Thursday 7 August 2008

Grit in the eye for Allergan? The Restasis licence refuses to go quietly

Via the most recent issue of Technology Transfer Tactics comes an item in the Chronicle of Higher Education ("A Raw Deal, in a Researcher's Eyes: Dispute over an invention highlights problems in technology transfer" by Goldie Blumenstyk) on the fairness or otherwise of the terms of an IP licence. According to this article the University of Georgia missed out on a chance to derive major income from its licence arrangement with Allergan Inc for the exploitation by the latter of the Restasis eyedrops, Even though the deal is expected to cost Allergan some US$70 million, former professor Renee L. Kaswan describes it as "naïve and shortsighted" because it allowed Allergan to pay for the right to reduce its royalty exposure. According to the article:

" ... The 2003 deal allowed Allergan to reduce the royalties it was obliged to pay to the university, in exchange for an upfront payment of $23 million and additional payments later.

... University leaders have said that their arrangement with Allergan guaranteed the institution a lucrative payday even if the prescription product was later found to be unsafe or was overtaken by a competing drug. ...

Allergan began selling Restasis in 2003. In the most recent quarter for which figures are available, it reported sales of $100 million, up 28 percent from the same period a year earlier. The company ... predicts sales of $375-million to $405-million in 2008.

Dr Kaswan says the deal ... also substantially shortchanges her; she is entitled to 35 percent of what the university earns from Restasis.

She contends that Allergan understated the sales potential for Restasis and overstated the possibility of long-term financial risks with the product and the patent to get the university to sign on. She also contends that the company the university hired to help it evaluate the deal did not do a good job researching the product's market potential.

Court transcripts and other evidence in the case show that board members of the University of Georgia Research Foundation decided to keep the deal secret from her — a move she calls a mistake because she understood Restasis's market potential better than they did. Faculty members who develop valuable intellectual property, she says, deserve better from their universities. "It's just not the way you treat your inventors," she says.

In April 2007, Georgia Superior Court Judge David R. Sweat ... did acknowledge that the foundation "made a bad deal"...."

Litigation continues (the article contains a great deal of further information concerning its background).

The whole episode makes depressing reading. The easy bit is that universities want a fair and reasonable return on their IP; commercial risk-takers like Allergan want the chance to milk the market when they have a winner on their hands, to compensate them for the investment cash wasted on failures; academics want recognition and reward; university administrators want a quiet and stable routine -- and everyone who is part of any decision-making process is entitled to make its decisions on the basis of the best information available both to it and to the other parties at the time negotiations take place.

While it is difficult not to feel sympathy for Dr Kaswan's position, it is equally hard to dismiss entirely the notion that the best market analysis is that which has been enriched by hindsight. We are hardly likely to reach that nirvana in which royalty rates are computed on the basis of a full exchange of all market intelligence between the parties, or fixed and varied by a third party 'wise man'. The best we can do at the moment is either to provide a mechanism for the variation of royalties that is less likely to confer a one-sided advantage than Allergan's pay-off clause, or which enables the rates to be revisited and revised on the occurrence of specified acts or events.

1 comment:

Anonymous said...

You could assume Restasis was proven successful only by hindsight, BUT during the negotiations between UGA and Allergan... (1) Allergan insisted Dr. Kaswan be excluded (2) Allergan refused to share internal sales projections (3) Dr. Kaswan was aware of their internal sales projections (4) Allergan dangled the threat of a competing drug for dry eye caleld Diquafosol that would devalue UGA's patent if the FDA approvd it, BUT Allergan knew the clinical trials of the drug had failed and FDA approval was not going to happen.

All of those extra little details, to me, indicate shade, underhanded behavior by Allergan and not just "luck of the draw" success.