Wednesday, October 26, 2011

State liability rules and jobs

In today's Milwaukee Journal Sentinel, Henry Greenspan criticizes a Wisconsin bill that would provide manufacturers of drugs and medical devices with an "FDA defense." If the FDA approves sale of the device, the manufacturer cannot be held liable in a civil suit.

I think that reasonable people can differ on the bill but a few of the claims made by Mr. Greenspan are substantially off the mark. First, he claims that a similar law in Michigan has contributed to the decline of the pharmaceutical industry there because a robust liability system creates more accountable and better companies.

The latter assertion is debateable - at least among the range of policy choices that are actually in play in the United States. But even if true, Michigan's law could not have had the slightest impact on Michigan manufacturers. Let me explain.

For over ten years, I advised a Wisconsin manufacturing firm (not drugs and medical devices but I don't think that matters) on issues of product design and liability. When a new product or modification was in development, we'd talk about whether it might create liability issues. I never gave advice based upon the particulars of Wisconsin law.

Why not, you ask?

Because we were a national firm. Given that Wisconsin is an average sized state, we could expect about 2% of our sales to be here. (Maybe a little better because we were based here but,then again, so was our principal national competitor for much of that period.) If there was an accident in one of the other 49 states where we sold 98% of our stuff, it would be governed by the law of that state. So even if Wisconsin had passed a law strongly favorable to manufacturers (and it hasn't), we could not base our decisionmaking on the law in Wisconsin.

Given that very few, if any, pharmaceutical companies manufacture for local distribution, I suspect that the same dynamic was at work there. A change in Michigan law was unlikely to make the manufacturers any more or less accountable - although it might affect the willingness of both Michigan and non-Michigan firms to sell into Michigan and pricing to Michigan customers.

Astute readers will ask whether this means that the bill pending in Wisconsin is unlikely to create jobs here for the same reason. It's a fair question.

Mr. Greenspan also asserts that "physicians agree" that a robust tort system is a good thing. The evidence he cites does not support such a broad statement and my experience sure doesn't. I have yet to discuss the "tort system" with a doctor and get anything other than a diatribe against lawyers.

So is the bill a good idea? Liberals who don't like it might be interested to know that it represents a more European approach to product safety and liability. In Europe, we were less concerned about what would happen in court because liability litigation is pretty rare. We were very concerned about obtaining EU certification.

Is Europe less safe than the US?


Tom said...

It's also worth pointing out that there is already a federal law prohibiting states from placing any liability on manufacturers for injuries caused by certain FDA-approved medical devices. (See Riegel v. Medtronic, 552 U.S. 312 (2008).) It's hardly revolutionary for a state to choose to do the same thing for FDA-approved drugs.

HG said...

I appreciate the comments on my op ed. Here are some responses.

Re: Michigan's economy, my comment meant to rebut a statement made by a representative of ATRA (American Tort Reform Association) who claimed, in a Cap Times article, that Pfizer left Michigan because of the possibility of our shield law being rescinded.

In fact, Pfizer said then, and continues to say, that its decision was entirely unrelated to the that possibility. I recently confirmed the point with the person who directed the company in our state. So the ATRA comment was disinformation. Pure and simple.

In the meantime, it is undeniably true that MI recently lost $20 M in a Medicaid suit entirely because of our law. And it is also true, as I wrote, that "many" who work in the drug and device industry argue that maintaining civil liability is good for their business. "Many" obviously does not mean everyone. These are most often people on the research side who suggest that liability restricts the "cowboys" (their term) in marketing from leading their company, and their customers, into disaster.

As far as physicians, I cited a statement by eleven former editiors of the New England Journal of Medicine. The Journal of the American medical association editorialized in precisely the same way. They, indeed, noted that it is rare for physicians to argue on the side of liability lawyers. But this issue "threatened public health" (again, their phrase) enough to speak differently.

So if the blogger never met a physician who said this, he does not read NEJM or JAMA.

HG said...

In fairness, I should add that I agree that FDA preemption in one or two states will not impact accountability more broadly, precisely because of tort law in the remaining states. Like the New England Journal of Medicine, I was writing in the context of FDA preemption as a doctrine.

Having lost in Wyeth v. Levine, it is, indeed, the strategy of FDA preemptors to pursue a state-by-state strategy. Thus far, they have lost everywhere they've tried. But the strategy remains.

The goal was well expressed in the Drug and Device Law blog, which shares the overall political viewpoint of this one. They expressed their wish that drug and device liability "should disappear from the face of the earth." [once again, their words]

If Europe has not become "less safe," I would suggest that is at least partly to do with the fact that tort liability still exists in the U.S. That point was also made, btw, in NEJM.

The argument against FDA preemption in general is supported by many conservatives, including Clarence Thomas in the Levine case. Milton Friedman also argued that product liability was precisely the free market check on corporate malfeasance that was required in the low regulatory environment he advocated.

Rick, want to debate this face-to-face in a public forum in Wisconsin?

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