Lawyers Inc. Health Care
The Lawsuit Industry's Effect on American Health, 2005
SAYING NO TO DRUGS
Breakthrough pharmaceuticals have
driven medical progress for decades.
By exploiting loose evidentiary requirements, clever lawyers use "junk science" to dupe juries into believing far-fetched claims.
Though breast-implant litigation may strike some as trivial, since the device's typical purpose is cosmetic, drugs and devices with genuine lifesaving and life-enhancing effects have also been driven off the market by the litigation industry's junk-science lawsuits. Take, for instance, the morning-sickness drug Bendectin, which greatly improved the daily lives of pregnant women and by 1980 was used by as many as 25 percent of all expectant mothers. Trial lawyers generated such a national panic over the claim that the drug was associated with birth defects—despite any evidence—that many women who had been taking the drug aborted their unborn fetuses. By 1983, the manufacturer of Bendectin pulled the drug in the face of $18 million in annual legal bills—against only $20 million in total sales. Though Bendectin is on the market elsewhere around the world, it remains unavailable to pregnant American women, despite more than 30 published studies—examining more than 130,000 patients—that have failed to find a link between the drug and birth defects. Since Bendectin was pulled from the market, the percentage of pregnant women hospitalized each year for morning sickness has doubled; the incidence of birth defects has not changed.
Even when there is scientific evidence that a drug can cause injury, our courts do a very poor job of distinguishing between creditable and meritless cases, as demonstrated most recently in Ernst v. Merck (see box). So unscrupulous operators within the litigation industry can (and do) flood courts with mass tort claims that group together many claimants—most of whom have no recognizable medical injury—and settle claims that compensate the unsick, undercompensate the sick, and produce astronomical fees for themselves.
THE IMPORTANCE OF BEING ERNST
Carol Ernst, the widow of a 59-year-old who had taken the pain-relieving drug Vioxx and died shortly after, was handed a $253 million verdict from a Texas jury this August. Texas attorney Mark Lanier, who moonlights as an evangelical minister when he's not leading Trial Lawyers, Inc.'s pharmaceuticals division, scored the big win. Although the verdict will likely be reduced under Texas's punitive-damages cap, the cap will not affect the jury's award of damages for the mental anguish suffered by the deceased's wife (of one year), which the jury determined to be $24 million.
Ernst had taken Vioxx for only eight months, less than the 18 indicated as potentially unsafe in Merck's study; he had 70 percent blockage in his arteries; and the original diagnosis for his cause of death was heart arrhythmia, which has not been linked to Vioxx. The Texas jury was apparently not persuaded by these facts.
The verdict in the Ernst case highlights the significant problems that American lay juries have in assessing complex medical claims of causation. One juror in the case told the Wall Street Journal, "Whenever Merck was up there, it was like wah, wah, wah. . . . We didn't know what the heck they were talking about." Without the ability to assess competing scientific claims with any precision, jurors can be persuaded by charismatic plaintiffs' attorneys like Mark Lanier to accept legal claims that a more sensible legal system would deny.
This tactic was pioneered by Trial Lawyers, Inc. in its long-established product line of asbestos litigation,  and today it drives product-liability claims over drugs and medical devices. A case in point is the litigation industry's attack on Fen-Phen, the diet drug that has already cost Wyeth $14 billion in litigation expenses and damages (and is expected to cost $7 billion more). Doctors at the Mayo Clinic discovered a link between Fen-Phen and a heartvalve disorder. According to Wyeth's initial models, the association was strongest for aortic valve damage, a rare condition. Most of the plaintiffs, however, claimed that Fen-Phen had caused mitral valve damage, "a much more common condition among overweight people generally."
You might ask how this could happen. So did Judge Harvey Bartle III, of the Eastern District of Pennsylvania. In one case, he held a six-day inquiry focusing on 78 claimants who had been screened by one of only two doctors. The first of these doctors "was working on contingency for the Hariton firm; he received an extra $1,500 whenever a claimant he’d evaluated submitted a green form to the trust." As for the second doctor, the judge stated that her "mass production operation would have been the envy of Henry Ford" and that her lead sonographer had been trained by an employee of the plaintiffs' firm.
By exploiting the legal system to sue manufacturers of drugs and medical devices that do not actually cause plaintiffs' injuries, Trial Lawyers, Inc. deters companies from researching and manufacturing legitimate lifesaving and life-improving products. Manufacturers try to maximize profit—they're not charities—so they will only research and produce goods whose expected sales exceed expected costs.
THE NEW DRUG LORD
The new CEO of the drug division of Trial Lawyers, Inc.'s health-care practice might well be Christopher A. Seeger. Seeger recently wrung a $700 million settlement out of Eli Lilly in a national suit over its antipsychotic drug Zyprexa, which his suit alleged caused diabetes—a side effect deemed worth the risk by the Food and Drug Administration for a medication that effectively treats schizophrenia and manic depression: when untreated, sufferers from these conditions face far more serious threats to their quality of life than regular insulin injections. Seeger now serves as a lead counsel or member of the plaintiffs' steering committee in many of the most prominent drug mass torts in the country—including suits against anti-diabetes drug Rezulin, anti-heartburn drug Propulsid, and weight-loss drug Dexatrim — and in April, plaintiffs' lawyers unanimously elected him to serve as co-lead counsel for the multidistrict litigation over Vioxx. Shortly after the decision in Ernst v. Merck, Seeger began his opening arguments in the second Vioxx case alleging that the drug caused a heart attack, a New Jersey lawsuit still pending as this publication went to press.
Of course, were our legal system functioning efficiently, lawsuits would force pharmaceutical companies to internalize the costs of side effects caused by the drugs that they produce—which would encourage the manufacturers to withhold more dangerous products and which in turn would lower the net social cost of accidents. But the legal system doesn't function efficiently, and the evidence strongly suggests that tort lawsuits have done little to lower accident rates. Rather, seminal research from Yale's George Priest showed two decades ago that accident rates fell significantly throughout the twentieth century—and indeed, fell even faster before tort law was expanded in the 1960s and 1970s than they did thereafter. A more recent study, forthcoming from the Manhattan Institute, examines accident rates and tort reforms from 1980 through 2000 and shows that reforms designed to limit the scope of tort law—including noneconomic- and punitive-damage caps, higher evidentiary standards, and product-liability reform—are actually associated with lower accident rates.
In the drug context, these results should hardly be surprising, given that the system as we know it has punished safe products from breast implants to Bendectin and overpunished other drugs such as Fen-Phen and Vioxx. Pharmaceuticals and other products that improve health and save lives have been indiscriminately driven from the marketplace. As Peter Huber has explained, "When all is said and done, the modern [tort] rules do not deter risk: they deter behavior that gets people sued, which is not at all the same thing."
The harmful side effects of overactive litigation go far beyond the actual products that are taken off the market. Countless other potentially useful drugs sit in petri dishes because companies hesitate to spend hundreds of millions of dollars on products that could land them in court, costing hundreds of millions more.
For example, lawsuits have prompted a virtual cessation in contraceptive research. Following on the heels of successful lawsuits against the manufacturers of IUDs, Trial Lawyers, Inc. managed to kill off other contraceptives such as Norplant, a long-term reversible contraceptive that was used by a million women in the United States and that is still used by millions more in other countries. Sued for alleged complications caused by Norplant's silicone applicator, its maker, Wyeth, withdrew the product from the U.S. market in 2002 after five years of litigation and over $50 million in legal costs—despite the fact that plaintiffs produced no evidence of harm. Indeed, when lawyers couldn't prove Norplant a health threat, they took to attacking Wyeth for failing to warn patients of its side effects. The upshot: U.S. companies have made no new contraceptive drugs since, and spend 20 times more money on cosmetics research than on developing new contraceptives.
The Vioxx case itself is a good example of how litigation exposure can stifle potentially lifesaving research, since Vioxx had been shown experimentally to prevent the growth of precancerous lesions in people at risk of developing colon cancer. Given the threat posed by such cancers, many patients would accept a moderately increased risk of heart attack to have an effective cancer treatment. But if trial lawyers have their way, people with real health needs won’t have such choices, and Vioxx's potential efficacy as a cancer preventative may die along with its use as a painkiller.
Do we really want schizophrenics to stop taking Zyprexa because they saw the trial bar's TV ads recruiting plaintiffs who had taken the drug?
In addition to removing lifesaving drugs from the market and sti- fling research, the specter of drug litigation can adversely affect health by changing patient and doctor behavior. More than 40 percent of doctors say they don't prescribe drugs that are under threat of litigation for fear that they will be drawn into the suit (see graph, above left). Even more frightening, 40 percent of pharmacists report that patients have refused to take prescribed medications that they knew were the subject of litigation (see graph, below left). Given the millions of dollars spent on drug-lawsuit advertising across the country (see graph, p. 5), such risks are very real, and when patients stop taking medications without legitimate medical reasons, they endanger their own health and, in some cases, the public at large: do we really want individuals with schizophrenia and bipolar disorder to stop taking their Zyprexa because they saw one of Trial Lawyers, Inc.'s thousands of television advertisements recruiting plaintiffs who had taken the drug?
Finally, Trial Lawyers, Inc.'s assault on the drug industry has undermined the democratic authority of Congress itself, which vests the Food and Drug Administration with responsibility for pharmaceutical regulation.  The FDA has been scrambling to reassert itself as the arbiter of drug safety as lawyers and juries usurp its role and increasingly make cost/benefit decisions that are rightly left to patients and their doctors. Necessarily, lawsuits such as those against Fen-Phen and Vioxx undermine the FDA's regulatory mandate from Congress to oversee drugs and patient health, as the agency itself has recently argued. Though the FDA is far from perfect and needs reform, its onerous approval processes are specifically designed to test drugs' safety and efficacy with an eye toward the big picture: they determine whether the costs of allowing a drug into the marketplace are higher or lower than the benefits that the drug is expected to bring.
In contrast, juries that decide lawsuits over drug side effects can consider only the case at hand, not the broader cost/benefit analysis. Such juries can impose punitive damage awards to "send a message" to drug companies, notwithstanding other juries' decisions to send the same message—or indeed, other juries' decisions that the message need not be sent. And Trial Lawyers, Inc. can exploit lax venue and jurisdiction rules to shop cases to the most lenient state courts, which not only have much looser evidentiary rules but also see lawsuits against out-of-state manufacturers as a cottage industry. These venues are what plaintiffs’ attorney Dickie Scruggs, a longtime Trial Lawyers, Inc. executive, calls "magic jurisdictions"—where "judges are elected with verdict money" and "it’s almost impossible to get a fair trial if you’re a defendant."
Effectively, the litigation industry is imposing its own national health-care policy, case by case—a policy not primarily concerned with the public's health but with the trial bar's power and wealth. The legal assault on the makers of our medicines and medical devices threatens our health and that of our children and grandchildren. We all need to just say no to Trial Lawyers, Inc.'s war on drugs.
40. See http://www.classactionconnect.com/issue_vioxx.htm.
41. See http://classactionamerica.com/.
42. See http://www.aphroditewomenshealth.com/news/20040424000521_health_news.shtml (noting that "NSAIDs, including the pain medications aspirin, ibuprofen and naproxen, are one of the leading causes of stomach ulcers and have been associated with side effects ranging from stomach upset to stomach bleeding, which can be life threatening. In fact, NSAID use leads to more than 103,000 hospitalizations and 16,500 deaths each year in the United States").
43. See, e.g., Press Release, U.S. Food and Drug Admin., FDA Issues Public Health Advisory on Vioxx as Its Manufacturer Voluntarily Withdraws the Product (Sept. 30, 2004), available at http://www. fda.gov/bbs/topics/news/2004/NEW01122.html. The Vioxx study has subsequently been published in the New England Journal of Medicine; see Robert S. Bresalier et al., Cardiovascular Events Associated with Rofecoxib in a Colorectal Adenoma Chemoprevention Trial, 352 New Eng. J. Med. Health Care 1092-1102 (Feb. 15, 2005).
44. See Frankel, supra note 6.
45. See Associated Press, Jury Finds Merck Liable in Landmark Vioxx Case (Aug. 19, 2005), available at http://www.msnbc.msn.com/id/9006921/.
46. See Bloomberg, Merck Says Vioxx Lawsuits Increased 15 Percent in Past Month (Aug. 25, 2005), available at http://www.coreynahman.com/vioxx_lawsuit.html.
47. See United Press International, Vioxx Recall Seen as Costing Billions (Nov. 4, 2004).
48. See Aaron Smith, Merck’s Vioxx Bill Could Hit $50 Billion, CNN/Money, Aug. 22, 2005, at http://money.cnn.com/2005/08/22/news/fortune500/merck/.
49. See Bresalier, supra note 43.
50. See generally Phantom Risk: Scientific Evidence and the Law (Kenneth R. Foster et al., eds., 1993).
51. Peter w. Huber, Galileo's revenge: Junk Science In the Courtroom 2-3 (1991).
52. The federal courts have improved their evidentiary standards; see Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), but loose evidentiary requirements persist in many state courts.
53. See Marcia Angell, Science on Trial: Medical Evidence and the Law in the Breast Implant Case, 28 CIv. Just. MeMo (Manhattan Inst. Center for Legal Pol’y, Aug. 1996), available at http://www. manhattan-institute.org/html/cjm_28.htm.
54. David E. Bernstein, Breast Implants: A Study in Phantom Risks, 5 res. Memo (Manhattan Inst. Center for Legal Policy, Apr. 1995), available at http://www.manhattan-institute.org/html/ research_memorandum_5.htm.
55. Sherine E. Gabriel et al., Risk of Connective-Tissue Diseases and Other Disorders after Breast Implantation, 330 new eng. J. Med. 1697-1702 (June 16, 1994).
56. See Bernstein, supra note 54.
57. See Angell, supra note 53.
58. See L. B. Holmes, Teratogen Update: Bendectin, 27(2) Teratology 277-81 (Apr. 1983).
59. See David E. Bernstein, Learning the Wrong Lessons from "An American Tragedy": A Critique of the Berger-Twerski Informed Choice Proposal, George Mason Law & Economics Research Paper No. 05-15 31 (Aug. 2005), available at http://www.gmu.edu/departments/law/faculty/papers/docs/05-15.pdf.
60. See Michael D. Stovsky, Comment, Product Liability Barriers to the Commercialization of Biotechnology: Improving the Competitiveness of the U.S. Biotechnology Industry, 6 High Tech. L.J. 363, 372 n.49 (Fall 1991), available at http://www.law.berkeley.edu/journals/btlj/articles/vol6/Stovsky.pdf.
61. See Melanie Ornstein et al., Bendectin/Diclectin for Morning Sickness: A Canadian Follow-Up of an American Tragedy, 9 Reprod. Toxicology 1 (1995).
62. See Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 582 (1993). The Food and Drug Administration has acknowledged that "available data does not demonstrate an association between birth defects and Bendectin." Daubert v. Merrell Dow Pharmaceutical Co., 43 F. 3d 1311, 1314 (9th Cir. 1995).
63. See Paolo Mazzotta et al., Attitudes, Management and Consequences of Nausea and Vomiting of Pregnancy in the United States and Canada, 70 Int'l J. Gynecology & Obstetrics 359 (2000).
64. See Trial Lawyers, Inc., supra note 1, at 10-11, available at http://www.triallawyersinc.com/html/part05.html.
65. See Frankel, supra note 6.
67. See id.
69. See id.
70. See id.
73. See generally Peter W. Huber, Liability: The Legal Revolution and Its Consequences 153-71 (1988).
74. See generally Guido Calabresi, The Cost of Accidents: a LegaL and Economic Analysis (1970).
75. See George Priest, Products Liability Law and the Accident Rate, in Liability: Perspectives and Policy 184, 184–94 (Robert Litan & Clifford Winston, eds. 1988) (showing that the decline in accident rates "has been steady and consistent both before and after the initial expansion of products liability law," with "little, if any, correlation between the decline in accident rates and the expansion in tort liability," characterized in Richard Epstein, Cases and Materials on Torts 889 (7th ed. 2000)).
76. See Paul H. Rubin & Joanna Shepherd, Tort Reform and Accidental Deaths, Emory Public Law Research Paper No. 05-29 (Aug. 2005), available at http://papers.ssrn.com/sol3/DisplayAbstractSearch.cfm.
77. Huber, supra note 73, at 164.
78. See Arkin, supra note 19.
79. See id.
80. See id.; Patient Compensation Exploratory Committee, The Impact of the Tort Litigation Machine on Women's Reproductive Health (2003); Walter Olson, Company to Settle 36,000-Plus Norplant Suits, at http://www.overlawyered.com/archives/99aug2.html#990827c (discussing $50 million partial settlement of Norplant claims).
81. Cf. Davis v. American Home Products Corp., 844 So. 2d 242 (La. Ct. App. 2003).
82. See Arkin, supra note 19.
83. See News Release, The University of Texas M.D. Anderson Cancer Center, Researchers Confirm Vioxx Nearly Doubled Cardiovascular Risks in Cancer Prevention Study (Feb. 15, 2005) (citing Vioxx study primary author, Robert S. Bresalier, as saying that Vioxx and related drugs "potentially ha[ve] very important roles in a variety of diseases—arthritis, cancer prevention, cancer treatment, treatment of Alzheimer's disease, treatment of precancerous lesions, not only in the colon but in the esophagus and many other organs") (on file with Manhattan Institute).
84. See id.
85. See Harris Interactive, Pharmaceutical Liability Study (July 13, 2003), available at http://www. instituteforlegalreform.org/resources/PharmaceuticalLiabilityStudy_report.pdf.
86. See id.
87. See generally Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 (2004).
88. See, e.g., Amicus Brief, Motus v. Pfizer, Inc., Nos. 2-55372, 02-55498 (9th Cir. Sept. 3, 2002).
89. Cf. Eric Helland and Alexander Tabarrok, The Effect of Electoral Institutions on Tort Awards, 4 aM. L. & eCon. rev. 341, 341-70 (2002).
90. Richard Scruggs, Asbestos for Lunch, Prudential Securities Financial Research and Regulatory Conference (May 9, 2002), in Industry CoMMentary (Prudential Securities, Inc., New York), June 11, 2002, at 5.
1314 (9th Cir. 1995).
91. See Heather Won Tesoriero, Merck Loss Jolts Drug Giant, Industry, Wall St. J., Aug. 22, 2005, at A1.
92. See Roger Parloff, The Preacher Who's Raising Hell with Merck, Fortune, Aug. 8, 2005, at 20.
93. See Tex. Civ. Prac. & Rem. Code §§ 41.003, 41.008 (2004).
94. See Ted Frank, Ernst v. Merck—one more view, PointOfLaw.com, Aug. 22, 2005, at http://www.pointoflaw.com/archives/001477.php#1477.
95. See Richard Epstein, Ambush in Angleton, WAll St. J., Aug. 22, 2005, available at http://www.pointoflaw.com/columns/archives/001482.php.
96. Tesoriero, supra note 91, at A1.
97. See Alex Berenson, Lilly to Pay $690 Million in Drug Suits, N.Y. Times, June 10, 2005, at C1.
98. Though the FDA has required Eli Lilly to put a warning label on Zyprexa, it has kept the drug on the market. See id.
99. See SeegerWeiss LLP, Firm Profile, Christopher A. Seeger, at http://www.seegerweiss.com/lawfirm/EmployeeIndex.aspx.
100. See id.; cf. Paul Davies, Merck Begins Its Defense in Second Vioxx Trial, Wall St. J., Sept. 15, 2005, at A16.