” the Third Circuit said in its recent decision.
Like all generic drug makers, Viatris is certainly no stranger patent litigation. It was recently on the losing end of a battle in May, when a New Jersey district judge ruled that Viatris’ proposed generics of Johnson & Johnson’s long-lasting schizophrenia treatment Invega Trinza would induce infringement of a patent dubbed ‘693.
Separately, Merck & Co. and Viatris reached a settlement in a long-running dispute over patents on blockbuster diabetes drug Januvia and its generic rivals.
The exact terms of the settlement were confidential, the companies said in a joint motion at the time.