Saturday, 17 September 2011

"The Dog Ate My Homework" Bill

In "A Late Addition Worth $214 Million: Amendment to the Patent Reform Bill Last Week Would Benefit Powerful Law Firm, Drug Company," Roll Call magazine writes about what is known in the blogosphere as the "The Dog Ate My Homework" bill:

The House might have sworn off earmarks, but that didn’t stop the chamber from essentially passing one last week that would allow a single drug company to avoid generic competition while saving a powerful law firm from paying out $214 million in a malpractice suit.

The amendment, authored by Rep. John Conyers (D-Mich.) and added to the patent reform bill Thursday, would have a direct benefit for the Medicines Co. by essentially ensuring it retains control of the patent for Angiomax, a blood-thinning medication and MDCO’s flagship product.

The provision would also be a financial boon to WilmerHale, which since February has had a malpractice settlement with MDCO hanging over its head that would require the firm to pay $214 million to the drug company — $115 million out of its own pocket and $99 million from malpractice insurance — if a generic drug is introduced before June 15, 2015.

Here's how the saga started:
At issue is MDCO’s 2000 application to maintain its patent over Angiomax. Following approval of the sale of the drug by the Food and Drug Administration in December 2000, the company had 60 days to file for a patent extension, which under the law would have precluded the sale of generic versions of the drug until 2014.

WilmerHale attorneys handling the application for MDCO technically filed the extension 61 days after the approval, and because the Patent and Trademark Office does not have authority to give applicants wiggle room in filing, the application was denied, meaning generics would hit shelves in 2010, costing MDCO an estimated $500 million to $1 billion in profits.

Here's the business strategy:
To regain control of the patent, MDCO opened up a three-pronged offensive. It filed suit against the PTO, arguing that because the FDA used a different interpretation to calculate the 60-day permit trigger, its 61-day filing time actually fell within the PTO’s definition.

MDCO also began malpractice proceedings against WilmerHale over its handling of the patent extension, while both MDCO and WilmerHale launched an aggressive effort to pass legislation overturning the extension rejection.

Over the next several years, MDCO and WilmerHale spent millions of dollars lobbying Congress, and several ultimately unsuccessful efforts to pass the legislation were attempted.

The amendment was sponsored by the Detroiter who I think is the longest-serving current member of the House, John Conyers:

In a floor statement before Thursday’s vote, Conyers, the Judiciary Committee’s top Democrat, called the language a “bipartisan amendment” that would make a “technical — but important — revision” to federal patent law.

“It addresses confusion regarding the calculation of the filing period for patent term extension applications,” Conyers said, adding that, “By eliminating confusion regarding the deadline for patent term extension applications, this amendment provides the certainty necessary to encourage costly investments in lifesaving medical research.”

For reference (you don't have to read it): Medicines v. Kappos, 731 F.Supp.2d 470 (2010).


  1. This is a typical example of the cost of monopolies to lobby for a law that knocks out competitors. It is amazing to see that this effort can add up to such substantial cost. Although Conyers' justification for the bill sounds reasonable in its own right because patent laws are meant to encourage innovation by providing monopoly power, it sounds ridiculous in this context because the whole society, including the relevant parties themselves, paid millions to prolong a monopoly which causes further loss in surplus regardless of the fact that the innovation has already been made more than ten years ago.

  2. Why are there such issues with doing things in a timely manner? I understand that there was error in the understanding of the law, but if something is so valuable to a company (such as extending a drug patent, and saving the company 214 million dollars) you think it would be on the top of the to-do list after taking out the garbage. Ridiculous.

  3. I think I see both sides of the story: why monopolies disrupt surplus maximization, but also the reasoning behind patents and their extensions. I worry that maybe opening the market to competition could lead to discouraging the companies that drive the research and innovation, as Congressman Conyers stated. Maybe the problem lies more with the fact that given enough money and influence, large companies such as MDCO and WilmerHale are able to push government into acting as they wish, rather than as would be best for all involved. At the same time, however, lobbying has been put in place as a form of appeal whenever legislation costs someone dearly, and clearly those who really care about the issue at hand are the ones that put so much effort and resources into getting their way.

  4. This article reminds me of regulatory capture. How the government agency intended to regulate the patent (drug) industry is controlled by that very industry. Two huge drug companies (MDCO and WilmerHale) were able to lobby and get the government to bend the rules for them so they could maintain power in the industry.

  5. This clearly shows monopolies exerting influence on institutional policies. The government fails to impose standard regulation on these companies in a fair manner. They were able to take advantage of their market power to amend the rules to their liking. This kind of monopoly power is exactly the thing the government is supposed to prevent, not encourage.
    Also I agree with Rebecca. If this was such an important product for the company, shouldn’t they be paying closer attention to their deadlines?

  6. I think Rebecca hit it on the head. I don't know how a company can not file a patent in time. This is a case of pulling strings, and monopoly power. I can't believe that the government would side with two firms who are apparently lobbying in their self interests. Increasing competition allows for better products, because as we have learned in class monopoly power can lead to a deadweight loss to society.

  7. Being Italian, I see this as a very slippery slope. Berlusconi is constantly passing complex laws that are simply smokescreens while their true intended purpose is to manipulate the law and rid him of legal guilt in certain financial scams.

    It is obvious to me that while Representative Conyers stated his intent was to clarify the filing parameters for patents, his amendment would also favor a corporation that undoubtedly has put great efforts into lobbying for this legislation. Moreover, while I am not an expert on patents, it seems that sixty days to file a patent is extremely straight forward so I am not sure how Conyers' amendment would really be rectifying anything whatsoever.

  8. It seems as though in this situation, it was a case that a giant pharm company influenced government because of its effect/contribution to the economy. R&D is costly and risky enough, and I don't believe our government provides enough incentive to conduct R&D. Maybe it is possible the goverment passed this as a way to compensate this issue.

  9. One thing I take away from this story is a new reason to do work well before deadlines: you might have made a mistake about the time of the deadline.