Congress must protect vital drug patents from Wall Street attacks

Hedge-fund investors are coming to raid your medicine cabinet.

Cutting-edge treatments for diseases affecting millions of Americans are threatened by Wall Street’s latest moneymaking scheme. The ploy: hedge funds bet against a drug company’s stock price, launch attacks against the firm’s patents on its best-selling medicines and then reap windfall profits when investors panic and the stock price plummets.

Unless Congress protects pharmaceutical-research firms from these assaults, funding for drug discovery will dry up and many new treatments won’t ever make it into the hands of patients.

Hedge-fund manager Kyle Bass pioneered the strategy, which relies on a new legal procedure known as “inter partes review,” or IPR. Earlier this year, Bass — who previously made $590 million betting that homeowners wouldn’t be able to make their mortgage payments during the financial crisis — filed a review against Acorda Therapeutics’ patent on a drug that helps multiple-sclerosis patients walk. The challenge caused Acorda’s share price to crash by 10 percent.

Wall Street began exploiting the system after Congress created the Patent Trial and Appeal Board, a new arm of the Patent Office tasked with taking a second look at patents that some consider too vague. Since its formation in 2013, the board has proven so hungry to annihilate patents that it’s been called a patent “death squad.”

Bass quickly saw how the board was wiping out patents and jumped at the chance to make money from a self-fulfilling prophecy: challenge the patent and short the company’s stock to profit on the market’s reaction.
Sign Up for Our Email Newsletter

RECENT NEWS

Gottlieb Likely to Take On Off-Label, Predictability at the FDA

Gottlieb Likely to Take On Off-Label, Predictability at the FDA

Dr. Scott Gottlieb is the right man in the right place at the right time....  Read more

Pharmaceutical Industry Raises Issue with Cuomo's Drug Price Control Proposal

Pharmaceutical Industry Raises Issue with Cuomo's Drug Price Control Proposal

CMPI President Peter Pitts appears on NY1 News to discuss Governor Cuomo's prescription drug proposal...  Read more

U.N.'s errant prescription for drug access

U.N.'s errant prescription for drug access

The U.N.'s war on IP rights ignores the real barrier to drug access: insufficient medical infrastructure....  Read more

DRUGWONKS BLOG