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?