U.S. Pharmaceutical Industry Reveals Its Latest Rent-Seeking Swindle

U.S. Pharmaceutical Industry Reveals Its Latest Rent-Seeking Swindle by Michael Krieger – Liberty Blitzkrieg

For as long as I’ve been writing on this website, I’ve argued that the U.S. economy has become little more than a gigantic rent-seeking swindle where much of the wealth being “created” isn’t being created at all. Rather, money is being shuffled around and extracted from the population at large via increasingly elaborate and preposterous schemes. Indeed, it appears much of the nation’s creative energy is being directed at discovering new corporate scams, versus the invention of new goods and services that benefit everyone.

For the latest scheme we turn, unsurprisingly, to the pharmaceutical industry and Allergan in particular. The ploy was revealed by The New York Times last week, and its pretty grotesque.

What follows are excerpts from the article, How to Protect a Drug Patent? Give it to a Native American Tribe:

The drugmaker Allergan announced Friday that it had transferred its patents on a best-selling eye drug to the Saint Regis Mohawk Tribe in upstate New York — an unusual gambit to protect the drug from a patent dispute.

Under the deal, which involves the dry-eye drug Restasis, Allergan will pay the tribe $13.75 million. In exchange, the tribe will claim sovereign immunity as grounds to dismiss a patent challenge through a unit of the United States Patent and Trademark Office. The tribe will lease the patents back to Allergan, and will receive $15 million in annual royalties as long as the patents remain valid.

The surprising legal move rippled quickly through the pharmaceutical world on Friday, setting off speculation about whether other drug companies would soon follow suit in order to protect their patents from challenges through a patent-review process that the industry despises.

If Allergan succeeds in holding onto its patents, “we will probably see multiple branded companies housing their patents with Indian tribes,” Ronny Gal, an analyst for Bernstein, said in a video message to investors on Friday.

Mr. White said the tribe was approached in April by a Dallas law firm, Shore Chan DePumpo, which proposed the idea. The tribe has already taken ownership of patents owned by a technology company that Mr. White declined to name, but said the Allergan arrangement is the tribe’s first pharmaceutical deal.

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Michael Krieger

As far as my academic and professional background, I attended college at Duke University where I earned a double major in Economics and Spanish. After completing my studies in 2000, I took a job at Lehman Brothers where I worked with the Oil analyst in the Equity Research Department. In 2005, I joined Sanford C. Bernstein where I served as the Commodities Analyst on the trading floor. About halfway through my time there, I started to branch out and write opinions on bigger picture “macro” topics that no one else at the firm was covering. These opinion pieces were extremely popular throughout the global investment community, and I traveled extensively providing advice to some of the largest mutual funds, pension funds and hedge funds in the world. I loved my job, but as time passed I started to educate myself about how the monetary and financial system functions and what I discovered disgusted me. I no longer felt satisfied working within the industry, and I resigned in January 2010. At that point, I started a family investment office and continued to write macro pieces on economic, social and geopolitical topics. That summer, I drove cross country for six weeks and ultimately decided to leave the crowded streets of Manhattan for the open spaces of Boulder, Colorado, where I currently reside.