Hayman's Bass Loses Second IPR Drug Patent Challenge

Sep 3 2015 | 5:05pm ET

Hedge fund manager and self-styled “short activist” investor Kyle Bass has been dealt another setback in his campaign to invalidate certain pharmaceutical patents.

The U.S. Patent and Trademark Office decided Wednesday against holding a trial to determine the validity of a patent on Biogen’s $2.9 billion multiple sclerosis drug Tecfidera. Bass’s Coalition for Affordable Drugs had requested the proceeding as part of an inter partes review (IPR) petition, one of more than 20 it has filed since February seeking review of key patents held by drug companies.

The Coalition argued that the Tecfidera patent, which essentially covers dosing, was obvious in light of previously known treatment methods. The setback comes less than a month after the same board declined to review two Acorda Therapeutics patents challenged by the Coalition.

Bass contends that abuse of intellectual property protections is a major contributing factor to sky-high drug costs in the United States. The patents he has challenged, in addition to protecting blockbuster drugs worth billions of dollars for their owners every year, were awarded or extended on meager grounds, such as changing dosing amounts or delivery methods, or based on prior art. The protection has delayed the entry of generic – and much cheaper - versions of these compounds into the market. 

The differences can be significant. In one of Bass’s challenges, against Horizon Pharmaceuticals’ patent on arthritis drug Vimovo, he contends that the compound is merely the combination of a generic pain reliever with a generic acid inhibitor, yet because of a patent, Horizon is able to charge 66 times more than the two generic components cost on their own. 

Bass, CEO of $2 billion hedge fund Hayman Capital Management, is widely considered to have shorted the shares of the companies whose patents he has targeted, hoping to cash in on lower prices should the IP surrounding key products be invalidated.

He has termed the existence of a financial interest in the decline of these stocks as a “truthful irrelevancy,” stating that whether he is short or long a firm’s shares should have no bearing on whether these patents are legitimate. 

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