It always raises eyebrows when a hedge fund investor gets entangled in a drug-related patent challenge. The first suspect is that the investor is merely bringing up the challenge to bring prices down and thus make profits out of it. It gets even more suspicious when the investors had earlier been involved in unethical practices and had curved an image of someone who can do anything to get himself rich. This, perhaps is what explains Kyle Bass’ petition challenging a patent covering several sclerosis drug Tecfidera dimethyl fumarate from Biogen Inc.
According to an article in wikipedia, the Patent Trial and Appeal Board has instituted an inter partes review (IPR) petition from Coalition for Affordable Drugs (CFAD) formed by Kyle Bass. CFAD was formed primarily to challenge several pharma patents filed with United States Patent and Trademark Office (USPTO). IPR procedure is used to challenge the validity of a US patent before the USPTO. CFAD has thus far, challenged several pharma companies’ patents including Acorda Therapeutics Inc, Jazz Pharmaceuticals plc and Celgene Corporation.
The intentions of a hedge fund in challenging a drug patent is to make money through driving stock prices downward. This was the case when Acorda’s stock prices dropped 10 percent upon a review of the first Ampyra patent was filed on 10th February. The funds have continually held that their intention is to make drugs affordable especially when the patents are ‘fake.’
According to a report on Biocentury.com, the patent is on dosage. Bass challenged US Patent No. 8,399,514 that covers the use of 480 mg of dimethyl fumerate for treatment of multiple sclerosis that expires in 2028.
There may just be legitimate claims of patent abuse according to PTAB. The board has stated that prior art that was introduced by the coalition provided “convincing evidence” in the way of arriving at the appropriate dose to treat autoimmune diseases.
On the wake of rising questionable cases of patents, CFAD has been up and running with petitions. As of 2015 in October, the coalition had filed 33 petitions for IPR. Some of the petitions are multiple patents against the same patent. PTAB has managed 17 institution decisions of the nature.
The success rate of the petitions can be rated ‘fair’ with 7 out of the 17 institution decisions being granted. The other 10 have been denied for lacking threshold to make it for a case. This translates to a 59 percent rate of denial.
The founder of CFAD, Kyle Bass is the founder and principal of Hayman Capital Management L.P. Bass’ earned recognition in the financial world when he correctly predicted the subprime mortgage crisis in 2008. He has, however, has been criticized for many of his investment decisions for both their performance and for ethical reasons. He is largely seen as an investor who seeks to make money by all means including over-stepping those he finds on his way.