Following notorious price hikes by Martin Shkreli and Valeant, the pharma industry found itself in the crosshairs over pricing in 2016. Seizing an opportunity to take a leadership position on the issue, Allergan CEO Brent Saunders wrote about the industry's "social contract" and pledged to limit price hikes.
In the blog post, Saunders wrote about principles the industry shares and said that "we must keep this social contract in mind as we make business decisions that ultimately improve wellbeing, and as a result, address the hopes others place in us."
If pharma didn't police itself, he warned, lawmakers could step in. Over time, pricing scrutiny has raged on and Saunders' pricing pledge has become a de facto pharma rule.
Another of Saunders' moves as Allergan CEO wasn't as popular, and that's where one of Saunders' actions didn't match up with the social contract commitment.
A year later, as Allergan's blockbuster eye drug Restasis faced loss of patent protections, the company inked a much-criticized deal with the Saint Regis Mohawk Tribe to transfer key patents and license them back. Saunders and Allergan thought the deal would allow the company to bypass an inter partes review challenge at the U.S. Patent and Trademark Office on grounds the tribe is a sovereign nation. By protecting the patents, Allergan could potentially evade generic competition and continue to charge monopoly prices for the drug.
Instead, the deal backfired and made Allergan the target of criticism from lawmakers, consumer advocates and others. Influential market watcher Brad Loncar tweeted that it'd be a "black eye" for the industry. Lawmakers piled on by starting investigations and vowing to block the arrangement.
This is going to impact all of us. Will be the next major black eye pharma story. Thanks $AGN.— Brad Loncar (@bradloncar) September 8, 2017
Saunders and Allergan defended the move by pointing to a "flawed" patent review system, under which drugmakers must defend their intellectual property in federal courts and at the U.S. Patent and Trademark Office.
In the end, the courts rejected the deal, but generics makers haven't yet reached the market with Restasis copycats due to FDA stumbles. In an interview with STAT, Saunders said the company "clearly eroded trust" that it worked hard to earn with the move.