Corporate titans are adroit at navigating the American legal system to their advantage. When it won’t work to simply outspend their critics and drag litigation out until any challenge to their aims withers away, gigantic companies are often able to find some other workaround to shelter their profit streams from judges, regulators, and politicians.
Irish-American pharmaceutical firm Allergan is now taking that recipe to its absurdist extreme. With a challenge looming to drug patents that shore up 10 percent of the multinational’s corporate income, Allergan is now claiming the drugs it sells belong to the 11,000 members of an upstate New York branch of the Mohawk tribe—a sovereign nation immune from the U.S. patent laws.
This patent scheme effectively allows a multi-billion-dollar company to borrow the legal indemnity and independence specially conferred upon Native American governments after centuries of genocidal conquest and broken treaties.
The Saint Regis Mohawk Tribe will receive $13.75 million immediately and $15 million a year going forward under the deal. The tribal government now legally owns the patents Allergan scientists filed while developing an eyedrop called Restasis, used by patients with severe chronic dry eyes. Allergan’s annual payments lease the patent rights back from the Saint Regis Mohawk—who are now positioned to negate a review of the legitimacy of the Restasis patents begun in late 2016.
The dry-eyes medication market is big business, with total annual sales expected to hit $2 billion annually in the coming years. That haul goes almost exclusively to either Allergan or fellow Ireland-based pharma firm Shire.
Both firms price their prescription dry-eyes meds at roughly $5,000 per year. Patients end up on either Allergan’s Restasis or Shire’s Xiidra when their chronic dry-eye is so extreme that it threatens to cripple their vision if left untreated. The companies’ pricing schemes effectively set a ransom on preserving your eyesight—and they’re trending up, not down. Allergan hiked the price of Restasis by 9.9 percent last year. That followed a 16.6 percent price jump in 2015, as documented by the AARP.
If the Restasis patents fall, clearing a lane for generic competitors to undercut the two firms’ domination, patients would save money. Allergan’s tribal gamble would foreclose that prospect, if it holds up in court. And even if the courts reject the sovereignty-for-rent deal with the Mohawk, the chances that Mylan’s patent arguments can win on the merits aren’t all that great. Pharma investments analysts mostly downplayed the risks to Allergan from the challenges back in December 2016 when the patent office granted Mylan’s request for formal review of the patents.
Allergan isn’t pioneering the tactic of renting tribal sovereignty to duck regulatory structures. Payday lending firms have been leasing tribal mailing addresses for years to evade state laws aimed at banning predatory storefront loan-sharking. But the patent-transfer deal appears to be the drug industry’s first foray into these dubious legal waters.
This is how modern American corporations behave when challenged. Uber’s business model can’t work if it pays drivers properly for the time it requires them to stay on the job? Easy: They’re contractors now, not workers. Burger King’s shareholders are annoyed with the company’s tax bill? Easy: Burger King lives in Canada now, no matter where it sells its beef. Financial markets are too tough to crack? Call your buddies at other firms and collude to rig prices on everything from exchange rates to oil to money itself. Wage theft liability bringing you down? Structure your fast food stores as franchises that must follow your corporate rules, then leave them on their own as independent businesses when those rules run afoul of labor law.
In each case, it’s the little guy who gets hurt.