It was a "sinister" plot, at least that’s how a Georgia state judge described a plan by pharmaceutical giant Allergan to buy down the University of Georgia’s share of the profits from the breakthrough dry-eye drug Restasis®.
The plan was simple enough, entice the cash-strapped University of Georgia Research Foundation to sell its long term royalty stream for the promise of a quick cash payment. In the end, UGARF would sell its rights to their share of hundreds of millions of dollars in profits for $23 million.
Allergan may have seen UGARF as an easy mark, but inventor Renee Kaswan, who knew more about Restasis® and its market potential than anyone, could prove to be a hindrance to Allergan. To ensure Kaswan didn’t avert their plans, Allergan required that UGARF prevent her from learning about the ongoing negotiations until they were completed.
In a letter to UGARF dated Jan. 7, 2002, the company demanded assurances from UGARF that "currently you are the sole, authorized representative of UGA and Kaswan does not speak for UGA in this matter." UGARF did not give Allergan this assurance, but in court, Allergan misrepresented that they had received it.
In a subsequent letter to UGARF, Allergan said it appreciated UGARF’s cooperation in keeping "our negotiations for a royalty buy-out in confidence…and that no disclosure of such negotiations be made by either party to third parties including Dr. Kaswan."
Without Kaswan in the room, Allergan set a lowball strategy in motion, downplaying sales projections for Restasis®. They claimed that Restasis® would soon be threatened by similar products and then by generics, and that it could be forced from the market by a catastrophic failure like the cardiac complications that doomed Vioxx®.
Kaswan sued Allergan and UGARF but has been unsuccessful in her attempts to rescind the secret royalty agreement. Georgia Superior Court Judge David Sweat, who for technical reasons ruled against Dr. Kaswan in the case, acknowledged in open court that the scheme seemed a bit underhanded: "I mean it's certainly -- you can say, well, it's sinister," he said.