When Patients Becomes Plaintiffs

Runaway product liability litigation is a constant threat to manufacturers of almost any consumer product, but, as the New York Times reported in April 2006, "lawsuits over prescription drugs carry perhaps the highest stakes of all product liability litigation[...] Plaintiffs' lawyers may spend years and millions of dollars to prepare for a single trial, but a victory can come with a verdict of $10 million or more." And if pharma is the most vulnerable industry, the exposure of makers of medical devices is not very far behind.

Medical products are a particularly perilous business to be in from a product liability point of view because they are inherently risky products, they are used by or for particularly vulnerable consumers and so very much is at stake in their use. As is discussed in Chapter One, with the marketing of drugs and medical devices so highly regulated, consumers have unrealistically high expectations of safety, and news of problems is quickly and widely disseminated. Plaintiff lawyers solicite clients to demand damages almost immediately at the first sign of any problem. Explains the New York Times: "For a decade, large plaintiffs' law firms have profited from suing corporate America over asbestos-related diseases, but asbestos suits are slowly drying up, leaving plaintiffs' lawyers searching for new targets, defence lawyers say. In addition, plaintiffs' firms have grown flush with cases from settlements of asbestos and tobacco lawsuits and now have the resources to finance cases."

And patients are ready to respond to that search for plaintiffs. It used to be that "people accepted that there was no such thing as a totally safe drug," commented Sir Tom McKillop, CEO of AstraZeneca; "Today we have become much more risk-adverse." Mary Parks, who decides on new drug applications at the US Food & Drug Administration, admits: "Even in the best case, with full due diligence, we will never know everything about a drug."

The medical products industry itself bears some of the responsibility for that, with heavy promotion of new treatments to physicians - and, where allowed, to consumers themselves - producers have raised the public's expectations. As Pharmaceutical Business Review noted recently, "Safety issues with products that are used widely in the general population and highly visible through marketing have been heavily covered in the media - feeding public concern and prolonging the safety scare." Vioxx is currently the best example of this, its recall generating thousands of lawsuits and providing a case study of both the perils of being in the healthcare business and the kind of managerial decisions that can mitigate or intensify that peril. There is no question that, at least in hindsight, Merck made some mistakes in its handing of the highly successful NSAID, but it is also true that Merck's savvy and financial strength gives it the wherewithal to survive the crisis. This is detailed in Chapter Two.

And while the jeopardy that faces companies selling in the US is the greatest, because laws and procedures there are particularly favourable to claimants, increasingly the rest of the world is finding merit in US plaintiff-friendly processes outlined in Chapter Three - such as class actions and liberal discovery - and developing their own versions of those legal techniques. Perhaps the most far-reaching is the decision by the EU, discussed in Chapter Four, that all its member states should change their internal laws so that product liability suits against manufacturers will be considered on a strict liability basis, with no need for the claimant to show negligence on the part of the maker of the goods.

As Minnesota lawyer Kenneth Ross noted in the February 2006 issue of the journal Risk Management, "The world has gotten smaller, both from a litigation and regulatory perspective. Government agencies around the world are talking to each other about safety and regulatory matters. Plaintiffs' lawyers around the world are communicating with each other. Selling globally increases the risk a manufacturer will do something that makes it potentially liable in the US or elsewhere."

As is examined in Chapter Five, methods to account in business plans for that potential liability do exist, and smart managers will both acquire catastrophic insurance and build into their financial projections the accumulation of a reserve that can be tapped to pay for both litigation and any awards made to plaintiffs by courts or non-judicial tribunals. And they will consider taking precautions in analysing clinical trial data, developing promotional campaigns, and handling adverse event reports that can minimise their exposure to suits. But, obviously, those concerns have to be balanced with other business interests; just as patients have to realise that all medical products contain some risk, business executives have to realise that there's no way they can develop and market a product that will insure they have no liability jeopardy. In both cases, what's needed is an unemotional analysis of benefits and risks, and a sensible balancing of the two.

And just as the world of commerce is becoming smaller, it is changing at an every increasing pace. Some predictions about how the future may look, contained in Chapter Six, offer hope that problems of product liability will grow less severe, as, for insistence, advances in genetics make it easier to identify which specific patients will be helped by a medication and which are most likely to suffer adverse reactions. But that good news has to be at least partially offset by the fact that as medical practice relies increasingly on pharmaceuticals, more and more patients will be taking more and more drugs, which exponentially increased the chances for adverse interactions. As BusinessWeek writes: "It will always be a struggle to hit just the right balance between help and harm."

One oft-quoted decision from Nebraska, Wentz v. State, says of the word "liability": "It has been referred to as of the most comprehensive significance, including almost every character of hazard or responsibility, absolute, contingent, or likely." In other words, no business can avoid it. But managers of drug and device companies may, with the aid of this Report, better understand it, prepare for it, and defend against it. They can do no more.