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Trial
Lawyers Inc.:
A
Report on the Lawsuit Industry, 2003
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No 2, June 2006
THE
MOVE TO REVERSE MICHIGAN'S MODEL REFORMS
Why Wolverine Staters Should Just Say No to the Trial Bar's
War on Drugs
In state after state, Trial Lawyers, Inc.'s high-octane governmentrelations
machine keeps businesses and consumers on the run. The latest
race is on in Michigan, where the litigation industry is seeking
to reverse part of a highly successful tort-reform package
enacted by the legislature a decade ago.
The lawyers' legislative assault could not come at a worse
time for the Wolverine State. Michigan has lost nearly one-third
of its manufacturing jobs–its employment mainstay–since
1999, and has hemorrhaged 20,000 jobs since March of last
year alone.[1] Anticipating just such
an employment exodus from the besieged automobile sector,
Michigan's legislators in 1996 passed an "FDA defense"
law that has allowed another sector of Michigan's economy–medical
research and development–to thrive. Should the plaintiffs'
bar succeed in repealing this rule, Michigan's 12,000 pharmaceutical-industry
jobs–with a direct and indirect economic impact of over
$4 billion–would be in jeopardy. Many manufacturers in
other sectors, as well, would certainly view the legislature's
retreat as an ominous portent for the state's litigation climate.
Repeal would, for example, forestall any hoped-for growth
in Michigan biotech that industry leaders have projected.
Michigan's Principled, Pragmatic Stand
In 1996, the Michigan legislature passed its historic "FDA
defense" law, under which a drug's approval by the Food
and Drug Administration (FDA) automatically sets limits on
the suits that can be filed against its maker. Because Vioxx
was approved by the FDA, for example, plaintiffs' ability
to recover for alleged Vioxx-related injuries in Michigan
courts is sharply curtailed.
Does the ten-year-old Michigan reform make sense? We think
so. As we noted in our Trial Lawyers, Inc.: Health Care
report:
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. . . . 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.[2]
Common sense–and a commitment to democratic and federalist
principles–dictates that local juries should not be able
to trump the considered decisions of a federal regulatory
agency. Runaway juries discourage vital innovation and harm
the public health.
Given Michigan's current economic woes, though, it's important
to realize that Michigan's lawmakers in 1996 weren't merely
interested in federalist principles or the state of overall
drug innovation in the United States. The FDA preemption law
was specifically intended to give Michigan a comparative advantage
over other states and attract high-technology pharmaceutical
jobs. Notes Dick Posthumus, who as Senate majority leader
led the 1996 reform efforts in the legislature:
One of the things we foresaw at the time was the
need to diversify Michigan's economy. We saw coming what eventually
happened, that is the globalization of the auto industry,
which meant Michigan wouldn’t be as dominant and we would
have to provide jobs in other industries. One of the industries
we looked at as a state back then, and I think rightly so,
was the life sciences industry. We had Pfizer in Ann Arbor
and Upjohn in Kalamazoo. We had Dow in Midland and the University
Research Center in Ann Arbor. . . . We had all of these pieces,
so one of the things we wanted to do was encourage the expansion
of the life sciences industry. There were a whole lot of pieces
to that, but one of the pieces was to ensure that a pharmaceutical
company working on a life-saving drug wouldn’t have to
worry about frivolous lawsuits.[3]
Just how well has the state legislature's plan worked? Life-sciences
companies have invested $355 million on research and development
in Michigan since the preemption law's passage in 1996, and
the pharmaceutical industry's 12,000 jobs in the state have
a healthy average yearly wage of over $60,000.[4]
And this in a state with a 6.6 percent unemployment rate,
at a time when unemployment hovers under 5 percent nationally.
VIOXX SUITS: A Pain in the Neck
The context behind the legislative fight in Michigan
is the battle royal being fought nationwide between
the plaintiffs' bar and Merck & Co., the maker of
the once-popular anti-inflammatory drug Vioxx. As we
detailed in Trial Lawyers, Inc.: Health Care–and
as anyone following the news is well aware–Merck
has faced a barrage of lawsuits since health
concerns prompted the company to voluntarily pull Vioxx
from the market in 2005.[5]
Many of these lawsuits have rested and will continue
to rest on the flimsiest of scientific evidence. For
example, in the widely publicized Texas case of Ernst
v. Merck, the jury awarded widow Carol Ernst $250
million for her husband's death, though such damages
will fortunately be reduced dramatically before all
is said and done. Key to the Ernst case was the testimony
of Dr. Maria Araneta, who initially determined that
Robert Ernst's death was due to irregular heartbeat,
but later changed her mind and claimed in a videotaped
deposition that he had actually died of a Vioxx-caused
blood clot. Never mind that Merck's clinical trial showed
that it takes 18 months of Vioxx usage before the risk
of cardiovascular events increases, and that Ernst had
been taking the drug only for eight.[6]
Even more astonishing is the new Texas Vioxx verdict,
in which a court awarded $7 million in compensatory
damages to the family of Leonel Garza, a 71-year-old
smoker with a history of heart trouble. Garza used Vioxx
for only a month before his heart attack–at least
according to his family’s lawyers. They were only
able to produce concrete evidence, however, that Garza
took it for one week.[7]
What has already become evident in the Vioxx cases–as
has been the case in so many mass torts in the past–is
that naive or misled juries will be unable or unwilling
to assess scientific evidence and reach a dispassionate
judgment in the face of tragedy, regardless of the facts
or the law. Little wonder that Trial Lawyers, Inc. has
thus far filed more than 11,500 lawsuits in Texas, New
Jersey, California, and elsewhere.[8]
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Trial Lawyers, Inc. against the "Little Guy"
Trial Lawyers, Inc., however, is not worried about Michigan's
unemployment. Despite its oft-voiced concern for workers,
consumers, and the economy, the trial bar's principal interest
is expanding its opportunities for collecting multimillion-dollar
verdicts and settlements. Since Michigan's preemption law
has made it a safe haven from predatory drug lawsuits, the
state has become ground zero for the plaintiffs' bar's latest
attack on the public interest.
 Working
in concert with Michigan House members Dianne Byrum and Ed
Gaffney, the lawyers have launched a frontal assault on Michigan's
FDA preemption law. A bill that would overturn the law, HB
5527, is scheduled to come before the state legislature later
this spring or early summer.[9] Byrum,
the bill's chief advocate, repeats the tired refrain that
drug companies put "profits before people and secrecy
before safety." Taking a page out of the Trial Lawyers,
Inc. public-relations playbook, Byrum claims to be standing
up "for the 'little guy.'"[10]
But it's precisely the "little guy"–the average
medical consumer and citizen–who will be seriously hurt
if Byrum and Trial Lawyers, Inc. succeed.
To understand how drug litigation affects medical consumers,
consider the case of Iris Linder, a Michigan attorney who
suffers from lupus.[11] Linder, once
dependent on Vioxx to ease her chronic joint inflammation,
now lacks an effective replacement. But for the specter of
drug litigation, it's highly unlikely that Merck would have
pulled Vioxx completely from the market, given that its health
risks are for identifiable populations taking the medicine
for identifiable periods and doses. Now, Linder and the hosts
of other "little guys" who once used Vioxx to ease
their pain and improve their lives will simply have to suffer.
Because of unfounded drug litigation such as the winning Vioxx
suits filed by Carol Ernst and Leonel Garza, a variety of
life-saving and life-enhancing medications–those now
in development and others yet to be imagined–may never
make it to the little guy's medicine chest.
While Michigan's laws can have only a marginal impact on
the national problem of drug litigation, Michigan workers
and taxpayers are certain to feel the bite should federal
preemption be overturned. Not only will jobs leave the state
as life-sciences industries decamp, but pharmaceutical companies
will also pass the cost of lawsuits on to consumers in the
form of higher prices. As Dr. David Janda, an orthopedic surgeon
and health-care cost-containment expert, put it: "Repeal
of preemption will raise the cost of health care for every
family and every business in Michigan."[12]
Finally, it’s important to recognize that the trial
lawyers will not stop at FDA preemption reform. If Trial Lawyers,
Inc. disposes of federal preemption in Michigan, it will set
its sights on Michigan's healthy battery of other tort reforms,
including a two-tiered damage-cap system in medical suits
($280,000 for "ordinary occurrences" and $500,000
for brain/reproductive-organ damage), a similar system in
product liability lawsuits, and a law limiting contingency
fees to 33 percent of the amount recovered. Businesses will
assume, quite reasonably, that such reforms are much more
likely to be repealed if the plaintiffs' bar succeeds in reversing
the FDA defense. Given that 50 percent of business leaders
say that their investment and relocation decisions are affected
by states’ litigation climates, a worsening legal climate
is a risk that job-starved Michigan can ill afford.
Trial Lawyers, Inc. and its public advocates talk as though
absolutely no protection for medical consumers exists in Michigan.
This is simply not the case. Michigan's law has a provision
allowing suits to proceed if it is determined that the drug
company willfully withheld or misrepresented information during
the approval process.[13] Such a safeguard
is a necessary precaution: if the drug company lies to the
FDA, the FDA's judgment is based on faulty information. The
Michigan law strikes an appropriate balance, permitting the
FDA to do its job but punishing companies that withhold valuable
information and interfere with the FDA's good-faith cost/benefit
analysis.
 Michigan's
FDA preemption law, as long as it stands, will limit the economic
and social costs that the litigation industry imposes on the
state. With luck, Michigan Chamber of Commerce president and
CEO James Barrett and others interested in this issue will
be able to stem the tide of opposition. Otherwise, an important
line of defense in the struggle for tort reform will be lost.
The Michigan law should serve as a model for other states
and the federal government. Michigan's economic outlook is
not so rosy that it can easily spare another 12,000 jobs,
especially the high-paying kind that medical investment brings
in. Michigan governor Jennifer Granholm has been aggressively
pursuing nontraditional industries for the state–even
traveling to Japan to lure biotech jobs to Michigan –but
her leadership in protecting FDA preemption has been lacking
to date. It would be a huge economic mistake if Michigan allowed
Trial Lawyers, Inc. to gut the state's model reform–a
mistake with real consequences for the health of Michigan's
consumers and the wealth of its workers.
Notes
- Josee Valcourt and Louis Aguilar, Detroit News,
4/20/06
- http://www.triallawyersinc.com/TLI-HealthCare.pdf
- John Reurink, Michigan Forward, March/April 2006
- Milken Institute, Biopharmaceutical report, 10/04
- http://www.triallawyersinc.com/TLI-HealthCare.pdf
- Alex Berenson, New York Times, 8/20/06
- Jennifer Won Tesoriero, Wall Street Journal, 4/22/06
- Amanda Bronstad, National Law Journal, 3/27/06, Alex
Berenson, New York Times, 4/22/06
- MIRS, 2/7/06
- MIRS, 3/29/06
- Iris Linder, Detroit News, 1/25/06
- Phone interview, 5/2/06
- Iris Linder, Detroit News, 1/25/06
Center
for Legal Policy
Manhattan Institute for Policy Research
52 Vanderbilt Avenue
New York, NY 10017
(212) 599-7000
www.manhattan-institute.org
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