Results matching “bendectin”

I recently summarized Singleton v. Wyeth, a round in the plaintiffs' thus far successful war against Prempro, Wyeth's (now Pfizer's) postmenopausal hormonal replacement therapy. Well, hot on the heels's of that victory comes a defense verdict in another case from Philadelphia. After only six hours of deliberation, a Philadelphia jury unanimously returned a defense verdict Wednesday in Foust v. Wyeth, a lawsuit alleging that a hormone replacement therapy drug caused breast cancer in an Indiana woman who died of the disease. The jury did find that Wyeth failed to adequately warn of the risks of breast cancer, but it determined that the decedent already had the disease. Apparently the fact that her identical twin also took Prempro but did not develop cancer weighed on the jury, though it is unclear to me why this affects the causation issue.

Wyeth of course responded to the verdict by noting that, "Many risk factors associated with breast cancer have been identified, but science cannot establish what role any particular risk factor or combination play in any individual woman's breast cancer."

This victory may be a pyrrhic one for Wyeth. Philadelphia juries have awarded as much as $75 million in punitive damages in the nine other HRT cases to have reached verdict -- many have resulted in punitive damages for "wanton" negligence under Pennsylvania law. Every plaintiff's verdict has or will be appealed by Wyeth, and there are 1500 suits still pending in the City of Brotherly Love, a forum clearly preferred by plaintiffs. This suit took four weeks to try. It's very hard to see how Prempro can survive this water torture. Will it go the way of Bendectin?

Trial Lawyers, Inc.: K Street -- Public Relations - PointOfLaw Forum

For the third installment on the Trial Lawyers, Inc.: K Street report, I'm going to discuss, briefly, the lawyers' public-relations activities. For a fuller discussion, see this section of the report, online.

Trial lawyers realize they aren't popular--as their decision to re-brand themselves the American Association for Justice would suggest. Opinion-poll data suggest that the broader public is largely disaffected with the legal system: "Eighty-three percent of Americans think that the legal system makes it too easy to assert invalid claims." For a group wholly dependent on government power to make its money, a negative public opinion presents a significant problem for the trial bar.

The plaintiffs' bar works to counter public skepticism with a sophisticated public-relations operation. First, the trial bar develops a veneer of legitimacy through its web of ties to the legal academy; although the general public isn't much aware of what legal academics do, they're highly influential over judges, policymakers, and the elite media. Next, lawyers aggressively court the media directly, by feeding them stories that agitate public opinion in favor of litigation. Finally, lawyers heavily fund various purportedly independent "consumer groups" that work in conjunction with media coverage to further drum up public-safety concerns--and directly argue against legal reforms.

  1. Legal academics. The trial bar discovered early on that befriending influential leaders in the legal academy could work to its advantage. The King of Torts Melvin Belli befriended former Harvard Law School dean Roscoe Pound, when the professor was in his 70s. In his later years, Pound had shifted from being a common-law critic to its fiercest advocate, largely because he was skeptical of the New Deal, and "he came to view the common law of tort as a substitute for the bureaucratic state." By 1958, Pound "worried aloud that those pushing for expansive strict product liability were 'not looking squarely at all the facts' and that such a program would have 'consequences beyond the law of torts.' Roscoe Pound, The Ideal Element in Law 340 (1958)." But the damage was done: Pound had penned a "glowing introduction" to Belli's book Modern Trials in 1954, and the trial bar had established a think tank in his name, the Roscoe Pound Civil Justice Institute, in 1956. The organization that bears Pound's name continues to conduct judicial seminars and publish papers supportive of expanded litigation.

    As we note in the K Street report, "The tort bar continues to cultivate relationships with academics who are willing to speak on its behalf." In many cases, professorial apologists for litigation are not the disinterested observers their university affiliations might suggest: "Law professors can [and do] earn hefty sums as 'expert' witnesses by giving an academic seal of approval to mass-litigation settlements, dodgy fee arrangements, and questionable theories of injury." I want to emphasize that I'm not trying to accuse the litigation-industry apologists in the professoriate of venality; most of these law professors are genuine believers in the views they espouse. But the trial-bar regularly levels ad hominem broadsides against its critics: the communications director of the American Association for Justice attacked the K Street report by calling the Manhattan Institute a "front group" for "insurance companies and Wall Street banks." Such attacks are even shallower than they appear when one considers how much money many law professors are getting from their trial-bar ties, often undisclosed: "the same trial bar that attacks any study even partly funded by industry tries to obscure its own role in enriching its ivory-tower advocates."

  2. Media. The trial bar also aggresively works the media to its advantage. Unlike professors, reporters aren't being funneled any money in litigation. But reporters do want to break the next "big story" detailing public danger, which wins them acclaim. For every scare that is legitimate--if often far less dangerous to most consumers than public hysteria would suggest--there are others that are "phantom risks," like breast implants or Bendectin. For the reporter, it matters little if the stories are founded in sound science: they're unable to tell the good from the bad, so they take what the lawyers feed them, uncritically. John Stossel, who won nineteen Emmy Awards as a consumer reporter, details the game:
    This partnership between reporters and trial lawyers is not a good thing, but it's hard for us reporters to resist, because trial lawyers are a perfect source. They do most of the work for us. We don't need to make phone calls to search for victims; the lawyers identify the most telegenic of them, the people whose stories make you cry, and they'll bring them right to our office.

    Then they identify the "bad guy" for us. We don't need to do much original investigating, since the lawyers use their subpoena power to force companies to turn over just about every record they've ever produced. The lawyers usually find some dirt (bet they'd find dirt on you if they got all your papers) and hand it to us. We double-check it, but we're following the lawyers' script.

    These consumer-media reports are reinforced by television and movie scripts that lionize trial lawyers' role in exposing and fighting corporate wrongdoing (think movies like The Rainmaker (1997, with Matt Damon), A Civil Action (1998, with John Travolta), Erin Brockovich (2000, with Julia Roberts), or The Runway Jury (2003, with Dustin Hoffman); or television shows like Ally McBeal, The Practice, and Boston Legal). Although such mythological portrayals do not undo broad public skepticism about our legal system, they do undergird the trial bar's defensive efforts by maintaining the illusion that plaintiffs' lawyers are the last, best, and only reliable protector of a vulnerable public.

  3. Consumer groups. The K Street report also details the symbiotic relationship between the trial lawyers and various "consumer groups" that purport to be independent watchdogs of corporate misbehavior. Some of these groups exist solely to defend tort litigation, like Citizens for Justice and Democracy (which headed by Ralph Nader disciple Joanne Doroshow). But groups with broader missions nevertheless work hard to help the lawyers: "Public Citizen, for example, pushes Trial Lawyers, Inc.'s agenda directly, through its Litigation Group, which fights preemption of tort claims, arbitration clauses, and other issues adverse to the interests of the plaintiffs' bar; and indirectly, through its Health Research Group, which publicly attacks the safety of hundreds of drugs and medical devices that are the bread and butter of the mass-tort bar."

    As the K Street report details, these consumer groups are often heavily funded by trial lawyers: "prominent California plaintiffs' attorney Herb Hafif has said that the trial bar supported Nader 'overtly, covertly, in every way possible.' " Again, I do not mean to suggest that pecuniary interests drive consumer groups' activities--"many of 'Nader's Raiders' and their successors are true believers in their cause"--but the consumer groups can ill-afford to offend their legal benefactors. And the leading consumer advocates' admiration for the trial bar is profound: Ralph Nader has long planned to build an American Museum of Tort Law in his hometown.


The trial bar's public-relations activities blunt public pressure for liability reforms and offer a metanarrative for elected officials who do the tort bar's bidding. Tomorrow, I'll begin to explore just how the tort bar is wielding its political influence, at the state level.

James Beck and Mark Herrmann

[Originally published in the Drug and Device Law Blog, 7-9-09.]

The two of us have been practicing law now for a little over 25 years. Bexis graduated law school in 1982 and Herrmann a year later. At big firms it takes a few years -- five at least -- before we could start to have any real strategic impact on the cases we were working on. And it took a few years for us to get around to being product liability defense lawyers in the first place.

But now we're here, there, whatever.

We've been doing product liability defense for the better part of a couple of decades, and we've got maybe a couple of decades more to go. So how are we -- not just us, but this generation of the defense bar generally -- doing at this midpoint of our careers?

Bottom line: Are our clients better off now than when we started?

We decided today was as good a time as any to take stock.

Class Actions

Grade: A. Back in the late 1980s, we had to take class actions in product liability litigation very seriously. While there were never a lot of certifications, there were enough of them that – during the Bone Screw litigation, for example – plaintiffs would argue that there was some sort of “modern trend” favoring certification of personal injury class actions. Some courts said so, too. See In re A.H. Robins Co., 880 F.2d 709, 738 (4th Cir. 1989) (later abrogated). We remember how relieved we were to beat the class certification motion in Bone Screw, which kept that litigation from posing an even more existential threat to our clients than it already did.

Then our side prevailed in Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997), and Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999). After that – with a lot of blood, sweat, and good legal argument from our side – class actions (at least successful ones) largely disappeared from mass torts, as we’ve discussed before. The few courts willing to certify class actions in drug and medical device cases have so far gotten shot down on appeal, most recently in the St. Jude litigation. Zyprexa may follow. And with the enactment of CAFA, most class action decisions going forward, and essentially everything in mass torts, will be made by federal courts applying post Amchem/Ortiz law.

Medical monitoring, a non-personal-injury derivative of personal injury causes of action that the plaintiffs’ bar dreamt up with class actions in mind, has largely failed in recent years to produce very many successful certifications – despite lots of attempts. We collected those cases here.

Likewise, class actions involving purely economic losses, usually brought as adventurous applications of consumer fraud, RICO, or warranty claims, have had rough going. The first round of appeals in St. Jude recognized the key argument: Even if a given consumer fraud statute does not require the individualized element of reliance, defendants may disprove causation with individualized evidence of non-reliance.

As a measure of how far out of the mainstream tort class actions have become over the last couple of decades, the ALI’s Aggregate Litigation principles project, for all its pro-plaintiff leanings in other areas of the law, states quite clearly that personal injury class actions are disfavored for a variety of reasons.

There’s also a distinct trend afoot, not limited to tort cases, to tighten consideration of class action allegations. The old rule of no "merits" consideration during class certification is out the window.

To top it all off, our side has also had a good deal of success arguing against cross-jurisdictional class action tolling - that failed class actions filed in one court should not toll the statute of limitations on claims filed in a different court. That deprives failed class actions of the one substantive benefit that they could confer upon plaintiffs (as opposed to their lawyers).

We’re still litigating a few issues, such as whether punitive damages can ever be assessed on a classwide basis – discussed here – but overall our clients are a lot better off on the class action front now than they were when we got into this business.

Expert Witnesses

Grade: A. Back when we got started, the courts waved through just about any garbage that a plaintiff’s expert wanted to say. See Wells v. Ortho Pharmaceutical Corp., 788 F.2d 741, 744-45 (11th Cir. 1986) (allowing testimony with no epidemiologic or other statistically significant support that spermicide, of all things, caused birth defects).

Then along came Daubert v. Merrrell Dow Pharmaceuticals, Inc., 509 U .S. 579 (1993). For a while there, it was touch and go. Daubert could have been interpreted as loosening the already capacious federal standard for expert certification even further. But the good guys, again through a lot of hard work and inspired argument, were able to gain the upper hand in this area. The most important thing wasn’t really the standard itself, but the concept of the judge – not the jury – as “gatekeeper.” Given the amount of junk science that plaintiffs’ experts were spewing, if we could just get courts believing that they had an obligation to review things critically, we would win.

And we did, although it took several return trips to the Supreme Court to nail it down. See General Electric Co. v. Joiner, 522 U.S. 136 (1997); Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999); Weisgram v. Marley Co., 528 U.S.440 (2000).

Daubert was a drug case. It was the Bendectin litigation’s lasting gift to the legal profession.

After a while, the Daubert divide’s gotten to be like night and day. We don’t win every case, but we win a lot more of them than before. Nineteen years after Wells, the same court decided McClain v. Metabolife International, Inc., 401 F.3d 1233 (11th Cir. 2005), reversing and requiring judgment n.o.v. where an expert relied on little more than temporal association. That's monumental change for the better.

And the most important part of Daubert – stringent substantive review of expert opinions, by whatever name – is increasingly finding its way into state court decisions as well, in places like New York, Texas, and Pennsylvania.

So this is another area where we think that, after twenty-plus years of our laboring in the litigation vineyards, our clients are a lot better off.

Pleading

Grade: A- (due to incompleteness). We’ve been all over Ashcroft v. Iqbal, 129 S. Ct. 1937 (U.S. 2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), on this blog.

For good reason.

Before these decisions, the federal pleading standard was a joke. Plaintiffs could survive a motion to dismiss without pleading a single actual fact, only the same boilerplate they could repeat over and over again in thousands of identical complaints, with only the names changed to encourage the greedy.

Under the new plausibility standard, so far it looks like things will get better. We haven’t done a complete survey by any means, but we do analyze post-Riegel device preemption cases, and a lot of those are being decided on motion to dismiss lately. Under the new pleading standards, the courts aren’t buying boilerplate allegations of “FDA violations” any longer – and cases are getting dismissed (or not refiled). That's immediate, concrete improvement.

We’re hoping that carries over to other allegations having nothing to do with preemption, such as feasible alternative design, warning causation, and reliance.

If our side can continue to build on Iqbal and Twombly the way we have with the Supreme Court’s favorable class certification and expert admission decisions, maybe we can force the other side to abandon their word processors and actually have to evaluate the facts relevant to each of their clients before filing suit.

So with respect to pleading, our clients are already better off – and could be a lot better off – than they were when we first got our seats at the table.

Learned Intermediary Rule

Grade: A-. The minus is due to the wrongheaded decisions of one state supreme court and a federal district court ignoring state precedent, undermining the learned intermediary rule in a couple of smaller states.

The A is due to the number of states that have adopted the learned intermediary rule since the mid-1980s. Take a look at the chart we did a while ago on who’s adopted the learned intermediary rule. In 1987 sixteen state supreme courts had adopted the rule. We’re up to 33 now, with the addition of Wyoming after that post was written. Three more states, including Texas, have had their supreme courts adopt the rule in cases not involving drugs or devices. Federal courts have predicted adoption in three more states.

Personally, we’ve been involved in state supreme court decisions either adopting or reaffirming the learned intermediary rule in Pennsylvania, Ohio, New Jersey, Connecticut, Kentucky, and Georgia.

Beyond simply the number of states adopting the learned intermediary rule, we’ve also seen a strong trend towards its expansion in various directions. It’s expanded from drugs to medical devices. The rule has grown from adequacy of warnings to whether an allegedly defective warning had any causal effect. It’s expanded from failure to warn claims to other claims such as consumer fraud. The rule has been increasingly adopted to protect entities like pharmacists, in addition to product manufacturers.

And because the learned intermediary rule requires that warnings be viewed from the perspective of medical professionals, courts have increasingly been requiring expert testimony as to warning adequacy.

So far, even when the other side tries their own version of “tort reform,” they haven’t really gotten anywhere trying to repeal the learned intermediary rule legislatively - at least not yet. "Constant vigilance."

So with the learned intermediary rule as well, we’d have to say that our clients are quite a bit better off now than when we started in this business.

Preemption

Grade: B. What? Didn’t you guys just get hammered in Wyeth v. Levine, 129 S. Ct. 1187 (2009)?

Yeah, and our ears are still ringing.

But back 20+ years ago, who’d ever heard of preemption in a product liability case to begin with? When we got started, preemption was nowhere.

We were on the barricades in the first wave of preemption litigation, in vaccine cases. We got clobbered.

We were back on the barricades in the second wave of preemption litigation. We had just gotten most of the Bone Screw litigation thrown out on preemption grounds, see In re Orthopedic Bone Screw Products Liability Litigation, 1996 WL 221784 (E.D. Pa. April 8, 1996), when we got clobbered again in Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996). So we’re sort of used to it.

But we’ve got some degree of prescription drug preemption after Levine, with the boundaries still to be fleshed out. In Riegel v. Medtronic, Inc., 128 S. Ct. 999 (2008), we won extensive preemption with respect to pre-market approved medical devices – a minority of all devices, but a category including a lot of the most important devices that would be most adversely affected by litigation as usual. Maybe best of all, preemption precludes the other side from standing up in front of juries and alleging that our client lied to the FDA in its regulatory submissions. Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S. 341 (2001).

So we haven’t gotten the home run with preemption that we hoped, but considering that back in the late 1980s preemption wasn’t even an affirmative defense worth pleading, our cohort has made significant gains for a significant number of clients.

Prevention of Innovative Liability Theories

Grade: B-. When we started market share liability was a major threat to burst its DES bounds and become generally accepted. That hasn’t happened. No state has adopted it since Hawaii in 1991, and some of the states that did so earlier, like New York, have tightly confined it to the original DES set of facts. Score one for the good guys.

Public nuisance is also appearing more and more like a bad idea whose time has passed. It got a little traction with some pro-plaintiff courts in gun litigation, but not that much. Lately the theory – when asserted in product liability litigation – has taken its lumps in lead paint litigation. Public nuisance has gotten nowhere in drug and device litigation. Two-zip to the good.

The third Restatement of Torts, adopted in 1997 and published the following year, cut back on some of the loopier aspects of strict liability, including liability for unknowable risks, and failure to recall/retrofit claims.

We’ve largely kept an independent duty to test out of the law, too.

And fraud on the FDA is preempted (see above).

But on the other side of the ledger, consumer fraud claims have become staples of our opponent’s litigation strategy, and thus banes of our existence. Twenty years ago practically nobody ever encountered them. So that’s not so good. Still, since consumer fraud claims are limited to economic damages, they’re not worth very much unless the plaintiffs can find some way of aggregating them. See our earlier discussion of class actions. So the jury’s still out on how useful those claims will be for the other side in the long run.

New Jersey, a drug tort hotbed, recently put the kibosh on consumer fraud claims in product liability actions – that’s good.

Even better, our side's been able to convince most courts that such statutes can’t be enforced extraterritorially, outside of the state that enacted a particular statute. That cuts down on the size of any attempt to aggregate claims.

The learned intermediary rule helps, too, since physicians make individualized risk/benefit decisions in deciding to prescribe drugs and devices. That fact tends to preclude litigating these cases as class actions. So does the additional fact that most drugs and devices – how shocking! – actually help people. People who took a drug or used a device, got the benefit, and didn’t suffer an adverse side effect haven’t been injured. Fact of injury thus becomes another individualized determination that has prevented class actions.

We’ve also had a see-saw battle with negligence per se claims based upon alleged FDCA violations. Most of the older cases that were around when we were getting started allowed those claims without a lot of discussion, because after all the FDCA was enacted to make products safer, wasn’t it? However, the principle that the FDCA prohibits plaintiffs from privately enforcing the statute against violators, enunciated by the Supreme Court in Buckman, has helped our clients defeat those claims more often in recent years. But negligence per se hasn't yet gone the way of the dinosaurs, and some courts have allowed such claims.

Something else we didn’t see much of twenty years ago was the so-called post-sale duty to warn. That’s proliferated quite a bit, as even the Third Restatement included it. Fortunately, we don’t see all that much of post-sale claims in our neck of the woods.

Another negative we have to admit is that on our watch medical monitoring went from a legal peculiarity to, if not a majority rule, at least being allowed by a fair number of states, as our 50-state survey shows. So we haven’t been able to stop that one either.

All this adds up to a mixed record in beating back the various novel theories of liability that plaintiffs have invented over the years. We’ve gotten rid of some altogether, and limited others. But some geniis have escaped from the bottle despite the best efforts of our generation of defense lawyers.

Discovery

Grade: D. Two words: “electronic discovery.” Twenty years ago, when we were starting to move into responsible positions, nobody had ever heard of it.

Now electronic discovery has gotten entirely out of hand. It’s hideously expensive, ridiculously intrusive, and almost entirely a one way street. Tort plaintiffs don’t often have large, frequently upgraded computer systems.

Everything else that our side’s been able to accomplish in limiting or streamlining discovery – routinized plaintiff questionnaires, federal-state coordination, restrictions on apex depositions, the inadvertent production doctrine, etc. – pales by contrast to the constantly metastasizing disaster that is electronic discovery.

Reducing Overall Litigation

Grade: F. It hasn’t happened. The other side has been more efficient in soliciting large numbers of plaintiffs to populate the ever growing number of pharmaceutical and medical device mass torts than our side has been in stopping them. The racket that mass torts have become is so downright predictable that we parodied it a while back.

But beneath that parody is lies the simple fact that, since the Supreme Court’s first benighted decision in Bates v. State Bar of Arizona, 433 U.S. 350 (1977), extending First Amendment protection to lawyer advertising, the other side’s solicitation machines have become more and more effective, and there’s not a constitutional thing we can do about it. Even when our side gets a crumb from the Supreme Court, such as Florida Bar v. Went For It, Inc., 515 U.S. 618 (1995), upholding a trivial 30-day cooling off period from personalized solicitations, the vote was only 5-4.

As long as society tolerates virtually unlimited lawyer solicitation as a constitutional right, there’s not a lot of ways for our side to close the litigation floodgates.

Not that we haven’t tried; it’s just our side’s efforts to stop the onslaught of boilerplate, virtually uninvestigated filings hasn’t accomplished very much. Lone Pine orders are a handy invention, but they have yet to become routine, as, say, the litigation hold memos our side has to put up with. Rule 11 once had possibilities, but too many lawyers on both sides played games with it, so in 1993 the Advisory Committee defanged it. That rule hasn't been a significant factor since.

Maybe we’ll have better luck requiring individualized showings of “plausibility under Iqbal/Twombly, but that’s still in the future.

For the present, and over the past twenty years, the number of mass torts, and the number of plaintiffs involved in mass torts, has grown steadily. The list of federal court product liability MDLs maintained by the Judicial Panel on Multi-District litigation is one way to measure it. There was never more than one new drug/device MDL created per year (and in a lot of years, none) until 2001, when Baycol, PPA, Silzone, and ProteGen were all created. Then: 2002-0; 2003-1, 2004-2, 2005-4, 2006-8; 2007-3; 2008-10. Not a trend to be proud of.

If everything that we do is ultimately supposed to deter future litigation against our clients, then it hasn't worked at all.

So we flunk ourselves on that one. Maybe the next generation of defense lawyers can do better.


James Beck and Mark Herrmann are respectively lawyers in the Philadelphia office of Dechert, and the Chicago office of Jones Day, and defend drug and medical device litigation for a variety of clients. They publish the widely known Drug and Device Law Blog, where this essay first appeared.

Risks overblown? No, that never happens - PointOfLaw Forum

Relevant to the renewed push for the misguided "Precautionary Principle", this jaw-dropping assertion (PDF) from a group of law professors affiliated with the Center for Progressive Reform, expressing concerns over the Cass Sunstein nomination:

It is difficult to think of a single public health or environmental threat that with the benefit of additional research has not proven even more dangerous over time.

David Bernstein @ Volokh doesn't find it difficult to think of such instances at all:

Mercury in vaccines; Bendectin; Silicone breast implants (and medical grade silicone in general); PCBs; Asbestos in buildings; Fluoride in water; Birth control pills; Occasional marijuana use; High fat diets; Exposure to low level nuclear radiation; New carpet fumes; "Toxic waste dumps"/Superfund sites; Moderate overweightedness; Moderate alcohol consumption; Spermicides; Metal fillings (for teeth); Cancer from physical trauma; Masturbation; Predictions in the 1970s of worldwide food shortages; "Overpopulation"; Global Warming (the predictions of the level of man-made warming have decreased dramatically, even among strong advocates of the theory); Miscarriage from video display monitors; Cancer from electromagnetic field radiation; Radon; Dioxin; Pesticides commonly used on fruits and vegetables causing cancer to "eaters";

The authors of the Center for Progressive Reform declaration, for the record, are: John S. Applegate, Indiana Maurer (Bloomington); Robert Glicksman, Kansas; Thomas McGarity, Texas; Sidney Shapiro, Wake Forest; Amy Sinden, Temple (Beasley); Rena Steinzor, Maryland; Robert Verchick, Loyola New Orleans; and James Goodwin, Center for Progressive Reform.

News inferno reports that Kamie Kendall, a 24-year-old Utah hairdresser has been awarded $10.5 million by a New Jersey jury for damages to her colon following use of the anti-acne drug Accutane. The trial judge refused to allow the jury to consider punitive damages.

Kendall is the third Accutane plaintiff to successfully sue Hoffman-LaRoche over inflammatory bowel disease. In May, another New Jersey jury awarded $2.62 million in damages to a patient who needed to have his colon and most of his rectum removed after taking the drug Accutane. In October, A Florida jury awarded $7 million in damages to another Accutane user who developed the disorder and said Hoffman-LaRoche failed to adequately warn of the drug's risks.

Kendall started taking Accutane at age 12. She was diagnosed with ulcerative colitis at the age of 14, and in 2006 she had her colon removed and now suffers from debilitating diarrhea.

Hoffman-LaRoche is apparently appealing all three verdicts, and insisted that the link between Accutane and inflammatory bowel disease has not yet been proven. In a possibly contradictory statement, however, the company also said that "the Accutane labeling has contained a warning about IBD for more than 20 years."

Accutane may well go the way of Bendectin....

Vioxx as the Modern Bendectin? II - PointOfLaw Forum

Following up on Michael's point, we have new evidence of the positive difference Vioxx was making on healthcare outcomes. Dr. Gurkipal Singh, previously a harsh critic of the FDA and Vioxx, released a new study to the American College of Rheumatology annual meeting, finding a 21% increase in the gastrointestinal events Vioxx was designed to avoid:

In 2004, the last year in which all three cox-2 drugs were still on the market, the incidence of serious ulcerations hit an all-time low of 357 cases per 100,000 NSAID prescriptions filled.

But a year later -- after the Vioxx/Bextra withdrawals and attendant controversy -- those levels had already climbed to 434/100,000, a 21 percent increase, the study found.

Experts said they aren't shocked by the findings.

"With decreasing use of gastroprotective therapies, it comes as no surprise to see a substantial increase in NSAID-related GI adverse events," said Dr. Mark Fendrick, a professor of internal medicine at the University of Michigan School of Medicine. He has followed the cox-2 saga closely, co-authoring a commentary on the drugs' risks and benefits for The Lancet earlier this year.

According to Fendrick, it's unclear whether the cardiovascular health gains achieved by removing Vioxx and Bextra from the market have now been outweighed by a surge in serious gastrointestinal events.

"What's always bothered me as a general internist is that every study that you ever read on this either looks at the GI side or the cardiovascular side -- never both," he said. A study that compared both aspects in the same population might provide real guidance, he said.

"Then I might be able to say 'Oh, if we saved 1,000 lives from heart disease by increasing GI adverse events by X percent, then maybe we are doing the right thing,'" Fendrick said. So far, no such study has been done, he added.

The Merck proposed settlement (see Ted's summary) comes, amazingly, just as the Manhattan Institute organized a one-day study session here at George Mason Law School on fee-shifting rules.
Arguably Merck offered to pay out sums it believes it does not owe in substantive law, just because such sums are less than litigation fees it would otherwise have to pay under the "American rule" (which declines to transfer the winner's court and lawyer costs to the losing party). Arguably many of the thousands of pending suits against Merck due to Vioxx would not even have been filed had a "loser pays" rule been in effect. Arguably the four judges administering 90% of Vioxx litigation (in the federal, Texas, California and New Jersey courts) would not have twisted Merck's arm to settle (avoiding a multi-year clogging of their dockets as Merck fought and won suits one-by-one) had a loser pays rule been in effect, since their dockets would not have been so clogged. Arguably Vioxx is the modern Bendectin -- a valuable product removed from the market because of the lack of fee shifting. [Bendectin is apparently still available in Canada, where it is marketed as Diclectin, by the way. No outbreak of birth defects in the great white north...]

Back in August the Wall St. Journal health blog observed that, in a pure repetition of the Bendectin scenario, many people still swear by Vioxx and complain to Merck that nothing else on the market works for them. Not to fear: a skeptic from Consumers Union responds: �A person�s conviction that something is helping them or that only one thing will help them is often erroneous. The impact may be exaggerated.� Gee, might that apply to a person's conviction that a drug is hurting them?

BY RICHARD A. EPSTEIN

In a recent issue of the New Republic, Arnold Relman, a former Editor—in—Chief of the New England Journal of Medicine, offered a most unflattering review of my recent book, Overdose: How Excessive Government Regulation Stifles Pharmaceutical Innovation (Yale University Press, 2006). The Editors of the New Republic have decided not to publish any reply from me. I am therefore grateful that the Manhattan Institute has stepped forward to publish my reply, with—I should add—an open invitation to Dr. Relman to respond if he so chooses.

In dealing with a longish review, the usual approach of the aggrieved author is to take on only one or two points of the critic, and let the reader draw whatever inferences he or she chooses about those points that were not addressed. The Relman review, however, makes so many instructive errors that a different course seems preferable. Let me first start with a few general observations and then turn to a point by point rebuttal of his argument.

The most obvious difference between us is that we inhabit two different intellectual universes. He dwells from the more liberal and more complacent medical culture of Cambridge, Massachusetts, and I come from the less fashionable and more driven legal precincts of the University of Chicago. Thus two great divides separate Relman from myself.

Start with the professional training. I am a lawyer by training, with an extensive, if informal, background in economics. I have worked extensively and actively in the health field area on a wide range of topics on health care, ethics, law and medicine for the past 30 years, much of it spent in the company of health care professionals with medical training. Relman is a doctor by training who fancies himself an expert in "social medicine," who has as best I can tell no formal training in any of the collateral disciplines that bear on the comprehensive analysis of health care. In his view, mere lawyers are always out of their depth in dealing with the kinds of issues raised by the provision of health care, including of course the development, testing, and marketing of pharmaceutical products. My view is that the technical matters of medical treatment can easily be bracketed in dealing with the larger institutional issues. I do not wish to decide which drugs should be tested in what clinical trials, but, even in the absence of that information, can comment intelligently on the use of these clinical trials in dealing with FDA approvals for new drugs or with their role in litigation. Indeed, in my work as a torts scholar, I am constantly forced to examine detailed medical information that involves such hotly litigated questions as whether Bendectin causes child defects or thimerosal causes autism. In my view, there is nothing whatsoever in Relman's traditional medical background that offers him any comparative advantage in dealing with the full range of property rights, regulatory, marketing, patent, and tort issues that are examined in Overdose, which should be evident to anyone who has worked his or her way through Relman's review.

The second deep cleavage between us has to do with world views. Relman is a generation older than I, being born in 1923, while I was born a generation later in 1943. The difference in age matters, because he takes the New Deal critique of markets as a verity from which all other truths flow. Indeed, for a man so insistent on field expertise, he shows no hesitation to take on Milton Friedman for his heretical views of the role and organization of market institutions. Those sentiments are quite evident in his searing conclusion that insists that markets "do not do a good job of protecting the public interest. If we want a pharmaceutical industry and a health care system that put patients' welfare and society's needs ahead of profits, we will need more regulation, not less."

I of course am very much in the camp of Milton Friedman, which is evidenced by our parallel lives at the University of Chicago and the Hoover Institution. And I was deeply honored to speak at his memorial service held at the Hoover Institution this past January. All that does not mean that I slavishly agree with all that Friedman says-a pose that Friedman himself would have found most distasteful. It does mean, however, that I take strong issue with the simple–minded portrait that Relman paints of my views. The proper question is not whether we put society's interest ahead of profits. That formulation of the question gives no guidance as to what should be done. Clearly if we are to have pharmaceutical companies, then we must allow them to have some profits in order to attract and retain capital. Relman is not subtle enough to distinguish between a risk-adjusted competitive rate or return and monopoly profits, or to recognize that the former advances social welfare and the latter retards it. Indeed, Relman's gripe is not only with Friedman but with every neoclassical economist from Adam Smith to the present

That said, the right question to ask is how we maximize a system of overall social welfare, which cannot be done if the industry is driven out of business. On that structural question I am happy to align myself with both Smith and Friedman on a number of key points: that voluntary transactions are preferable to coerced ones, that subsidies and taxes can easily distort the choices of private actors, that state officials often have private agendas to advance even when in public office, and that the state which concentrates its effort on the control of force and fraud, the provision of public infrastructure and the control of monopoly-which means refusing to create state monopolies-will do better than the big New Deal government that sees in every market a looming imperfection, which only the wise hand of government can correct. The system of government control that Relman proposes is ruinous to the ends of patient welfare and social prosperity that he supports.

His fundamentally unsound world view does create a huge professional and philosophical chasm between us. Worse still, it infects every portion of his New Republic review. Here it is convenient to break down his arguments by into two areas. I will first treat his general critique of the economic issues raised on matters of drug, pricing, patenting and marketing. Thereafter I shall turn to health and safety, with special reference to the FDA, clinical trials and tort liability.

RELMAN'S ECONOMIC CRITIQUE:

Corporate responsibility. Relman begins his attack by quoting Pfizer CEO Jeffrey Kindler, a lawyer by training no less, who says: "We will transform virtually every aspect of how we do business, focusing on actions that create and sustain value for our shareholders." That statement, made by the CEO of a company whose stock has been under constant pressure should be regarded as good news to shareholders, and to anyone else who is concerned with Pfizer's recent lag in performance. But not to Relman, who sees in this benign pronouncement the spread of Friedman's dreaded influence into the sacred precincts of the pharmaceutical industry. Indeed Friedman said, famously, in words that wave a red flag before Relman's eyes: "Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible." Relman hears in these words not "we shall do our best by our shareholders." Rather, to him the words say: "the public be damned."

Now it turns out that Friedman (who was not a lawyer) did overclaim in this sentence. The proper analysis says that the corporation is (or is formed by) an agreement among its shareholders, so that any gifts that it chooses to make should be in accordance with the conditions of its charter, which in some cases may allow for such giving. Indeed, I know of no case where a corporate gift has been successfully attacked in court. Relman can breathe easily on this point. But that is a mere detail. Friedman's central point is that shareholders can agree on any program that maximizes share value. Once that is done then the shareholders as individuals can make whatever charitable gifts they see fit with the dividends and gains that they make from their investment. Friedman's argument, which Relman does not understand, is that private giving at the shareholder level is preferable because avoids the real conflict of interests that arises when corporations make gifts to some charities but not to other. And needless to say, Relman shows no evidence of the major corporate law qualification to this rule, namely, that "gifts" to charitable or other institutions that work to promote the good will of the corporation are consistent with the operation of a profit-making institution, as countless cases have held.

We can ignore the fine points of the analysis, because Relman is after bigger game. His view is that Kindler is engaged in some massive hypocrisy when Pfizer makes all these high-sounding statements that it is "working for a healthier world," or "putting its patients first." Pharmaceutical firms are not unique in making these remarks; Ronald Reagan remarked as the spokesman for General Electric, "Progress is our most important product." But Relman is thoroughly confused about how corporations work. The management owes duties of loyalty and care to the shareholders; after all shareholders have put their money in with the firm, and it would hardly do to allow the management to misappropriate the funds so that the shareholders go home empty-handed. But the customers of the firm are not investors, and they can walk away and buy somewhere else if they do not like what they get. The key challenge to any firm is to figure out how to secure their repeated loyalty and that can only be done by offering them goods and services that they value at more than they pay, which the corporation can produce at a cost lower than the prices they can command. Therein lies the critical concordance of interest between buyer and seller that Kindler grasps. Kindler knows that unless he can preserve the good will of his customer base, Pfizer will have to close up shop. The firm has to walk a tightrope, and in that regard it is no different from any other company in any other industry. Indeed, one major problem for any firm in a large industry is that its reputation really matters, such that a single infraction can produce losses in future sales that far dwarf any direct fine or tort judgment that could be imposed. These are good features, because we now know that large companies bind themselves to good behavior by their brand and reputation. One of the first things that Kindler has to do is to make sure that his firm does not acquire a reputation that matches that of the tobacco industry (for which, years ago, I consulted). It is very hard to do in the face of uninformed critics who see a large target that finds it difficult, even with the money it spends, to mount an effective public relations campaign. Like many corporations, pharmaceutical companies are only omnipotent in the fevered imagination of their most severe critics. In reality, a single bad headline or court ruling can erase billions in shareholder value and leave CEOs like Kindler trembling.

After his initial foray, Relman then turns to my view that regulation has hurt the industry in ways that do not help the public. Relying on the judgment of unnamed experts on the drug industry, he concludes that the industry's greatest enemy is itself, not regulation. But, put the word "greatest" to one side, and there is no either/or there. I made it quite clear in Overdose that the industry blockbuster model has not worked well, and that some of the fault lies in the management of the major companies-a point that Pfizer's Kindler obviously accepts. But one cause does not operate to the exclusion of all others, and Relman must be blind to think that the endless efforts to undermine patent protection, to increase the length of clinical trials, to impose price controls, to allow for multi-billion dollar consumer refunds and tort actions has no impact on the day-to-day operations of any pharmaceutical firm, and its long-term prospects. Any change in costs can produce negative results, and it is just unsupported allegation to say that the drug companies have a deep obsession with "financial ambitions and marketing considerations," so-his italics-"that is the root of their current problems." His argument might have some tenuous credibility if deemed to explain why some firms succeed and others do not. But if there is an industry-wide risk of stagnation, it is just wrong to assume that the management of every firm falls prey to these biases. The more plausible diagnosis for a systemwide failure is the systemwide effects of expanded regulation and liability.

Competition and Monopoly. Relman will have none of this equivocation. So that is where I come in, as an industry "apologist" who can put his lawyerly skills to defend the indefensible, which in this case is acting as handmaiden for the industry's monopolistic ambitions while preaching the virtues of free competition. He notes my consulting connections, fully disclosed, to the pharmaceutical industry, and then attacks my general view on health care, as developed in Mortal Peril: Our Inalienable Right to Health Care?, which is deeply opposed to universal health care. Oddly enough, Relman thinks that it is some kind of indictment of my position to say that excessive health expenditures through Medicare and Medicaid "has had negative, although unintended, consequences." But rather than explaining why I am wrong to his committed New Republic audience he just makes the comfortable leap: the man who cannot be trusted on health care is the man who cannot trust on pharmaceutical issues either. The nub of his argument: "prescription drugs are different from most other commercial products-so different that they warrant government regulation of their development, their manufacture, and their sale." At no point does he stop to ask where the libertarian position might call for regulation, which would surely include cases where impure drugs are sold as real, or where drugs are misrepresented as to their uses or side effects. By implication he confuses the libertarian position of small government and free competition with the anarchist position of no government at all.

Nor does he see any reason to do so because he takes the view that I will abandon my principles at the drop of the hat by arguing "for stronger government support of the industry's monopoly rights and for government protection against price competition from abroad. He wants handouts from the public without public oversight." Here, Relman has lost his intellectual compass. On the first point, "industry monopoly rights" refer to patents, which grant exclusive rights to sell particular products to individual inventors. By putting the proposition in this inflammatory way he makes it appear that I wish to block new entry by other firms to compete with firms that have already received patents on drugs already in the marketplace. In fact, in Overdose I am at pains to attack large claims that would give any firm a patent over entire areas of treatment, including my extensive defense of the judicial decision University of Rochester v. G. D. Searle & Co. 358 F.3d 916 (Fed. Cir. 2004) (a case on which I briefly worked for Searle), which refused to allow the University of Rochester to obtain a patent over all drugs that relied on any Cox-II method of inhibition. The patent system, rightly used, gives people exclusive control over their own products, which is a monopoly of sorts. But so long as there are multiple substitutes subject to different patents, then no firm in the industry exercises monopoly power. There can be, and with sound policies, should be effective competition among holders of different patents of drugs that are in the same class.

Relman's statement about "government protection from price competition from abroad" also reflects either economic ignorance or conscious deceit. The last thing that I favor is allowing any firm to induce the government to place tariff or tax barriers to entry on products from overseas. But the programs to which he refers are not efforts by pharmaceutical companies to block competition by other firms hawking their own products. Rather it has to do with the issue of parallel importation, where goods from the United States are sold to, say, Canadian firms at prices dictated by the Canadian government for internal Canadian use, with the knowledge that they will be reimported into the United States for sale at lower prices than those available domestically.

For Relman, who knows nothing about the fine print of this initiative, to call this program "free trade" is a bad joke. The defenders of parallel importation make it clear that American firms should be under a statutory duty to sell as much of any good as any buyer wants to buy at a price that is determined by the state monopolist (more precisely, monopsonist) on pain of losing their privileges to sell in the United States. Then once these goods are sold, the research pharmaceutical firms are barred from asserting their patent rights against a rival firm that wants to sell the products that it has commandeered courtesy of the United States Congress. This looks more like involuntary servitude than free trade. But then again perhaps Relman is in favor of those provisions that hold that doctors, as a condition for being able to work in the voluntary market, have to devote as much of their time to government service for the poor as the state asks, for fees that it determines.

Later on in his essay, Relman again then criticizes the industry for the "extraordinary steps that a Republican-controlled Congress took to ensure that Medicare would not be permitted to influence market prices by directly purchasing prescription drugs for beneficiaries who enroll in Part D under the so-called Medicare Modernization Act of 2003." I did not discuss this issue in the book, but it is worth noting why Relman is in such error on the point, for which the work of the Manhattan Institute's Ben Zycher is so instructive. See his The Human Cost of Federal Price Negotiations: The Medicare Prescription Drug Benefit and Pharmaceutical Innovation, Medical Progress Report, No. 3, November 2006. The first point here is that letting the government into the market on the buy-side does not advance competition, but creates a huge monopsony position capable of forcing down drug prices, which of course the industry does not like. But on this point its position and the public interest correspond. Just as monopolies set prices too high, so monopsonies set them too low. The huge fraction of the market under Medicare will lower rates of return that will reduce the funds available for funding new drugs, which will impair innovation, just as Overdose claims, and Zycher documents. No matter whether one looks at reduction in funds for research ($10 billion per annum), or new medicines delayed (107 to 220, depending on assumptions), the result is the same. In Relman's world regulation is a free good. In the world we live in, it is not.

Nor should we think that the only adverse consequences of government control lie in the future. It is worth noting that even before Relman wrote the Democratic effort to insert the government into the purchasing process started to falter. It is not that the current plan participants were worried all that much about the future. They were worried about the present. The Veteran's Administration is treated as the ideal for Medicare Part D, for its ability to control costs. But how? By limiting choice. Yet many people will prefer to pay more to get more, and the insertion of government into the purchasing process promises to bring in its wake the same restrictions on formulary that are found, say, in England and Japan, which delay the use of new drugs until it is too late for some people. There are, in a word, all sorts of principled reasons to be opposed to any expansion of the government role on the buy-side of the market.

The Cost of New Drugs. Relman then continues his critique of the industry by noting that I am wrong to make too much of the high costs and risky investments needed to bring pharmaceutical products to market. His first point is that the exact cost is a "mystery" because the company data is not public, even though it was given to a team of researchers led by Joseph DiMasi, director of economic analysis at the Tufts Center for the Study of Drug Development, in forming an estimate of the costs of drug development. See Joseph A. DiMasi et al., The Price of Innovation: New Estimates of Drug Development Costs, 22 J. Health Econ. 151-85 (2003) (available here). But this is not an insuperable obstacle. There are certainly crude measures that are publicly available that point to the high, and ever higher, cost of new drug innovation. If research budgets total around $35 billion for the industry, and we produce about that number of new products, then we have something of a rough first approximation of a billion dollars, which can to be corrected to take into account other factors. But don't count on Relman to make the right adjustments. He first notes the standard figure of $800 million, developed by DiMasi's team several years ago doubled today, only to comment: "Yet both these figures include the so-called time-cost of the money spent, a theoretical and much-disputed quantity that contributed about half of the $800 million figure." So now we have it: the "so-called" cost of capital is not a cost of production because, at least to one untutored physician, a dollar spent today is precisely offset by a dollar earned eleven years from now.

There is still the nasty question of how to recoup these costs, which present a difficult problem in any high-fixed, low-marginal cost business. Relman notes that I assert that high prices are needed "to recoup the high cost of their initial R&D, but that implication is denied by at least some of the leaders in the industry," but notes thereafter that Raymond Gilmartin, past Merck CEO, has "publicly stated that it was the 'value' of the drug to the patient that was the prime determination of price, not what it cost to bring the drug to market."

Relman's brief foray into pharmaceutical pricing reflects his total ignorance of the subject. As I explained in Overdose, high-fixed, low-marginal cost products present special challenges in market settings, because there is little tendency of the price of drugs to fall to the marginal cost of their production, which is all that Gilmartin wanted to say. The argument here depends on a variety of second-best considerations. So long as a company could recoup all its costs and normal profits in the first patented pill produced, marginal-cost pricing would be a great boon for all consumers that purchased the second to nth pills. After all, it is only that first pill that costs $800 million. But there's the rub: Who pays for that first pill? Clearly, no one consumer can cover its full marginal cost, so that if the company is to make back its costs plus a reasonable profit, it has to charge users two through ten million some figure above the marginal cost to make back something of what it lost on that first pill. But how much, and to whom?

Here is where the rubber hits the road. There is no unique algorithm which explains how much gets charged to any customer. The "value" issue arises because you cannot charge anyone more for a drug than it is worth to them, or indeed more than they can afford to pay, taking insurance into account. What makes matters more complicated is that every buyer understands the situation and hopes to negotiate a deal that allows it to pay as little above marginal cost as possible. This leads to price discrimination in these markets, where some customers who can move elsewhere pay less than those who do not. Relman notes that prices remain high at retail pharmacies, but misses the point when he treats that segment of the market as representative of the whole, when in fact they are not. Retail pharmacists and independent drugstores have to carry all lines. HMOs and other provider groups do not and can play off one supplier against another, leading to lower prices for them. Hence, one has to look at the whole market, to see how it all works. It is in this world wholly incomplete to make his observation that "the listed wholesale price of a prescription drug almost never goes down, no matter how much its sales increase." Listed prices are not where the action is. What you have to know is the number of side deals and rebates and special programs that constitute the full market, about whose structure Relman does not have a clue. And through it all, we do know this much: we should expect in general prices to rise as costs for production rise, because companies will not produce goods when they do not think that cost recovery is attainable over its useful life. The distribution of these increases is hard to predict because of the complex dynamics of market pricing, but connection between costs and prices, however hard to measure, is to this extent real.

Relman of course touches none of these issues. He notes that cancer therapies can run $50,000 per annum, but does not examine either the cost or benefit side for these drugs, or how deregulation might lower prices. He notes that the industry runs high profits, but scoffs at the notion of risk-related return, even in the face of the industry's mediocre performance in the stock market. To him the "the industry" (and never the firm) just "dictates" prices. And what does he propose? In his New Republic review, nothing. But his sympathies, like those of Marcia Angell, lie with a system of price controls that is sure to be a disaster, given the number of products, the shifts in prices, the number of different distribution paths and the like. Maybe Relman doesn't think that pharmaceutical companies should behave like ordinary firms. But he surely gives us no inkling here of what pricing regimes follow from his own enlightened view of the industry.

Advertising. Relman is equally uninformed when it comes to advertising, which in his inimitable authoritarian style he would like to limit or ban. But there are two sides to this story as well. Start with the consumer side. On many conditions, people are undermedicated because they are unaware of the risks they face or the conditions that available drugs can treat. Getting this information out is critical and can save lives. And once a patient gets to a physician, he may well take a different drug for the condition than the one for which he saw the ads. The key point is to get patients into the system, which only advertisement can do.

Next Relman does not appear to believe that advertisements lower average costs because of his excessive reliance on list price as evidence of market prices. But of course they do, for why else would a firm advertise if it could not recoup those costs and then some? The increases in total costs are offset by the increase in volume so that greater penetration takes place in the market. Of course, we have to worry about fraud, and he is not the first to observe that the line between truthful and false advertisement is filled with grey, which is what makes this so difficult a field to regulate even for a libertarian who has to balance the risk of too much against the risk of too little regulation. Relman is oblivious to the need for trade-offs at the margin-here and everywhere else.

Next there is drug promotion to the profession. Here it is quite remarkable the number of institutions-like Penn, Yale or Stanford—that have taken the position that any drug sponsorship of a program is so tainted that it should not be allowed in university medical centers. This position is wholly misguided. The question here is: what is the alternative? Let us assume for the sake of argument that there is some bias in each drug company-sponsored program. Funny, the doctors should know this as well. But there are also benefits. The sponsorships are competitive, and overstatements by one sponsor are inevitably caught by another. Nor are these presentations the only source of information. Doctors can generate their own information sources to supplement and correct what the companies say. Unfortunately, the dominant attitude today is that drug company sponsorship is not a cost to be traded off against other costs, but an evil, to be banned.

And what is put in its place? Well, there is the rub. Troyen Brennan and colleagues (see Brennan et al., Health Industry Practices That Create Conflicts of Interest, 295 JAMA 429 (January 2006)), came up with the dreamy proposal of asking drug companies to contribute money to educational funds that anti-drug company doctors could spend on their own spiel. Talk about aiding and abetting your opponents. As fiduciaries to shareholders, no company would sponsor education on fields in which it does not do research. Their proposal is a total nonstarter. So where will the medical schools and learned societies come up with the money? Don't ask such nettlesome questions, for good intentions cures all practical ills. Just assume that the lesser amounts information gathered from these sources will be more reliable. But don't count on it. Individual physicians do not have reputations the size of drug companies, and many will not speak for free anyhow, at least many times. So the likely upshot of the ban is less information with greater bias, albeit in a different direction. This is not progress, but a dangerous cutting of ties between industry and universities and learned societies that should be fostered, with due care and attention to conflicts of interest. Fruitful partnerships should not be bludgeoned to death on the strength of some idle idealistic assumptions.

Patents. Relman is equally fearless when he takes on the patent issues. He references the interesting work of Adam Jaffe and Josh Lerner, Innovation and Its Discontents (2004), who think that the standards for patents are too lax, and thinks that it supports the charges that Marcia Angell makes in her book (which I have reviewed unfavorably) that too many patents are given for me-too drugs that do not represent real product advances. But Jaffe and Lerner are talking about a different problem. Me-too drugs are not double-click patents. No one doubts that the spate of me-too drugs on the marketplace meet whatever patent standards Jaffe and Lerner would propose; and they surely meet the recent Supreme Court standards of nonobviousness in KSR International v.. Teleflex (2006), which dealt with the positioning of sensors in gas pedals. How could these me-too drugs not be nonobvious extensions of existing molecules when the FDA requires that they go through separate testing. Two molecules may look similar but their behaviors could be quite different, so the hard matter never concerns patentability, which is a given, but regulatory approval.

On this point, Relman and Angell are the defenders of the single worst idea of regulatory policy to come along in a long time. Recall that Relman thought that I was too soft on monopolies. So their new suggestion is that the FDA ratchet up its standard so that a new drug should be let into the market only if it outperforms the existing drug. The problems with this proposal are legion. Most obviously, separate companies work on parallel tracks so that the FDA approval of the first now freezes out all the others: talk about the monopolist's best friends, Relman and Arnold? And think about the effect on research expenditures. There are fewer winners in this world, but the lucky winners get much more in the new winner-take-all game, so there will be redoubled research efforts to patent early just to preclude others, and for what? To make sure that consumers pay higher prices, which will happen if there is only a single seller in the market, with its own super high initial cost. Or maybe it is to deny options that arise for patients that do better on one therapy than other? Relman and Angell's repeated defense of their position remains a mystery. Ruinous and foolish, from a social point of view, are apt words to describe so misguided a social policy.

Safety and health issues. Even though Relman makes an utter hash of the economic issues, one might think that he would do a bit better in talking about the health and safety issues, which are more up his alley. But again he misfires on all cylinders.

In dealing with this issue, it is useful to break the topic down into three different questions. The first of these deals with purity and contamination. The second deals with drug safety, i.e., whether the product when properly formulated has adverse side effects that outweigh the benefits of its use, and the third topic is effectiveness: even if a particular drug does not kill, will it at least help?

In my view, the most important of these by far is the contamination and purity issue, which was the exclusive target of the original Pure Food Drug and Cosmetic Act. We now have a clear set of reminders as to why that is so, as we think about the contaminated products that have come in from China, which at great public expense have to be confiscated and destroyed. It is only because of the relative success in dealing with this issue that we tend to forget its dominant importance.

The issue has, regrettably, resurfaced with drugs. The reports of world wide drug counterfeiting with disastrous results are too numerous to count. And yet what is Relman's reaction to one portion of the problem? Simple denial. More concretely, one set of objections to the parallel importation scheme from Canada and elsewhere is that there are real health risks that have to be watched. There is no question that the history of protectionism in the United States and elsewhere is replete with cases where disappointed competitors raise deliberate health scares to keep out superior products with lower price tags. But this is not one of them. Relman, however, dismisses the matter with a wave of the hand, calling the entire concern "spurious," without ever bothering to say why. He does not explain why the huge return from selling bogus goods gives no incentive for unscrupulous people to break into a porous system. He does not explain why long supply lines through foreign territory increase the opportunities to distribute counterfeit drugs into the market. He has no explanation as to why private companies spend small fortunes to label and track goods in an effort to thwart counterfeiting. He gives no explanation as to why every FDA official who has looked at this issue, in both Democratic and Republican administrations, will not give their blessing to parallel importation or why Congress, after its usual bluster, always backs down on the issue. Perhaps he will buy these drugs, but not I, at least if I can figure out which ones they are.

The real front on this issue, however, deals with the role of the FDA as a good government agency that is designed to deal with the safety and efficacy of new drugs. Relman starts by charging me with the "incredible assertion" that pharmaceutical goods are "ordinary products." His refutation: we have the full system of regulation that is now in place to deal with them. Clinical trials, prescription requirements and lots more. And so he is right descriptively. Drugs are not treated as an ordinary good, but neither are lots of things, from wheat, which is subject to all sorts of odd subsidies, to rental units in New York City, to gasoline, telephone lines, to land. And lo, for each, when special restrictions are imposed, rational actors' antisocial behavior in response to such imposed incentives occurs. Medical care is not immune to these dangers. No one over sixty-five will admit to the overconsumption of medical care, but when three-fourths the cost of Medicare comes out of public funds contributed by others, the overconsumption should be taken as a given, as a cost to be taken into account along with the real and supposed benefits of the program.

In response it could, and should, be said that health care raises real problems with information, but so do lots of other goods, including complex financial services and retirement plans, computer programs and the like. There are differences in all these goods, but one mistake that Relman makes is to think that only former editors of the New England Journal of Medicine understand just how difficult it is for ordinary people to understand medical services. But again, that problem is not unique to health care, but arises in other markets as well, like real estate and life insurance. And so in some instances people hire brokers, and in others they hire doctors. It is one thing not to know much about drugs, but it is far more dangerous not to know that you do not know anything about drugs. The point here is that knowledge of deficiency is sufficient to get one to hire professional help, which is an ordinary response in some but not all sorts of markets. There are of course lots of ways to compensate for information deficits without giving the FDA the power to regulate which drugs get on the market and, increasingly, what kinds of warnings they provide.

Relman is dismissive of any critique of FDA policy, in large measure because of the touching faith that he places in clinical trials. "Does Epstein really not understand that properly designed and conducted clinical trials are now universally accepted as the most reliable means of determining the effectiveness of a drug?" Or elsewhere that "clinical trials . . . changed the basis for the use of drugs from something akin to hearsay and witchcraft to something much closer to science." Well, yes I do understand his point, but at the same time wish to place it in perspective. The first rejoinder; "reliable" does not mean "quickest". And for people who do not have the luxury to wait years until a well run clinical trial is done, the rational thing to do is to make the best guess of future treatment on the strength of information that is available to them here and now. And for these people the fetish over clinical trials is a death sentence. In the usual case, as rational agents guided by rational physicians, they will typically try those treatments that do meet the heightened standards of clinical trials. But when those options fail, and the choice is high risk or certain death, people are willing to roll the dice because they have a higher expected utility taking the chance than they have by sitting passively by waiting to die.

The point here is not some nasty pharmaceutical propaganda. Indeed the most vocal attackers against clinical trials, without exception, are not pharmaceutical companies (who fear the liability implications of allowing people to use their drugs), but the ordinary patient who knows how to make the simple expected utility calculations that elude Relman and, more importantly, the FDA. No where in his review did Relman mention the efforts of Abigail Alliance-that's Abigail as in Abigail Borroughs, whose family sought vainly to get her access to Eribtux or Iressa, not on the advice of Richard Epstein, but on the advice of her own Johns Hopkins oncologist. See http://abigail-alliance.org/story.htm. There are no pharmaceutical companies on its board of directors- just ordinary people who wonder why the FDA stands in the path of their last best hope because it knows that clinical trials are the most reliable form of information. And then there is the litigation, as Abigail Alliance tried and failed to assert a constitutional right to obtain treatment of any drug that has made it through Phase I clinical trials, so that its toxicity was within measurable levels. See Abigail Alliance v. von Eschenbach, 2007 U.S. App., Lexis 18688. Perhaps that exotic argument should have lost, but if so it was before a judiciary that takes far too sanguine a view of the Congress and the FDA to protect us from serious danger. Whether correct as a matter of constitutional law or not, the impulse for the attacks on the FDA come from the people who want to take the drugs. And Arnold Relman knows so much about medicine that he is prepared to turn them away at the gate. What a way to put people before profits. For shame!

The beat does not stop there. Relman does not mention at all the pressing issue of off-label uses, because again it does not fit in with the tidy story that makes clinical trials the indispensable gold standard of American medicine. But there is in the United States a peculiar bifurcation of authority over the practice of medicine. The FDA may be able to keep a drug off the market, but it cannot regulate the practice of medicine. So once the drug is out there, then physicians can use it not only for its stated implications but also for off-label uses. And they do. Sandra Johnson (See Polluting Medical Judgment? False Assumptions in the Pursuit of False Claims Relating to Off-Label Prescribing, Marketing and Research, Minn. J. L. Science & Technology (forthcoming)) has put together figures that suggest that for many oncogenic drugs, the off-label uses dominate the permitted uses by large margins.

Consider the drug thalidomide, devastating when taken in early pregnancy, but is now sold as the renamed Thalomid. In the earlier version of this article, I had written that Thalomid "is licensed for use in treating leprosy. But its booming sales are a function of its success in cancer treatment." The fuller and more accurate story has turns out to be more instructive than my earlier cryptic reference. Thalomid was originally licensed by the FDA for use in treatment of leprosy in July, 1998. In May, 2006 it received approval from the FDA for the treatment of multiple myeloma, after accelerated clinical trials which were, as is wholly proper, directed to determining the adverse side effects of the drug when put to its intended use in combination dexamethasone (Dex), where the both gains and the adverse side effects were higher with the combined treatment than with Dex alone. The FDA approval (see www.fda.gov/cder/Offices/OODP/whatsnew/thalidomide.htm) took place on an accelerated basis, based in part on a randomized clinical trial of 207 patients recently diagnosed with multiple myeloma. The approval requires additional clinical trials to demonstrate the clinical benefit of the drug. Since the distribution of Thalomid is tightly controlled, the off-label use of the drug today is likely to be smaller than with other drugs.

Here are some troublesome questions about this history. First, what was the frequency of Thalomid use for multiple myeloma in the 1998 to 2006 period? Second, how many deaths could have been averted if the drug could have been used on an interim basis for all cases of multiple myeloma for which it is indicated? Third, how was the information accumulated that made it attractive to run the clinical trial on this drug, as opposed to the many others where it has not taken place? Fourth, to what extent does the accelerated treatment meet the standards that Relman would require before letting dangerous drugs on the market? And fifth, does it tell us anything about the current get-tough policy on various cancer treatments that are used typically in last-ditch circumstances? Interestingly, there is a voluntary organization, the National Comprehensive Cancer Network (www.nccn.org) , composed of 21 leading cancer research institutes. The key question is whether this network is better able through conversation and suasion to deal with these new therapies than the FDA? And if it is, is its work hampered by the grey market status of off-label uses? Taken as a whole, there is nothing in this somewhat unusual success story That strengthens Relman's case for a strong FDA control over the use of drugs for the treatment of deadly cancers.

Thalomid is of course only one of many potent cancer drugs, and its own history seems to account for the exceptionally tight controls that are placed on its distribution. But the general picture seems to be that many anticancer drugs do not have clinical trials to back them up, but none of Dr. Relman's peers will sit by to watch patients die if they think that the drugs could shorten the odds. It would be nice to collect data on the effectiveness of these uses, but the FDA will not allow drug companies to promote off-label uses, or to warn about their side effects, so that one obvious avenue of information collection is blocked. But even if it did, time still is of the essence, and there is little if any systematic evidence that suggests that physicians who take a drug licensed for breast cancer do their patients a disservice if they try using it on otherwise incurable colo-rectal cancer. There is a bit of theory that suggests the tumors may respond the same, an anecdote here or there which says that it might have worked, and the utter absence of anything better. Would Relman want to shut down this entire mode of doing business because there are lots of doctors out there who don't know the meaning of a "gold standard"?

Perhaps not. Perhaps we should have clinical trials for those additional uses. A nice idea, but with strings attached. Those trials take time. The company that has the patent on the drug will not spend millions to get it approved for a new indication just before it turns generic. Patients will not wait for a clinical trial that will take years to deal with an illness that leaves them with an expected life of six months. Who is kidding whom with respect to gold standards?

And last, much science, including medical science, does not take place with gold standards anyhow. Surgery is a business that is done in decentralized fashion without the blessed oversight of the FDA. The progress in its many fields is palpable. Hip surgery forty years ago left foot-long scars and required extended hospitalizations and exhaustive physical therapy. But it was better than a wheelchair. Now there is minimally invasive surgery that can have a patient in at dawn and out on crutches at dusk. Yet, last I looked, no FDA-clone that guided this progress. It was the same decentralized system of knowledge acquisition that has worked so well everywhere else, and which could work again with drugs if we dropped the fixation with clinical trials.

Does this mean that I think that these trials are useless? Of course not. But there are clinical trials and clinical trials. Relman only glorifies the practice, and he makes the odd assertion that things have gotten better because of the more rapid deployment of drugs since the passage of PDUFA (for Prescription Drug User Fee Act) in 1993, which did use drug company user fees to speed the process along. Relman says optimistically that "for many drugs" the FDA requires "only one or two good clinical trials." But PDUFA is only part of the story, and the shortened periods of patent lives make it clear that the path to drugs has become longer, even with PDUFA in place.

A most instructive study, dating from November 2003, makes the point. See Jim Gilbert et al., Rebuilding Big Pharma's Business Model, 21 Business Med. Rpt. (available here). From 1995 to 2000, the authors estimate total costs of bringing a new drug to market at around $1.18 billion dollars, of which about $550 million were spent in the discovery phase, and about the same amount in clinical trials. Move on to 2000-2002, and the total figure by their estimates runs to $1.78 billion. The discovery phase costs moved up slightly but the huge expansion in costs comes in clinical trials, distributed over all phases, which now run about $1 billion, give or take. The expedited procedures of which Relman speaks lie only in his imagination.

The recent trends are no better. Richard Miller, for example, in a recent Wall Street Journal op-ed "Cancer Regression," (August 1, 2001), lamented how the FDA has backtracked on its fast track programs for cancer drugs. Perhaps Dr. Relman thinks that the rejection of five new cancer treatments by the FDA is a sign of speedy progress. But the deluge of angry letters to the FDA when it refused to follow the positive recommendations on the promising new vaccine for advanced prostate cancer, Provenge, for example, was mounted by patients who saw in it the only refuge from advanced prostate cancer. Yet at no point does Relman address any of the mountain of evidence against him. Nor does he turn his scientific eye to each new FDA protocol that requires additional trials on smaller populations, starting from the premise that expedited FDA approval is solely a source of agency embarrassment. There is a lot that can and should be done to rationalize clinical trials, even if the FDA were kept in place. And there is a lot that accurate review of post-marketing data can do on extended populations to pick up safety risks that matter.

Indeed, one important use of good clinical trials is to throw out of court the various law suits in tort litigation, but you would not know this from Relman's screed, because he does not mention a single word about tort litigation, even though he well understands the risk that medical malpractice litigation poses to medical progress. It would have been nice for him to say that the lawsuits against Bendectin did no earthly good, even if they made it next to impossible for any firm to market ever again an antinausea drug for treatment in early pregnancy. And the same perverse saga is taking place right now with thimerosal, with its asserted but dubious connection to autism. On these cases the FDA has done the retrospective studies that have confirmed the safety of the drug or preservative. Legally, the FDA has taken the position that its licensing procedures should block any attack on FDA-approved drugs. The legal arguments are tough on both sides, but in the midst of his attack on my position, why doesn't Relman at least defend the FDA against the use of junk science by (some) plaintiffs' lawyers? Perhaps he believes that the agency is in the pocket of the drug companies, when the greater pressures come from an irate Congress and vehement critics like himself who constantly harp that the FDA offers too little "protection," and not too much.

Well, then, what about the use of warnings as a substitute for bans? Such an approach is an improvement because the FDA cannot have a monopoly over warnings, which anyone can issue, and which are found in great abundance in the Physician's Desk Reference and other services. But don't think that warnings are harmless either. There has been a long question of whether Prozac causes or prevents teen suicide. Over the objection of most psychiatrists who prescribe the drug, the FDA put a black box warning on it, which accomplishes three things. First it frightens-an official warning, you know-patients and physicians off the drug. Second it makes it easier to win a malpractice suit against a prescribing physician for any subsequent adverse outcome. And third it increases the number of suicides because of the lower rates of drug use in the at-risk teen age population. Just what the doctor ordered.

CONCLUSION. There is a common theme to all the points contained in Relman's ill-tempered broadside. Relman's belief about the operation of pharmaceutical markets was the attitude that my grandmother took to flea markets. If the other guy wants to sell at a given price, don't buy, because he is there to rip you off. Today, Relman's view is that if the company makes a profit, then we have to be suspicious about its motive and its performance. He utterly fails to grasp that most markets in ordinary goods-pharmaceuticals included-survive because they generate win/win transactions, just as Smith and Friedman said. His third party interventionism acts as a tax or a ban on the transactions, and thus creates smaller wins or real losses. Then again, anyone who thinks that Milton Friedman was talking through his hat when he spoke about the efficiency of markets will take a jaundiced view of private profits and public health, thinking that the will mix no better than oil and water. I can't comment on his medical skills, but as a professor of social medicine, even at Harvard, it would help if Dr. Relman took, for the first time, Economics 101.
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Richard Epstein is the James Parker Hall Distinguished Service Professor of Law at The University of Chicago and the Peter and Kirsten Bedford Senior Fellow at The Hoover Institution.


This AP report
summarizes another Merck victory. A Tennessee man's claim that the maker of the withdrawn painkiller should compensate him for his 2003 heart attack has been rejected by a federal jury in New Orleans, the company's fourth victory in five federal trials.

The seven-member jury answered "no" on a verdict questionnaire when asked if evidence showed that Merck failed to adequately warn Anthony Dedrick's doctors of any known risk posed by Vioxx, or that the lack of such a warning was a cause of Dedrick's heart attack.

Merck lawyers had attacked the credibility of Dedrick, 50, of Waynesboro, Tenn., who was seeking $200,000 from the company. Dedrick's own lawyer acknowledged in his closing statement that Dedrick had other risk factors for his heart attack, including tobacco use, high blood pressure, high cholesterol, diabetes and cocaine use...

Merck has reserved nearly $1.6 billion for legal costs related to Vioxx, but has resisted setting aside money to pay jury awards or settlements with plaintiffs. This reminds me of the Bendectin litigation, won by the defendant but nonetheless leading to withdrawal of the product because of the costs of successfully defending it. Stronger arguments for loser-pays rules are pretty hard to come by.

Why Flatter The Trial Lawyers? - PointOfLaw Featured Discussion

Jim:

I trust you enjoyed your Thanksgiving break, as did I. I think we have made considerable progress in this exchange. My first goal in this final post is to wind down our discussion of medical malpractice reform, where I think we have many sentiments in common. My second goal is to respond to your impressions of the trial bar generally, and to your specific concerns about pharmaceutical litigation. With respect to these issues, I think you surface several interesting and important issues, but to me they remain unsettled. I hope you will not interpret my uncertainty, and occasionally my skepticism, regarding the latter issues as vitiating our points of agreement on the former.

Let�s start with medical malpractice. I think we have very substantial agreement on many points. If major differences remain, I attribute them (as you have in prior posts) to our different perspectives. I think of litigation as a very tiny piece of the health care system, and I�m interested not only in improving medical litigation but also (more) in influencing in positive ways the great majority of health care transactions that never give rise to litigation. So I�ll always be trying to connect goals of tort liability � injury prevention, compensation, justice � to procedures that don/t depend on actual litigation, and that in fact are much closer to the process of delivering health care than to the process of resolving disputes in court. For example, I�m generally in favor of ADR, but I�m more enthusiastic about early disclosure of error and mediated discussions that are essentially an extension of giving good medical care (see the report by Carol Liebman and Chris Hyman on the Pew project website, www.medliability.org) than I am about pre-trial mediation or formal arbitration. Similarly, I think it embarrassing to physicians, as well as counterproductive to speedy, low-cost dispute resolution that the way many patients find out the details of possible medical errors is by consulting a lawyer, who in the course of declining the representation does a little investigation and explains to the patient what happened and why. Lawyers shouldn�t be doing physicians� jobs. I also care a lot about defensive medicine, and other consequences for health care of how physicians perceive the liability system. And I very much want to find a way to compensate � using the term broadly to encompass information, restoration of trust, and future prevention as well as monetary payment � a much larger percentage of patients who experience undesired outcomes of medical care than litigation offers.

I�m delighted, for example, that you are also concerned about the ill effects of delay after medical injuries occur. And I would love to join forces with you on getting the employer community involved in testing better alternatives to malpractice litigation. Regarding my personal interest in having Medicare sponsor a pilot program, I agree that political concerns are important. However, it is easy to document that seniors currently are very, very poorly served by the tort system, which might well bring AARP on board. Moreover, I would welcome serious engagement by AARP and other powerful health care constituencies; as I noted in my first contribution to our discussion, I think that the principal political barrier to constructive malpractice reform has been that litigation politics, not health care politics, has controlled the debate. How costly a better system for Medicare patients would be is a legitimate concern; one reason to do demonstration projects is to find out.

Let me turn now to your comments that don�t relate to medical malpractice. Your distinction between business and profession no doubt reflects real concerns about trial lawyering, but I think it raises more questions than it answers. A first question is the compatibility between the attributes of professions that you and I both value and the social benefits of competition for professional services that you and I value as well. Ron Gilson wrote years ago that market power is probably a precondition to professionalism, and your ambivalence about advertising, joint venturing, and other competitive behaviors when engaged in by lawyers supports his insight. Competitively insulated lawyers occupying �elite� roles probably will exhibit fewer unseemly behaviors. Noblesse oblige. At the end of the day, then, I suspect that the best society can do with respect to law or medicine is to police serious abuses of market power and create incentives for professionals to further the expressed interests of their patients or clients, but otherwise encourage the exercise of professional authority and judgment. I do, however, think that professionals should have public obligations in exchange for these privileges. In other words, I do not view professionalism as compatible with a pure individual advocacy model. As I�ll come back to later, I think these public obligations � which I usually call �regulatory duties� � need to be enforced directly rather than piggybacking them on the �relational duties� owed by individual to individual (a distinction I apply beyond the professional context).

In malpractice litigation, for example, a lot of problems both real and perceived reflect the number of �amateurs� representing plaintiffs. Malpractice cases are complex, protracted, and consequently difficult and expensive to litigate. In a contingent fee system, experienced plaintiffs� lawyers seldom accept even winnable malpractice cases with potential damages under $100,000 ($200,000 in some states). Experienced lawyers routinely reject cases that are meritless, or even speculative. However, there are so many lawyers in the U.S. who represent individuals in personal injury cases that, even if most take on a malpractice claim only very occasionally, inexperienced lawyers account for a substantial percentage of malpractice litigation in the aggregate. (And, of course, many negligent injuries that have serious financial implications for patients and their families go both lawyerless and uncompensated.) Certificates of merit, screening panels, and other requirements designed to reduce frivolous litigation assume the inexperienced lawyer; experienced lawyers police their own cases quite effectively, even without a loser-pays system. Applied across the board, however, screening panels in particular can be cumbersome and cost-ineffective. As you know, I�d like most medical errors to be prevented, and the ones that occur to be compensated outside of the courts. But in general I would also support reforms that got the amateurs out of the medical malpractice business � they tend to take bad cases and handle them badly. By contrast, the �name� plaintiff lawyers who handle malpractice cases exclusively, or nearly so, usually impress me with their case selection as well as their ability to generate ample settlements for their clients. Perhaps careful attention to competitive conditions in litigation markets would cause specialization to emerge as an efficient outcome, and I�d be happy to consider reforms that might tend in that direction. But it is also possible that, in order to preserve professionalism, a regulated oligopoly of malpractice plaintiff�s lawyers is preferable to a free market.

On the other hand, I�m afraid I don�t understand your assertion about lawyers uniquely having the power to take property from parties without their consent. I don�t think this is an economically or politically coherent �monopoly.� One could equally say that lawyers are empowered to reclaim property on behalf of those who have had it taken from them without their consent. Such is the adversarial system, and only the neutral arbiter can decide which party is entitled to take or reclaim. What you call �redistribution through force,� others might regard as �justice through law.� Depending on the context, there could be some truth to each perspective. Plus there are many lawyers who help create wealth, even if some wealth creation eventually devolves into redistribution through litigation. And though I agree that litigation is an extremely inefficient form of redistribution, I doubt that even the most successful class action lawyer would regard litigation as a principal form of redistribution in society. So we�re left, as we should be, assessing each practice area separately for its costs and benefits, rather than condemning the litigation enterprise en masse.

It is also difficult to buy into your generalization about the victimization of defendants. Although struggling family physicians and rural hospitals are often the public face of tort reform, most defendants in the cases you complain about are large corporations. I agree that courts� tendency to add zeros indiscriminately to damage awards involving corporate defendants is problematic. Like you, I was dismayed by the Vioxx award. And I take account of the issue in my own proposals for enterprise liability in malpractice cases; decoupling medical negligence from a sympathetic individual physician defendant and assigning it to a faceless commercial entity creates real risks of excessive compensatory and undeserved punitive damages. For that reason, the malpractice working group of the Clinton health reform task force proposed capping damages if universal health coverage were accomplished through competition among accountable managed care plans bearing enterprise liability.

But the rhetoric of forcible taking simply doesn�t suit this category of defendant. It is rare as hen�s teeth for contingent fee or class action lawyers to victimize the poor defendant; there�s no financial reward for doing so. The most attractive defendants are the richest ones, who are far from powerless against the supposed monopoly of force that you ascribe to plaintiff�s lawyers, and who engage to an even greater degree in over-the-top marketing. I actually think Merck behaved quite well with respect to Vioxx considering the financial importance of the drug to the company. But it can hardly be called a passive victim. For every ad currently warning of the dangers of Vioxx and marketing legal services, there were dozens of ads by Merck touting the drug�s supposed benefits before it was withdrawn from the market. Sure, Bayer wasn�t sued, but Bayer didn�t lead consumers to believe that aspirin was better than existing drugs when it really wasn�t, and Bayer didn�t price aspirin for the lucrative, patent-protected, health-insurance paid, prescription-dependent market. This doesn�t absolve the trial bar of its own excesses. Nor does it excuse courts who get the science wrong: much as I think that the Supreme Court�s decision in Aetna v. Davila was a missed opportunity to clarify ERISA preemption, there�s a delicious irony to dismissing a large-dollar claim brought by a patient who alleged he was wrongfully denied Vioxx at the same time that millions of other patients have lawyers alleging they were wrongfully given Vioxx. However, it does make it seem absurd to single out the plaintiff�s bar for its political and financial muscle.

That said, I think a market analysis of personal injury litigation is well worth doing. Your twist on the �who is the consumer� question so central to health insurance is clever: considering defendants the �buyers� because they end up paying the bills through contingent fees. I agree that solves the problem of looking for an authentic consumer of class-action litigation, but overall I�m skeptical that it is the first direction in which one should take the competition policy of litigation. In many ways, contingent fee litigation (and certainly hourly fee litigation) is an easier market to analyze than medicine because there are clear financial gains to trade in most circumstances, so that willingness to pay for legal services equals ability to pay. In medicine, a lot of services are needed or desired by people without the means to pay, even through insurance mechanisms, so the issues of social subsidy are more important (and the idea of paying for successful performance not self-enforcing). There are certainly many areas of litigation that don�t come with a financial payoff and therefore that require public support, but not personal injury lawyering � though I�ll readily admit that we overly depend on financial payoffs in malpractice litigation to attract lawyers even when clients would prefer information, apology, and other non-monetary redress for their grievances.

I prefer more grounded inquiries regarding markets for legal services. For example, I take very seriously the point Lester Brickman makes about lack of competition for contingent fees, so that fees do not increase with risk of failure. I�m also very interested in referral patterns. One of the big issues in Pennsylvania during the current malpractice crisis was venue reform, with health care providers desiring to keep cases in their local communities rather than having them transferred to plaintiff-friendly Philadelphia. There are unanswered normative and factual questions here. Are Philadelphia juries too friendly to patients, or are other parts of Pennsylvania too friendly to physicians? Is it unfair to send a case to Philadelphia just because the suburban hospital where the doctor practiced was affiliated with an urban academic medical center, or was the prestige of that affiliation one reason why the patient sought care from the suburban physician and hospital in the first place? But these issues aside, the success of any particular venue reform in public policy terms depends in part on the law and norms governing lawyer referrals, including the point I raise above regarding the general desirability of having malpractice cases handled by specialists. And I�m fascinated by your insight that lawyers collectively profit from wins, making the competition to gather clients the only meaningful competitive issue. I suspect there are many industries where competitors want each other to succeed in opening up new markets, but you certainly raise questions worth examining in specific practice areas regarding imperfections in the market to attract clients, in the price of legal services, in entry barriers, etc.

Your discussion of federalism and repeated bites of the litigation apple raises a related second question: who should supervise lawyers? One difference between law and medicine is that the judicial branch of government claims a near-exclusive right to regulate the former, while the latter � when not allowed to regulate itself � is subject to a broader set of legislative, administrative, and judicial constraints. Both systems are susceptible to capture, but you are probably right that lawyers� groups find it easier to capture elected judges in some states than doctors find it to capture their overseers. There are also other limitations and confusions that likely arise from the more insular regulatory framework applied to lawyers. Take your concerns about deceptive marketing, for example. Attempts to rein in lawyers typically come from the judiciary and therefore constitute state action subject to the First Amendment (but immune from antitrust enforcement). Attempts to rein in doctors typically come from private professional associations, which by contrast are subject to antitrust review but not to the First Amendment. I think the latter approach is more effective at policing the abuses that worry you (not to mention the risk that courts will confuse the two standards, as Tim Muris believes has occurred to the detriment of consumer protection). On the whole, then, I am relieved rather than concerned if both doctors and lawyers come to think of themselves as participating in regulated industries as well as ethical professions (e.g., when Congress or the SEC imposes public obligations on securities lawyers).

A third question is the relationship between litigation and legislation/regulation. I think there needs to be a relationship rather than an either-or choice, and I�m encouraged when you allow for the possibility of private redress � however circumscribed both substantively and procedurally � as part of public regulatory systems. As I�ll get to shortly, for example, I think drug product liability should be integrated with (but not merely preempted by) federal regulation. The broader issue for me, however, is as follows. I believe that many of the excesses of personal injury litigation � and, yes, I do believe there are excesses � arise because general �regulatory� obligations to society as a whole become entwined in the courtroom with specific �relational� obligations of defendant to plaintiff, with the unhappy result of applying causal standards and awarding damage amounts that try to encapsulate aggregate, impersonal interests using the emotional, personal context of an individual grievance. Strongly relational duties such as those between health care providers and patients are particularly susceptible to this conflation. For example, �conflicts of interest� are used incoherently in the regulation of medical research because societal interests in innovation, public confidence in medicine, and avoidance of unnecessary harm map poorly onto a the popular image of a �researcher-subject relationship� that is drawn from longstanding beliefs about doctors and patients. But the conflation of relational and regulatory duties also happens whenever an aggregate economic harm can be portrayed in relational terms, often as fraud or misappropriation (e.g., fraud-on-the-market, insider trading, fraudulent conveyancing, fraudulent concealment, unfair business practices). The punitive damages debate is a core example of how the legal system can be blind to these effects because it communicates so poorly with other regulatory systems. Cathy Sharkey�s article describing punitive damages as �societal compensatory damages� is such an important contribution because it states the obvious in a way that allows many people to see it for the first time.

One can think about class-action lawyering and individual client lawyering in these terms, though to do so one has to acknowledge that lawyers who pursue these careers tend to have very different modal beliefs and incentives. Let�s leave lucre aside, and stipulate that all these lawyers want to do well financially. In my experience, lawyers for individual clients see themselves as the last bastion of defense against the predations of either overreaching corporations or overreaching government. Your objections seem to go only to the former commitment, but in terms of the latter some plaintiff�s lawyers have quite principled objections to the sort of administrative compensation system that I would like to see replace malpractice litigation in the majority of situations. They express these in quasi-libertarian terms as discomfort with �social engineering� and a preference for helping individual clients vindicate infringement of their basic liberties in the insulated courtroom setting where nothing (supposedly) matters other than the single plaintiff and the single defendant. Class action lawyers, in my experience, are a totally different breed: �legal wholesalers� who lose interest in cases as soon as the need to explore individual situations in any detail becomes evident. As you relate, many class action lawyers see themselves as clientless policy entrepreneurs. The tobacco litigation is a perfect case in point: as several commentators have observed, the global tobacco settlement was a large, undemocratic tax on smokers that class action lawyers were paid a fortune to impose because elected officials didn�t want to.

Similar analyses can be made of the managed care and non-profit hospital class action litigation. I agree with you that the claims were a stretch legally, and that both the administrative costs and the potential damages were disproportionate to the public benefits. But the public policy problems were quite real. In the managed care litigation, the court was asked to decide what consumers should be told about their health care in a seemingly new, more competitive health care system. As Clark Havighurst has written, if these cases had been litigated to conclusion the courts would have been put in the ironic position of crafting aggregate information disclosure principles after decades of individual litigation in which those same courts resisted the idea that patients could ever make informed health care purchasing decisions. In the nonprofit hospital cases, it is quite true that people without insurance are charged much higher �list prices� than patients who have private insurers on their side to negotiate discounts. When I was a medical student, I noted that it �cost� much more to be seen at the public pediatric clinic in San Jose, California than in a plush private office in nearby Saratoga � nearly all patients at the public hospital had Medicaid, making the list price irrelevant, and the hospital was not about to miss out on overcharging an occasional paying patient who stumbled in. But failure to pay these higher rates has real consequences for patients in terms of their credit ratings, budgeting decisions, and self-esteem. In both cases, then, one can view class action litigation as a misguided attempt to do what the regulators wouldn�t. Some class action lawyers display amazing hubris when they publicly claim to be more effective than Congress in bringing powerful industries to heel, but one has to admit, however regretfully, that they occasionally have a point.

Turning to pharmaceutical litigation, we have many points of agreement: that the Vioxx judgment was absurd, that good drugs like Bendectin shouldn�t be forced off the market, that vaccines are not sufficiently profitable to cover potential liability without tort immunity and an alternative compensation arrangement. I�m more skeptical about the assertion that liability in general is crippling pharmaceutical innovation; these are successful companies that make terrific products and have every expectation of continuing to do so. They also have sophisticated ways to protect themselves: Dow Corning, I seem to recall, was a limited purpose joint venture that was driven into bankruptcy by breast implant litigation, but its structure assured that its much larger corporate parents would be spared. One more illustration of the fact that one could teach virtually every graduate program just using the pharmaceutical industry: medicine, business, law, most natural and social sciences, philosophy, even perhaps divinity.

It is rather hard to view the FDA as currently providing a comprehensive regulatory scheme because its political evolution has been piecemeal. It evolved over roughly 100 years � not smoothly but in leaps following scandals � from a disclosure statute to a screening process for safety to a screening process for efficacy. Interesting factoid: the pre-1938 FDA wasn�t empowered to stop the sale of sulfanilamide �elixir� because it was killing people, and could do so only because it was misbranded (an elixir means dissolved in alcohol; the manufacturer was using poisonous diethylene glycol instead). But the FDA has virtually no authority over physicians, and therefore can do next to nothing about �off-label� use. Nor does the FDA have authority to withhold approval for drugs that work no better than existing drugs, or drugs that are incredibly expensive for the benefit they offer. And post-marketing surveillance remains mediocre. How, then, can one rely on FDA to safeguard consumers and patients from all the serious risks involved in taking new drugs?

Of the points you make about pharmaceuticals, I�m most interested in the role of FDA regulation in adjudication of injury claims. I think preemption is the wrong path. Instead, I would very much like to see FDA�s expert determinations being used constructively in litigation to supplement adversarial testimony, and I would like to see evidence from drug product liability cases being used by FDA to assist its post-marketing surveillance efforts. For example, one could envision an administrative process within FDA being used to adjudicate personal injury claims and provide limited compensation. I was glad to see you express interest in an administrative adjudicatory scheme of some sort. I haven�t thought this through in the same detail as my malpractice proposals, but Cathie Struve recently published an article in Yale Law School�s health policy journal outlining a constructive relationship between civil procedure and administrative processes in pharmaceutical regulation. The key point is simply that one can improve the relationship between litigation and regulation rather than choosing one over the other.

I would be happy to discuss your specific FDA proposal with you at another time; I don�t think general readers would get much out of our debating the details in this forum. We would likely agree on many things, but disagree on a few based either on our making different policy choices or our having different predictions of the incentives created by a particular approach. For example, your argument that malpractice is more naturally governed by tort than product liability because �doctors are negligent all the time� is interesting, but my reaction is that doctors� negligence is defined by a professional standard that they set, while drug manufacturers have no such professional underpinnings. Do you mean to suggest that preemption of tort claims should depend on whether an industry is largely self-regulating (tort allowed) or largely regulated externally (tort disallowed)? That strikes me as the wrong line to draw, if lines can be drawn at all. Similarly, when you imply that healthy people should have an easier time than sick people asserting a claim for injury from medical care (including pharmaceuticals) because the latter assume the risk, there are conflicting values at issue. I certainly like the idea of holding drug companies to a stricter standard when they are marketing those products to marginal consumers than when they are serving the core group of patients who indisputably need their products (e.g., for Vioxx, people at high risk of gastrointestinal bleeding with older drugs). Informed consent law basically follows this paradigm. On the other hand, there are good reasons not to give a free pass to those who do a bad job treating the desperate. Loss-of-a-chance doctrines opt for this paradigm when they allow patients to sue even if they would more likely than not have died regardless of whether competent medical care was administered.

Your overall take on regulation probably doesn�t differ hugely from mine, but I admit to being baffled by how you get there. You distrust courts. You distrust legislatures. But for some reason you seem willing to bet the farm on expert administrative agencies. In practice, of course, these bodies are seldom insulated from politics, but take direction from non-experts in the executive branch and constantly mix it up with both legislatures and courts. Remember how the FDA was complicit in breast implant litigation? It imposed the moratorium in large part because it feared being out of step with the courts and therefore the public, and the moratorium was a billion-dollar gift to the trial bar in surfacing plaintiffs and biasing jurors.

How far would you really trust administrative processes to make binding cost-benefit determinations? Let�s say � just picking a random example � that you love to eat very, very rare hamburgers. If an administrative agency, acting within its authority, determined that very rare hamburgers should be banned because of the risk of bacterial contamination, how would you feel? And if the agency didn�t ban very rare hamburgers, how would you feel about the restaurant that serves you a negligently contaminated one because it no longer has to worry about being held individually accountable in court?

Anyway, this has been a fun, interesting exchange, but all good things eventually must end. Here�s my bottom line on the Trial Lawyers, Inc.: Health Care report. To me, there is a huge disconnect between the sweeping assertions and unyielding positions contained in the report itself and the thoughtful, nuanced, open discussion that you and I are conducting. Painting the world in black and white is a trick of the trial bar (and of partisan politics). Both vocations follow adversarial scripts. We all know that reality shades gray. So why can�t we remember that in policy discussions? For example, as I said previously, I�m all for litigation reforms, including non-litigation avenues for individual redress, that incorporate attributes of a regulatory model where that model is superior. I just don�t see why embracing regulatory or self-regulatory processes requires totally condemning adjudicatory ones.

A related point in conclusion. Another trick of politicians and the trial bar is to make the opponent seem as big and scary and single-minded as possible. Take managed care litigation. Skilled plaintiff�s lawyers made it seem like every bad thing that happened to patients in the 1990s was the fault of HMOs. This was because managed care, at least as it developed initially, attempted to put commercial �brands� on what remained decentralized, disorganized processes of care. So every conceivable injury got lumped together under the brand-name umbrella, with predictable results in courts of law and public opinion. Think of Helen Hunt�s famous expletive in �As Good As It Gets�; if anything, managed care did better than unmanaged care treating asthma (which her character's son suffered from), not worse. Your report plays the same aggregation trick with personal injury lawyers. You know perfectly well that class action lawyers behave differently than lawyers representing individuals, and that specialists in particular fields behave differently than generalists. You know that the range of skills for lawyers is much wider than for physicians, with much lower median incomes. You know that many trial lawyers barely scrape by, and that many people with legitimate grievances have no place to turn for help. But you don�t acknowledge these subtleties in your report for fear of diluting or confusing your message. Instead, in a move that would make any litigator proud, you assemble a horrendous beast called Trial Lawyers, Inc.

Which brings me to my last question:

Why flatter trial lawyers by imitating them?

With warm regards,

Bill

PS As I promised in an earlier post, here are citations to a few articles on medical malpractice and on the relationship between lawyers and health care.

Selected Bibliography

Sage WM. Malpractice Insurance and the Emperor�s Clothes. DePaul Law Review 2005; 54(2): 463-484 (Clifford Symposium on tort law). Available at http://medliabilitypa.org/research/files/depaul-sage062105.pdf

Kessler DP, Sage WM, and Becker DJ. The Impact of Malpractice Reforms on the Supply of Physician Services. JAMA 2005; 293(21): 2618-2625. Available at http://jama.ama-assn.org/cgi/content/short/293/21/2618

Studdert DM, Mello MM, Sage WM, DesRoches CM, Peugh J, Zapert K, and Brennan TA. Defensive Medicine Among High-Risk Specialist Physicians During a Malpractice Crisis. JAMA 2005; 293(21): 2609-2617. Available at http://jama.ama-assn.org/cgi/content/short/293/21/2609

Black B, Silver C, Hyman DA, and Sage WM. Stability, Not Crisis: Medical Malpractice Claim Outcomes in Texas, 1988-2002. Journal of Empirical Legal Studies 2005; 2(2):207-259. Available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=770844

Sage WM. New Directions in Medical Liability Reform, in Malpractice and Medical Practice Handbook (Richard Anderson, ed.). Totowa, New Jersey: Humana Press 2005: 247-278.

Sage WM. Reputation, Malpractice Liability, and Medical Error, in Accountability: Patient Safety and Policy Reform (Virginia A. Sharpe, ed.). Washington, DC: Georgetown University Press 2004: 159-183. Available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=681925

Sage WM. The Forgotten Third: Liability Insurance and the Medical Malpractice Crisis. Health Affairs 2004; 23(4): 10-21 (lead article). Available at http://content.healthaffairs.org/cgi/content/abstract/23/4/10

Sage WM. Unfinished Business: How Litigation Relates to Health Care Regulation. Journal of Health Politics, Policy, and Law 2003; 28(2&3): 387-419 (special conference issue, �Who Shall Lead?�).

Sage WM. Medical Liability and Patient Safety. Health Affairs 2003; 22(4): 26-36.

Sage WM. Understanding the First Malpractice Crisis of the 21st Century, in 2003 Health Law Handbook (Alice G. Gosfield, ed.). St. Paul, Minnesota: West Group: 2003; 1-32. Available at http://medliabilitypa.org/research/law1103/chapter.pdf

Institute of Medicine. Fostering Rapid Advances in Health Care: Learning from System Demonstrations (Janet M. Corrigan, Ann Greiner, and Shari M. Erickson, eds.). Washington, DC: National Academies Press: 2002. Available at http://www.nap.edu/books/0309087074/html/

Sage WM. The Lawyerization of Medicine. Journal of Health Politics, Policy, and Law 2001; 26(5): 1179-1195 (Special Issue, Kenneth Arrow and the Changing Economics of Medical Care, Peter J. Hammer, Deborah Haas-Wilson, and William M. Sage, eds.).

Sage WM. Enterprise Liability and the Emerging Managed Health Care System. Law & Contemporary Problems 1997; 60(2): 159-210 (symposium on medical malpractice law) (published in 1998).

A Business, Not a Profession - PointOfLaw Featured Discussion

Bill (or should I say Dr. Sage?),

I�m belatedly getting around to discussing what�s really at the core of the Trial Lawyers, Inc. project: the fact that trial lawyers today operate much more as a business than as a profession. I don�t think that this basic fact is really much in dispute, and I can hardly go into the point here in the depth that my colleague Walter Olson did some 14 years ago in The Litigation Explosion, or even in the depth that we went in the original Trial Lawyers, Inc. report. But let me try to give a synopsis of what I call the �business model� of the plaintiffs� bar. I�ll then turn to drug products liability, and finally I�ll touch on some of the medical malpractice liability proposals you�ve endorsed.

Law Goes From a Business To a Profession

Let�s begin with the underlying history and premises. Law historically, like medicine, has been a �profession.� That is, as opposed to general businesses, lawyers (and doctors), operate under special ethical rules of conduct (rules that, for better or worse, are typically set by the professionals themselves). There are important reasons for doctors and lawyers to be professionals. First and foremost, both professions represent patients/clients who are often unsophisticated in assessing the services being offered, so the professionals have to be scrupulous in providing a duty of care consistent with the patient�s/client�s interest. Doctors shouldn�t sell snake oil or unneeded surgeries. Lawyers shouldn�t bilk their clients with billable hours for unneeded work. And patients and clients need to be able to be totally honest with their doctors and lawyers, so they�re owed a duty of confidentiality.

Now, I think that these basic points should be relatively uncontroversial � as should the important counterpoint: the professionalism of medicine and law need not imply that there�s no place for market-based approaches, because incentives obviously do matter. Approaches that force medical patients to foot more of their own bill, as opposed to shifting their costs to a third party, will inevitably put downward pressure on costs. Aligning lawyers� incentives with those of their clients � as the contingency fee does � will keep attorneys from wasting time that they otherwise might.

When it comes to the legal profession, there�s a significant additional point to keep in mind � one that differs from the medical profession and all others. Practitioners of law, uniquely among those not in the government itself, have the power to take property from parties without their consent. Lawyers, through the courts, have unique access to the government�s monopoly over the use of force. Now, other businesses and professions can dupe people through fraud. The medical profession has some limited ability to take people�s freedom (e.g., by forcing people into psychiatric wards). Still, in general, law is the only American business, apart from crime, where the fruits of one�s labors are directly tied to one�s ability to take others� property without their consent. Crime, of course, is something we try to stop. But the ability to take property through the law is something the American system facilitates, in a manner unlike any other country.

A few features make American law unique. First, we have the contingency fee itself. Although some other countries are opening up to the idea, historically, the contingency fee is an American innovation. Its salutary effect is that it opens access to the courts to the less affluent and it aligns lawyers� incentives with their clients�, as noted above. Its downside? The contingency fee creates a direct, and powerful, incentive for lawyers to take as much property as possible. In the course of representing a single client, this effect is less pernicious (though, as Olson notes, the incentive to cheat, manufacture evidence, etc. � unbecoming an officer of the court, as those in the �legal profession� are supposed to be � is far greater when you have a vested interest in the outcome). But what we�ve seen in the plaintiffs� bar is the wholesale solicitation of clients (more on that later), many of whom aren�t really injured; and in the course of aggregative litigation (dramatically expanded since the 1960s by changes in Rule 23, which governs class actions), lawsuits where there isn�t really a client at all (if you doubt this, ask securities lawyer Bill Lerach, who once said he had the greatest legal practice in the world because he didn�t have any clients). The contingency fee is a direct inducement to litigate � and thus to take property by force. Olson analogizes the practice of enabling invading armies to keep whatever they plunder: it may help troop morale, but the consequences are predictable.

In addition to the contingency fee, the United States (apart from Alaska) has the �American rule,� i.e., the system wherein a party who unsuccessfully brings litigation doesn�t have to bear the other side�s costs. Low-value, good claims are discouraged, as I noted earlier in this discussion: lawyers working on a contingency fee don�t want to bear costs they�re unlikely to recoup. But the inverse is true, too: low probability cases are encouraged because the defendant�s litigation costs are sufficiently high that they�re willing to settle even very weak claims.

The latter incentive is significantly muted when defendants face repeated, similar claims; as game theory would suggest, to discourage low probability claims, a rational defendant would only settle repeat claims where the plaintiffs� lawyer had a positive expected value, i.e., where the expected verdict exceeds the plaintiffs� expected legal bills.

But in the American legal system, even for low probability claims, the expected value of a claim from the plaintiffs� lawyer�s perspective can be quite high � because juries regularly make erroneous findings of fact, and because they can slap defendants with exceptionally high punitive damages and difficult-to-review noneconomic damages. Contingency fee lawyers, with sufficient ability to disperse risk, can play a game with a positive expected return. It�s a gamble, but they have the house odds.

America�s decentralized federal system also creates a lot of opportunities for overlitigation. In general, federalism is a salutary American feature: it disperses power, and as Brandeis noted, can let states serve as �laboratories of democracy� with competing policy packages. Such varying policies generally create incentives that drive states toward efficient rules over the long run, since labor and capital are mobile. But as our nation�s experience with the Articles of Confederation showed, the devolutionary principle has its limits. Where states have incentives to impose costs on their neighboring states � say, by dumping their refuse in a river that flows next door � the federalist premise breaks down. As Tabarrok and Helland�s research on state judges shows, states (or, more precisely, elected state judges) have incentives to adopt loose liability laws so that they can impose costs on out-of-state defendants to the benefit of in-state plaintiffs. The absence of a federal choice of law regime means that states (like West Virginia) or localities (like Madison County, Illinois) can make litigation a cottage industry. When venues are easily shopped � as in products liability cases and, at least until this year, class actions � plaintiffs� lawyers can exploit these �magnet courts� to great benefit.

Finally, American lawyers today are able, in a rather �unprofessional� way, to hawk their services. Prior to the late 1970s, the basic American norm on lawyer solicitation generally was in accord with Lincoln�s suggestion that we �discourage litigation.� But by 1977, the Supreme Court called the �underutilization� of lawyers in America a problem, Bates v. Arizona, 433 U.S. 350, 376 (1977) � and upheld lawyers� right to advertise the availability and price of their services. By 1988, the Court extended that right to direct-mail solicitation. See Shapiro v. Kentucky Bar Association, 486 U.S. 466 (1988). I tend to be a free speech purist, but it�s hard not to acknowledge that the ability to advertise is directly related to the de-professionalization of the plaintiffs� bar and the litigation explosion in America.

The Trial Bar's Business Model

These incentives all matter. And they�ve led to a plaintiffs� bar that to a significant extent works as a sophisticated business, not as a profession. How so?

Marketing. To be successful, any business must attract customers. The plaintiffs� bar of course lacks traditional customers: the people who pay plaintiffs� lawyers aren�t willingly parting with their money, but rather are being forced to do so. That captive customer base is the key feature that makes the plaintiffs� bar so successful. To get at those customers, however, the plaintiffs� bar must attract clients. That�s something the plaintiffs� bar is able to do today with a very high level of sophistication:

o Television, radio, and print ads. One day when you�re home sick, just check out the ads that run during those annoying daytime talk shows. Or turn on BET for a while. You�ll see scores of plaintiffs� lawyer advertisements, going after the trial bar�s attractive client base.

o Internet-based solicitation. There are increasingly targeted banner adds, sites where you can sign up �for the money you may be due,� and targeted emails (have you gotten a Vioxx solicitation lately?).

o Automatic clients. While advertising is the bread and butter of the mass tort bar, the class action bar has it easy � they just need to find a name plaintiff (sometimes itself a dubious task: just ask Milberg Weiss), and everyone else comes in, automatically, under Rule 23, unless they bother to �opt out� of the class.

In the health care context, we see all these methods of gathering clients. When Scruggs and Boies, and later Milberg Weiss, sued HMOs under civil RICO, they developed a class action. Ditto for Scruggs�s suits against nonprofit hospitals. TV, print, and internet client solicitation for pharmaceutical mass torts are ubiquitous. Internet ads seeking clients whose babies were born with cerebral palsy shout, �Your child's cerebral palsy may be the result of a medical mistake. Don't get mad. Get Even!�

Division of markets and labor. Some �trial lawyers� make their wares without ever pretending to go to trial � they�re client grabbers. They round up folks and sell off their claims. Other lawyers are negotiators, and others actually go to trial. Such division of labor in and of itself isn�t troublesome, and increases efficiency. The problem is that trial lawyers, at least in much mass tort litigation, don�t really �compete� for customers in the traditional sense. They work with the client aggregators to gobble up as many clients as possible � clients who aren�t really picking their lawyers based on any real criteria at all. There�s to a significant extent a division of the market � you get yours, I get mine � and the process creates a major barrier to new entrants. Of course, an enterprising plaintiffs� lawyer can join the big boys� club by winning a landmark case: but it�s a long-shot, and the existing players have sufficient capital to carve up much of the market for themselves. There�s a lot of rivalry, but not a lot of price competition: contingency fees are essentially standard, as Lester Brickman has shown.

Product development. Lawyers don�t make products, but they do try to develop successful lines of business. Anyone with a deep pocket is a potential target. As Trial Lawyers, Inc.: Health Care shows in significant detail, in health care, every market segment has been in the trial bar�s crosshairs � doctors, hospitals, and nursing homes; drug and device makers; HMOs. �Developing� a product line is an expensive process, but one lawyers spend a lot of time and money on. Conferences on various types of litigation are abundant. ATLA makes information on various �litigation groups� available on its website. Now, many of these techniques relax the barriers to entry already mentioned. But the key for the trial bar is to share knowledge and score wins � because wins beget settlements. The competition to gather clients is the only real rivalry in town.

Business Analysis

If you were to do Michael Porter�s �Five Forces� industry analysis of the litigation market, Trial Lawyers, Inc. would score big:

Buyers (i.e., defendants) have no power, apart from imposing costs on plaintiffs under the American rule.

� Since expert witnesses willing to prostitute themselves for money are readily available, the only supplier power the trial bar faces comes from the West/Lexis electronic legal research duopoly, which itself is weakening in the internet era.

� The trial bar faces no real substitutes, since its access to the courts is unique.

Competition among plaintiffs� lawyers is fierce, but only for initial client solicitation, and then not on price . . .

� . . . owing in significant part to the substantial barriers to entry in the mass tort/class action market, already discussed.

Now don�t get me wrong � being a plaintiffs� lawyer per se isn�t necessarily an easy road. There are a lot of lawyers who have a hard time squeaking by. What Trial Lawyers, Inc. is about is those market leaders � the guys who are able to dominate the class action and mass tort bars � and they have a pretty lucrative business indeed.

The Problem of Law as a Business

So what�s the problem? I�m a supporter of free markets � you even characterize me as a �shill� for �big business.� What�s wrong with lawyers acting more like businesses? Well, as I�ve already suggested, the problem is that the lawyers� business, unlike others, doesn�t inherently generate value but rather redistributes through force. If I sell you a product or service, we both benefit, assuming there�s no fraud or duress and that we�re both able to assess our self-interest. I value your money more than the product or service I sell, and you value the product or service more than the money you pay. Redistribution by force doesn�t work that way. Party A, the plaintiff, takes from party B, the defendant. Party A is better off, but party B is worse off. And there�s a net social loss in that the scarce resources spent taking from party A and giving to party B could have been spent elsewhere, i.e., generating goods or services of value.

So the real question we should use to evaluate litigation is whether it adds any value apart from redistribution itself, and whether that value added, if any, exceeds the extremely high transaction costs and opportunity costs inherent in the system. There�s nothing wrong in principle with lawyers making a lot of money. The problem presented in the litigation context is (a) whether that money is reflective of real value added for the client, and (b) whether that money should have been redistributed in the first place � i.e., whether a real harm that �should� be compensated occurred, as judged from the standpoint of either fairness or efficiency. (Ultimately, in the world of tort, I think that the fairness and efficiency criteria for (b) wind up the same: even if we buy into the notion that you advance in your last post that the way society treats its weakest members matters � and I agree to some extent � the tort system is about as inefficient a means of general redistribution as we could possibly devise.)

The problem with the plaintiffs� bar today, for critics like me, is that it often exploits its clients and that it taxes society with litigation that it shouldn�t, leading to substantial dead weight loss today and perverse incentives not to invest and innovate for tomorrow. Though the tort system in its classic form did offer a means of redress for injured parties whose injuries were wrongly caused by others, the system is ill-equipped to be a general insurance scheme, Prosser, Traynor, et al. be damned. And though the classic common law tort system was generally efficient and served to deter harmful behaviors, the system is ill-equipped to be a general, comprehensive regulatory regime, Calabresi, Posner et al. notwithstanding.

But today, the perverted tort system is what we have. Far from its roots as a profession representing clients and owing a general duty to the public, the plaintiffs� bar is a big business tapping into the American legal system�s unique rules that enable it to feed at the trough. The trial bar�s business success owes not to natural monopoly but to its rule-enabled abuse of lawyers� unique access to the government�s monopoly on the use of force. And perhaps the most sophisticated part of the lawyers� business model � their government relations and public relations efforts, which we detail at length in our Trial Lawyers, Inc. report � are geared specifically toward protecting the rules that make their government-enabled monopoly so valuable: unregulated contingency fees, the lack of a loser pays rule, maximum jury discretion, loose evidentiary requirements, loose aggregation requirements, unlimited damages, and easy venue shopping, to name a handful already discussed.

Torts for Drugs and Medical Devices

OK, so now that I�ve gone on at length about the business model of the trial bar, I�ll move into the other, specific element I said I�d cover: the mass tort problem as it relates to drug and medical device litigation, and my preferred response (preemption). Americans� health care has been radically improved in the past generation or two in large part due to dramatic innovations in the development of pills and products that prolong life or make our lives easier to live. Bacterial scourges that once wrecked havoc have been all but eliminated, as Huber noted in the article I cited in my last post. Drugs and medical devices constitute only 11 percent of health care spending � most still goes to doctors and hospitals � but they�ve revolutionized health care. People who were bedridden and needed full-time care are now able to walk and function without assistance; people who were institutionalized can now take a pill and interact in normal society; people who would have dropped dead prematurely of a heart attack can keep their cholesterol down with a host of medications.

The medical innovations that have so changed our health care have occurred regardless of the litigation explosion, but let�s not pretend that lawsuits don�t matter on the margin. And the marginal impact on companies� incentives is sizable. As I point out in my director�s message in Trial Lawyers, Inc.: Health Care, the estimated liability costs of Vioxx and Fen Phen, alone, are roughly ten times their respective companies� research and development budgets. On an annualized basis, the cost of those two mass torts comes to roughly ten percent of the entire U.S. pharmaceutical industry�s revenues (the percentage would be lower if we account for the time value of money, but these aren�t super-delayed torts like asbestos). That�s a punch that packs quite a wallop.

And the punch is also, far too often, below the belt. We�ve seen lawsuits bankrupt companies with billions in liabilities over products that aren�t unsafe (e.g., the breast implant litigation). We�ve seen lawsuits force useful drugs from the market that aren�t unsafe (e.g., Bendectin). We�ve seen lawsuits saddle companies with far more liability than their products actually caused by flooding the system with bogus claims generated by fraudulent screening systems that are mass production systems �that would be the envy of Henry Ford� (e.g., Fen Phen). We develop these and other examples in much more detail in Trial Lawyers, Inc.: Health Care.

The point? Just as our system of adversarial trials before juries makes a mess of med-mal cases, it gets it wrong an awful lot in products liability cases. That�s the biggest problem with the stylized law and economic models that Calabresi, Posner and their successors developed for tort law: they assume that trial outcomes, on average, get it right. What we see is that trial outcomes, on average, get it wrong. Let me stress that when I say �on average,� I don�t mean that most juries get it wrong. They don�t have to for the expected return of trials to be way off base. You just need the odd jury to produce outlandish results, with outlandish dollar verdicts, to throw off the average verdict � and the expected return from litigation � dramatically.

The law-and-economic theory of tort regulation in essence tries to make the courts a regulator of choice � despite the fact that trial outcomes don�t come close to approaching a proper cost-benefit analysis and that the administrative costs of running the system are exceptionally high. The system lacks the fundamental principle of the rule of law, that is, predictable outcomes.

In criticizing �regulation through litigation,� I don�t mean to ignore the trenchant critique of regulation. Adopting overly strict ex ante rules can stifle innovation. There�s something to be said for setting up clear overarching guidelines � simple rules, in Epstein�s terms � and punishing harms ex post.

But for ex post penalties to work, we have to have some confidence that they will be rationally related to the harms they penalize, so that actors appropriately internalize their costs. When it comes to mass tort drug and medical device litigation, I simply lack confidence that the penalties will make sense. In addition to the aforementioned examples, take the Angleton, Texas verdict recently levied against Merck when a 59-year-old man with clogged arteries died of a heart arrhythmia (a condition no scientific testing has shown to be linked to Vioxx), after taking Vioxx for 8 months (10 months less than the length of time for which scientific testing has linked Vioxx to heart attacks), in moderate doses (notwithstanding that Vioxx has only been linked to heart attacks when used in heavy doses as an experimental treatment for precancerous intestinal polyps). Carol Ernst, the deceased�s wife of one year, scored a verdict over $250 million. Will that verdict be substantially reduced? Yes, largely due to Texas�s punitive damage caps � but the $24 million in �mental anguish� damages aren�t capped, and they will prove difficult to review.

As my colleague Peter Huber noted in Liability, �jurors, who generally can reach sensible judgments about people, perform much less well when they sit in judgment on technology.� In part, jurors� failings are due to a lack of technical expertise. Jurors also fail because they �face accidents up close� without the �broader vision, dominated by the individual case.� In addition, jurors are particularly prone to hindsight bias, �the natural human tendency after an accident to see the outcome as predictable � and therefore, easy to affix blame,� which �makes the defendant[s] appear more culpable than they really are,� Steven Hantler, The Seven Myths of Highly Effective Plaintiffs� Lawyers, Manhattan Institute Civil Justice Forum 42, at 13 (April 2004). Finally, jurors tend to penalize the new while accepting the old, which clearly threatens innovation. Aspirin and ibuprofen kill 16,500 people a year due to gastrointestinal side effects � the very problem Vioxx and other Cox-2 inhibitors are designed to avoid � but you�ll never see Bayer getting slapped with aspirin liability.

Compounding the inherent problems jurors have in assessing drug liability are the many structural elements of the American legal regime that enable lawyers to game the system. Widely used drugs wind up as mass torts, and lawyers can flood the system by recruiting thousands of claimants, some of whom have an actual injury caused by the drug but many of whom do not. Lawyers and defendants both know that jurors will occasionally be duped, so the cases will have settlement value, and the lawyers will only get burned if a thoughtful and energetic judge takes the time to really look into the pool of claimants, as has recently happened in Fen Phen and silicosis cases.

What jurors often fail to realize, at least for new medications, is that pharmaceuticals that save or help most people, but kill or injure some small subset of users, are often drugs that nevertheless should be on the market. To get through the onerous FDA review process, drugs must go through substantial testing for both safety and efficacy. The point of the federal regulatory regime � which is far from perfect, admittedly � is to perform a basic cost-benefit analysis. The safety-effectiveness trade-off is a function of the magnitude of effects � the harms prevented and the harms caused. A drug that kills 1 in 100 users but is the only treatment for an otherwise fatal illness, and increases the likelihood of survival from 0 to 50 percent, is clearly a drug that should be on the market. Any rational consumer afflicted with the fatal disease would choose to take the drug. Any doctor would recommend that his patient afflicted with the disease take the drug. If the disease being treated is 99 percent likely to cause death, the calculus doesn�t change.

Of course, in the real world, choices are rarely so black and white. Ailments aren�t necessarily fatal, and they often vary in degree, and side effects vary depending on patient profile. The job of the FDA is to determine if a drug, on balance, is sufficiently safe and effective to be on the market at all; and to determine what warnings and other information on the drug should be presented, and how, so that consumers � in reliance on their doctors � can make reasoned decisions about whether taking a medication is for them worth the risk.

That drug liabilities should be �known� and �reasonable� so that patients and doctors make informed decisions to assume risk was classically a key feature of how tort law handled drug liability � as long as the risks of using the product were known, drug makers were traditionally insulated from liability for their products unless they had been faultily manufactured (i.e., they�d made a �bad batch�). See Restatement of the Law 2d, Torts, � 402A comment k (American Law Institute 1965) (asserting that the manufacturer of drugs �is not to be held to strict liability for unfortunate consequences attending their use merely because he has undertaken to supply the public with an apparently useful and desirable product, attended with a known but apparently reasonable risk�). Paradoxically, though, even as the federal government developed a comprehensive regime to regulate drugs on the market � with the aforementioned safety and efficacy testing, as well as tediously precise dissemination of warning labels and information � the protection for drug manufacturers whose products were �apparently useful� but had a �known but apparently reasonable risk� came to be gutted by the courts.

The Solution: FDA Preemption

Hence my call for FDA preemption. Let me clarify exactly what I mean. If the FDA approves a product, and the drug manufacturer was not fraudulent in its FDA submissions, the manufacturer should not be held liable for harms caused by its products that were known to the FDA and, at the FDA�s discretion, publicized in labeling or otherwise as the FDA best saw fit to require. The FDA permits the drug on the market that kills 1 in 100 people but saves half of the 99 percent who otherwise would die? Those 1 percent killed have no claim. Likewise with any other person injured by a drug if such injury is a side effect known and publicized at the time the drug was prescribed.

Now, what about those claims � like Vioxx and Fen Phen � in which an initially unobserved side effect becomes evident through subsequent testing? We may not want to foreclose all potential for redress here. I�d be worried then about too much FDA Type II error � i.e., if the FDA knew that anyone injured by a drug it had approved had no recourse whatsoever if an undiscovered side effect cropped up, it would face that much more institutional pressure to order larger, and longer, tests. The public would suffer, as good drugs were kept off the market for too long.

So for those classes of injuries that cropped up in later testing, post-FDA approval, we might well want a compensation scheme for injured parties who took the drugs. But the claims shouldn�t be in tort! Remember that the traditional tort rule was merely that a drug be �apparently� reasonable. A drug manufacturer who complies with the FDA process but subsequently discovers a defect hasn�t committed a �wrong,� even though its product has caused injury to some individuals who weren�t fully aware of their own risks at the time they took the drug. Acknowledging that patients who are injured by drug side effects unknown at the time of FDA approval need not imply that we muddy our tort system with these claims and process them in the administratively expensive and imprecise way that the litigation process necessarily involves.

Fortunately, we have a pretty good template for handling drug claims outside the courts in the Vaccine Injury Compensation Program, which Congress established in 1986 after lawsuits threatened to wipe out vital children�s vaccines. (Vaccines present a special case: we want people to take them, because we�re all better off if they do. But there�s an inherent free rider problem in that if everyone else is vaccinated, you lose some of your incentive to assume the costs � and the risks � of taking the vaccine yourself.) The VICP operates efficiently, at 9 percent administrative cost. It effectively weeds out bad claims but generously compensates good claims. A comparable program could handle all drug claims, rejecting outright any premised on harms that were disclosed by FDA requirement at the time the drug was prescribed, and allowing claims to go forward for injuries actually caused by side effects that were unknown at the time of prescription. And if the FDA decided to add a new side effect warning to a drug, while permitting it to still stay on the market, suits by individuals who subsequently took the drug would of course also be barred.

The key caveat to the FDA preemption I propose is that the drug manufacturer was not fraudulent in its FDA submissions. If the manufacturer did in fact lie to the FDA, it should lose its statutory safe harbor � because it did do a �wrong,� and its drug was not �apparently reasonable� as the FDA had assumed. But lawyers shouldn�t be able to circumvent the statutory preemption merely by making this claim, which would be routine in all drug lawsuits and gut the regime�s whole effectiveness. Rather, the FDA � or another independent body � should have to make a ruling that the company had been fraudulent. Only then would the company lose its safe harbor protection.

Getting Back to Medical Malpractice

So that�s my take on drug liability. I�m very interested in your thoughts. Though this post is already some 5,000 words, I do want to spend a little time getting back to medical malpractice, and addressing your specific points raised in your prior post, because I don�t want us to �talk past each other.� I�ll also comment briefly on a couple of other ideas, at least one of which you�ve backed in the past.

Before I get specific, let me make a comment on my earlier invocation of Philip Howard and Common Good: I mentioned him not to imply wholehearted endorsement of his approach to medical malpractice liability but to show that the Manhattan Institute Center for Legal Policy has given a lot of attention to alternative approaches to medical malpractice reform � and relatively little to damage caps. Philip is a friend, and I think he�s done a lot both to show the problems with the American legal system and to think outside the box about solutions, but by saying that we�ve featured him in events I didn�t mean to suggest that his preferred solution gets it all right. (I would take a little issue with your statement, though, that �a genteel business lawyer like Philip is not generally perceived as moderate by groups that aren�t naturally sympathetic to tort reform� � his Common Good board of advisors includes folks like George McGovern and Bill Bradley, whom I wouldn�t call big business shills or right-wing extremists.)

Your Plan for Health Courts: Thoughts and Questions

Now let�s get to the IOM-endorsed administrative compensation scheme you outline. To begin with, I�d agree that to the extent we can take medical malpractice compensation outside the adversarial tort system, it�s a goal worthy of experimentation. The adversarial system stifles real disclosure and safety improvement in medicine, as I noted before (and as you agree, at least to some degree).

I also agree that in general it could make sense to leverage existing regulatory mechanisms as much as possible � much like I propose building from the existing FDA and VICP in handling drug liability. But note that the case here is different than for drugs, from the standpoint of one who�s interested in torts (you, admittedly, are more interested in health policy outcomes, not the overarching tort regime). I don�t think most drug lawsuits belong in tort because the mere fact that a drug causes a harmful side effect doesn�t mean that manufacturers have done anything wrong. Unless drug makers have lied to the FDA, they haven�t committed a products liability tort that should be actionable.

In contrast, doctors are negligent all the time. That doesn�t mean they�re bad people, or even bad doctors, but they�re often at fault for patient injuries. When doctors are at fault, they do commit what those of us who are interested in that area of the law would call a tort. So Philip�s notion of a more traditional legal regime � based in tort, but with specialized decision makers � is in some ways more attractive to tort scholars. When you start carving out special exceptions to tort, as with workers compensation, there may be unintended side effects over time. That doesn�t mean we shouldn�t do so; I just flag the issue.

And I think to make myself more open to your idea, I might interpret it as follows: we�re setting up a regulatory regime at the state level, much like the FDA functions at the federal level, that in itself is designed to screen medical provision to reduce injury. Presumptively, even if individual mistakes are made that cause harm, a provider that�s been compliant with the regulatory regime isn�t at fault in the tort context. Injuries, even avoidable ones, are an �apparent risk� in today�s health care world, and aren�t really torts in the traditional sense in that people assume those risks when they go to the hospital in the first place � at least if the hospital is complying with an adequate regulatory regime that ensures that on balance it�s not making more mistakes than it should. That doesn�t mean people injured � if such injuries are �avoidable� � shouldn�t receive any compensation; but it means the injuries don�t belong in tort, at least in most instances. I�m not sure if that�s a legitimate read of your idea, but such a rationale would make me a bit more comfortable that simply saying, �health care�s special, and we should carve it out of tort because it�s special.�

There are a couple of salient points to your approach as I understand it that I�d like to comment on � and if I�m off-base in my understanding of your proposal, let me know. First, as I read your idea, it�s optional to the health care provider, not mandatory. Such a feature is important, because if the proposal were to get mucked up � either in the legislature or by the regulators � providers could always stick with the status quo.

I think by now you probably have guessed that I�m very skeptical of the legislative process. Public choice theory suggests I should be. The more complicated proposals become, the more politicians can mess them up. Jeff O�Connell found this out the hard way with automobile no-fault, and your comments on Pennsylvania�s treatment of Phil Howard�s health courts idea suggests more of the same. Part of the appeal of �traditional� tort reforms � damage caps, elimination of joint-and-several liability, and the like � is that they�re simple; you�re either for them or against them, but you can�t come up with a beast that�s worse than the problem you�re trying to fix. Those who are critical of the Congress�s proposed fix on asbestos � a fix that�s as necessary as any in tort � have just that argument, i.e., that the complicated trust fund mechanism that�s made its way through the judiciary committee is worse than what we have now. I�m not saying those critics are right, but the current example is a good one in showing just how easy it is for complicated reform schemes, which are elegant in theory, to get messed up when our actual political actors get their hands on them. In any event, a proposal that gives providers an option, as I read yours to do, has that as a major plus at the very outset.

I also tend to like your reform�s emphasis on what seems to be an �early offer� mechanism: �Providers would have strong incentives to engage the patient in mediated discussions, and to offer prompt, fair compensation.� As I read your idea, in your post and in other variants I�ve seen, providers who opt into the system would be immune from suit but in turn would have to make an early offer to pay patients reasonable economic damages and noneconomic damages (according to a workers-comp-style schedule based on type of injury). Disagreements would be resolved administratively, in a process that avoided a lot of the nonsense we see in the regular courts.

I tend to like the �early offer� mechanism of your approach, because it mirrors a lot of the ideas we discuss in the tort reform community. In general, our tort system mistreats victims of injury not only through its cost but also through the length of time it takes individuals to collect. Jeff O�Connell�s new reform idea for medical malpractice uses just such an early offer mechanism, though it goes a bit further (Jeff�s idea is that early offers to compensate economic damages in full immunize doctors and hospitals from suits over basic negligence). Other tort reform ideas tap into early offers, too � often functioning as client protection mechanisms; e.g., Lester Brickman�s idea, developed about a decade ago with the Manhattan Institute, calls for attorney contingency fees to be collectible only for �value added� above a defendant�s early offer of settlement. And those of us who think that offer of judgment rules offer the best opportunity to introduce loser pays principles into American jurisprudence also welcome attention paid to early offer mechanisms.

Now I fully realize that the early offer mechanism in your approach is just a part of the overall safety regime providers would have to opt into to qualify for immunity. But I like it, and in part I like it because I think it dovetails with other ideas that are important to the broader discussion over civil justice reform. Since that�s my primary focus � not just civil justice that affects health policy, but all civil justice � it�s a relevant consideration for me.

I�m not sure exactly how the idea would work in all respects. Let�s say someone claims he was harmed in an �avoidable injury,� but the provider never approached him about it or offered to pay. I�m guessing he�s still preempted from tort, as long as the provider has generally been compliant with its regulators? He still has to go through the administrative process � but perhaps the provider is socked with a penalty if the administrative tribunal determines that there was indeed an avoidable injury and the patient should have been informed and made an offer. Is that a reasonable reading of your approach?

I�m a bit more skeptical of your preferred implementation mechanism, namely Medicare, but more for reasons of political reality than anything else. If there�s a lobby more powerful than the trial bar, it�s the seniors� groups, and the AARP and ATLA tend to be tight. Any reform that the AARP might possibly view as lowering seniors� protections � and the trial bar would sell any change to the status quo as a lowering of seniors� protections � would be a non-starter politically. If you could persuade the AARP that it�s in seniors� interest to adopt a non-tort, administrative-law-judge approach to medical malpractice claims, I�m afraid that you could only do so by making the system exorbitantly costly. I may be overly cynical, but I do have concerns. (Note that my concerns with Medicare as a fulcrum for reform are more practical than theoretical. Indeed, as a purist, I�d much rather federal damage caps be imposed specifically on Medicare and Medicaid recipients, not preempt all state regimes, for reasons of federalism. But politically, such an approach wouldn�t wash.)

I tend to be more enthusiastic about employer-initiated approaches, i.e., letting employers offering health coverage through ERISA push their covered employees into an administrative plan. If the �big business� you accuse me of shilling for has any concern that�s bigger than litigation, it�s the cost of health insurance, and I think you might get business really motivated for such a reform if you could persuade business leaders it would actually work. Of course, ATLA might get labor to side with it in opposition, which could stifle reform, but I�m not totally sure that they would, especially if labor leaders were convinced they�d get some benefit back in lowered deductibles or higher wages.

Remaining Questions

A couple of other points before I sign off. First, I think that binding alternative dispute resolution could be a tenable reform. In theory, the Federal Arbitration Act enables such an approach, but in practice, state judges tend not to enforce arbitration and ADR provisions. What are your thoughts?

Also, I�d love to hear a bit more about your thoughts on enterprise liability, which I understand was once a major project of yours. To me, it seems as if private parties probably could contract for such a solution now, to a significant extent, but they don�t. Is that true, and if so, why do you think that is? How would legislation make a difference?

Anyway, at long last, I�m ready to catch up on my sleep (in anticipation of a big Thanksgiving meal). I think we�ve moved well beyond damage caps � and any accusations of who�s a �shill� for whom (though I really never meant to imply you were a �shill� for the trial lawyers!). I think I�ve given you quite a lot to chew on, and I look forward to hearing from you sometime after you�ve recovered from your turkey.

Jim

What a Difference a Day Makes - PointOfLaw Featured Discussion

Bill,

In our Point of Law featured discussions, we always strive for civility, and I�ll continue to endeavor to do so. You may think my initial post overly �diplomatic� � in your phraseology, �saying nasty things in nice ways.� I don�t really think anything I said was nasty, implicitly or explicitly. I merely have a difference of opinion with you, and I took issue with your characterization of the Trial Lawyers, Inc.: Health Care report vis-�-vis its treatment of med-mal damage caps, as well as what I felt was a caricature of the tort reform movement as a whole � and of my and the Manhattan Institute�s role in it. As to who�s being nasty, I�ll let our readers decide.

In any event, you seem to be frustrated that I�m too �on message� � really, for not saying what you�d want or expect me to say (E.g., �Why be so coy in response to my pointing out that you favor damage caps and blame the legal system? Why deny that caps are your preferred medical malpractice reform while, in the course of that denial, rehashing all your arguments about the virtues of damage caps?�). But I don�t think I was coy: I do favor damage caps, at least at the state level, and my initial post said so. Still, I don�t think they�re the only or even the best reform � your beliefs or suggestions to the contrary notwithstanding.

Why did I give the issue of damage caps so much attention in my initial post, if they�re not my �preferred medical malpractice reform�? Because I think you unfairly characterized the tort reform debate as a simple dichotomy between �tort reformers� who favor damage caps and lawyers who want to defend the status quo, and because you try to fit Trial Lawyers, Inc.: Health Care into that box. You mentioned MICRA six separate times in your opening post. I think that you were basically attacking a straw man � saying that tort reform was just about damage caps, and that Trial Lawyers, Inc.: Health Care was all about support for damage caps: �But guess what? The report would be a lone voice � far out of the mainstream � in any gathering of health policy experts interested in medical malpractice. . . . I know nobody � repeat, nobody � in my professional community who favors MICRA-style reform as a stand-alone solution.�

But I�ve got a guess what for you, too: damage caps aren�t at the core of what most of the tort reform people I talk with on a daily basis think about, either. Damage caps are a significant component of a lot of tort reform legislative activity, but they�re far from the only tort reform policy idea out there, and I don�t know anyone who supports them as a �stand-alone solution� either. The reason damage caps get so much public attention, in my view, is precisely that the plaintiffs� bar and its supporters want to define tort reform down to being all about damage caps. It makes for good soundbites: �they�re taking away your rights,� �it�s all about protecting greedy corporations who injure you,� �what about the woman who loses her breasts through a doctor�s incompetence?� The other major legislative tort reforms out there that actually have been enacted � including those that deal with prejudgment interest, collateral source rules, caps on contingency fees, periodic payments, joint and several liability, or statutes of limitations, each of which you use as variables in your own June 2005 JAMA article that you co-authored with Dan Kessler and David Becker � aren�t quite as easily adapted to this line of attack.

Another guess what: far from advancing an agenda to push damage caps to the exclusion of other policy alternatives, the Manhattan Institute has sponsored writings and programs that do precisely the opposite. We�ve had Phil Howard of Common Good here to speak, twice, on his idea for medical courts (and we�re having another dinner with Phil and other opinion makers this very evening, in Washington, D.C.). Indeed, Phil Howard launched Common Good at a Manhattan Institute luncheon, featuring him and Johns Hopkins�s William Brody, in March 2003. On the issue of no-fault administrative compensation schemes, we hosted a large conference in Washington, D.C. this January. The focus was the 9/11 Compensation Fund � highlighted by a keynote address from the Fund�s administrator, Ken Feinberg � but a clear undercurrent was the adaptability of no-fault approaches to health care. Dan Troy, former counsel to the FDA, was on one of our two panels and spoke on the issue as it relates to drug liability. Finally, last fall the Center for Legal Policy put forth a working paper by Dan Kessler � your JAMA co-author � with commentary in a featured discussion here at Point of Law including, yes, Phil Howard. Kessler�s paper summarized the empirical evidence on various traditional tort reforms (the weight of the empirical evidence does indeed clearly support damage caps and other traditional tort reforms � as does your more recent JAMA article that your co-authored with Dan). But Kessler went further to explore various alternative reforms: guidelines-based systems, enterprise liability, binding alternative dispute resolution, and no-fault systems.

Over the almost three years since I�ve been at MI, we�ve sponsored only one event or publication that could plausibly be construed as focusing on damage caps. And even that event wasn�t really: two leading New York physicians spoke here on the crisis in obstetrics in the state driven by liability. On a panel with them: Dan Kessler, summarizing the empirical evidence. The luncheon keynote speaker: Phil Howard, talking about medical courts. Although the doctors tended to focus on caps as a preferred policy outcome, they mostly chronicled the problem, not the solution.

Characterizing my position, or that of MI, as be all about damage caps simply isn�t accurate. I think they�re a good idea in that they�re proven to be effective. I think states should adopt them. But they�re far from a holistic solution, and I � and most people who think seriously about (rather than lobby for) tort reform � agree with you strongly that we should look for more comprehensive solutions.

So forgive me for being a bit skeptical: defining tort reform down to being all about damage caps is the primary tactic of the trial bar, and your initial post � and your second post � fit well within that paradigm. Your initial post basically said, as I read it: (1) I care about health policy outcomes, not tort law per se; (2) tort reformers only care about legal process, and the tort reform debate is just about people who�re for damage caps and those who aren�t; and (3) we sophisticated folks in the �health policy community� have a much deeper, more nuanced view that you simple tort reform folks can�t or won�t appreciate. My response was guided by that reading, so I freely admitted that there were tons of very important health policy issues outside the scope of tort law, which I wouldn�t be discussing; that your (and the trial bar�s) caricature of the tort reform debate was highly simplistic; and that while tort law is certainly not the only variable at play in improving U.S. health policy, that I thought it plays a very important part, and in fact intersects with all variables of interest to overall health policy, namely cost, access, quality, and innovation.

Just as I think your (and the trial lawyers�) caricature of the tort reform debate as being all about damage caps is inaccurate, I don�t think that support for damage caps is the main point of, or takeaway from, Trial Lawyers, Inc.: Health Care. The report is designed to speak to a general audience � reporters, political staffers, and community leaders � not to academics, policy wonks, or practicing lawyers; and it�s designed to show just how the trial bar operates, increasingly, as a very sophisticated business, how that business is targeting all segments of the U.S. health care industry, and how American health suffers as a result � not to develop or discuss the best legal reform ideas out there. As I�ve described at length, we do that in other venues.

Do I, or the report, �blame the legal system�? Yes � inasmuch as I think the legal system exacts a staggering, often unappreciated cost on U.S. health care; no, if you mean that I, or the report, blame the legal system for all of America�s health care system failings � far from it, which is why I referenced the other health care work MI is doing, with which I generally agree, though the areas aren�t my specialties.

Is the Trial Lawyers, Inc.: Health Care report �a political document,� as you suggest? Well, I suppose that too depends on what you mean. Do we want politicians � and voters � to pay attention to the report? Sure, because the Manhattan Institute is all about �turning intellect into influence.� We aren�t about publishing dry articles in academic journals that nobody reads. And compared with empirical studies or policy documents, Trial Lawyers, Inc. is much more intended to reach a lay audience. But no, the report is not �political� if you mean partisan. In the government/public relations section of the report, we specifically explore how trial lawyers have worked to influence both parties. ATLA and major plaintiffs� firms do give overwhelmingly to the Democrats � and in the last presidential cycle were at the center of the party�s fundraising apparatus � so any discussion of how the plaintiffs� bar works to influence politics would have been lacking indeed if it didn�t point to that fact. But we also gave significant attention to Republicans with ties to the trial bar � from Judiciary Committee Chairman Arlen Specter to former trial lawyers Lindsey Graham and Mel Martinez to former Congressman and media personality Joe Scarborough. (Believe me, I got phone calls and emails from those in the �tort reform community� to complain about our having included some of the folks we highlighted in the report.)

Our regular readers on Point of Law and the followers of my and Walter Olson�s work over time know well that we take issue with both parties on quite a regular basis. Last fall, we scheduled a featured discussion in which Ted Frank, now at the American Enterprise Institute, and Ron Chusid, of Doctors for Kerry, debated the merits of the Bush and Kerry approaches to med-mal reform. I think that Ted won the debate � and that Chusid took the all-to-familiar tack of reducing the issue to damage caps, and recycling trial lawyer talking points against them � but you can decide for yourself. The point is that we presented both points of view.

OK, enough about all that. We agree that damage caps aren�t a holistic solution � we merely differ on whether they should be supported at all � so let�s get down to the business of trying to explore other facets of the problem, on the way toward looking at other reform ideas. I�ll begin with problem definition. In your most recent post, you say the following:

Medical liability expanded during the late 20th century because of the tremendous success of modern medicine, not its failure. . . . Liability is never truly �unlimited,� whether or not damages are capped. Rather, liability expands incrementally as medical care improves, costs of receiving services and remediating injuries rise, and care delivery processes become industrialized. In the late 1980s, now UCLA law professor Mark Grady argued persuasively that negligence law is primarily a response to technologic progress. (You might know Prof. Grady � he used to be Dean and Chairman of the Law and Economics Center at George Mason University School of Law, hardly a front for the trial bar).

In general, well put, and an important caveat to the debate. I�m familiar with Professor Grady�s work � his seminal article Are People Negligent? Technology, Nondurable Precautions, and the Medical Malpractice Explosion, 82 Nw. U. L. Rev. 293 (1988) and subsequent follow-ups � and I think his point is very well taken, if perhaps overstated. Simply put, in medical malpractice law, technological change can drive new types of litigation precisely because the costs of failing to use the new technology can result in death, whereas people would have died regardless before the technology was in place. That�s important to keep in mind, as is the fact that the explosion in observable health care costs is also to a significant degree technology (and division-of-labor) driven: a very strong case can be made that health care costs, rightly understood, have fallen dramatically in the last fifty years. My colleague Peter Huber made just such a claim last year in Forbes:

The cost of health care in the U.S. has been declining steadily for the last 50 years. It will decline faster still in the next 50. All of the doleful commentary about mushrooming costs and budget-busting programs ignores the principal economic costs of illness, which are falling fast, and the science of pharmacology, which is transforming the economics of health care.

By far the largest economic cost of illness is lowered labor productivity. Sick people can't work, and when adults die in their prime, they take all their intelligence, skills and initiative with them. Until recently, the cost of illness among children and the elderly was also shouldered mainly by the healthy adults who devoted countless hours to their care. Such costs aren't reflected in revenues to doctors or hospitals, still less in federal insurance programs. They are felt in lost corporate profits, lower wages and, for many women, tireless but entirely off-budget toil in the home.

Several developments radically changed this economic calculus in the second half of the 20th century. Vaccines all but eradicated many of the most common childhood diseases and substantially curbed infectious disease among adults as well. However much it cost to develop the whooping cough vaccine or to distribute it free to families who couldn't afford it, the cost must surely have been dwarfed by the economic gains that came from freeing up mothers to engage in other pursuits. Antibiotics had a comparable impact. Tuberculosis was a fantastically expensive disease a century ago--think of the balconies in the mountains of Davos or New York's Saranac Lake. Polio meant braces and iron lungs. Those costs have all but disappeared.

But while the costs of incapacity, home care and the sanitarium declined, spending on hospitals and physicians rose sharply. Families began outsourcing their health care, particularly for the elderly. This pushed the costs out into the open, where they could be covered by insurance programs and decried by budget experts. The real cost of health care--avoiding disease or recovering from it--certainly continued to drop fast, but now the costs were incurred not in time but in dollars--often government dollars--and that of course changed the debate.


It�s important, though, that we correctly characterize Professor Grady�s work. While he looks to technology rather than doctrine as the primary cause of the medical malpractice litigation explosion, he isn�t saying that the explosion isn�t a problem. He certainly isn�t saying as you do � echoing the favorite mantra of the trial bar � that these crises �largely reflect the failure of cyclical insurance markets.� What does Grady say? �New lifesaving technology can easily create a tort crisis by expanding the amount of insurance that doctors are obliged to offer their patients. For various reasons, patients and other potential victims may not be willing to pay for the amount of insurance that the new technology, operating through the tort system, foists upon them.� Not the �insurance cycle� (I agree with you that insurance companies� investment returns matter, by the way, due to the time value of money; but the long-term driver of liability insurance is liability, which you essentially agree to in your last post) � but rather insurance that new technology �foists upon them� �through the tort system.�

Let�s put this point in different terms. Patients cannot �opt out� of tort contractually (notwithstanding that they�re really in contractual relationships with their medical care providers � they don�t run into doctors accidentally on the street). They can�t buy health insurance policies that are cheaper but have binding provisions that, say, cap the damages they could recover in a tort negligence claim. (Paul Rubin argues rather convincingly that they should be able to, but his ideas, like some of yours, haven�t gained political traction.) In essence, the tort system �foists� unwanted insurance on health care consumers.

Grady�s work merely points out that rather than being due to changes in substantive or procedural legal rules, this effect may be due in significant part due to the rapid pace of technological change itself. That doesn�t mean it isn�t a problem. Grady again:

Technology-induced insurance effects are practically indistinguishable from the older insurance effects that are implicit in applying the negligence rule to old activities. While negligence liability generally has a beneficial deterrent effect, liability for inadvertent negligence inevitably has an undesirable insurance effect that after a point outweighs the benefits of increased deterrence. . . . [F]or a variety of reasons already emphasized by Danzon, Priest and others, the normal measure of damages may exceed the amount of insurance against physician inadvertence that the patient would wish to purchase, and this may be especially so in periods in which risk-loading technological change has an edge over the risk-dumping variety. The very magnitude of medical benefits relative to most people's income can make unwanted insurance very costly to consumers, and this problem becomes more acute as medical technology improves.

I think that the �point� Grady describes has been reached. Access to health care is limited for many Americans, in no small part, due to the fact that American tort law � operating on what law and economics scholars call strict �liability rules� � can�t be contracted around in the medical malpractice (or products liability) arena. So all Americans must purchase the maximum technologically feasible health care � as determined by courts (ultimately, lay juries) � or be left unable to afford health care at all. Do you really think that liability problems don�t �come within an order of magnitude of threatening medicine�s success�? (Caveat: I know that you write �success in the future,� which shouldn�t be overlooked. But I�d say the effects on innovation of product liability abuses � see, e.g., Bendectin, breast implants, Fen Phen, which we detail in Trial Lawyers, Inc.: Health Care � are enormous. Vioxx and Fen Phen will cost their companies ten times their respective research and development budgets. The annualized cost of the liability for these two drugs alone is roughly one-tenth the annual sales of the whole U.S. pharmaceutical market. That doesn�t have a significant impact on innovation?) I think here�s the crux of the issue: we just don�t agree on the degree to which the liability system generates health care problems.

I�ve gone on for a while, but problem definition is important. I will however touch upon each of the health care issues you call out, at least briefly.

1. Compensation for avoidable injury is inadequate.

I can�t imagine how flat caps on damages would help get more injuries fairly compensated in conventional litigation, or would fail to harm the most severely injured. But perhaps you see possibilities I don�t.

I agree with you on point one, and at least somewhat on point two. Damage caps (here we go again�) aren�t a solution that would help compensate the many avoidable errors that our liability system doesn�t reach. Why aren�t many injuries compensated? Because the administrative costs of the tort system are enormous. (A side point: in your last post, you snarkily remark: �I�m always surprised that tort reformers, despite their business allegiances, fail to grasp the basic economic fact that, administrative costs aside, a reduction in insurance premiums unaccompanied by a reduction in insurable events is merely a wealth transfer, not a net savings to society.� Well, the administrative costs can�t be left �aside� � they represent over half of all litigation costs. Tort awards themselves are nothing but wealth transfers, effected by a system with extremely high administrative costs. The question is whether those transfers make sense in the first instance. If, say, the tort system were merely a random lottery in which one out of every 100 medical patients struck it rich, it probably wouldn�t make a heck of a lot of sense, even leaving administrative costs to the side. Why should the other 99 patients have to pay to support this lottery? Now I�m not saying that the tort system is literally a lottery, but if the system is just transferring money without properly meting out its deterrence function (which can include deterring the wrong things, it�s not simply having no deterrent effect at all), it�s not a system we�d want to defend, since we could operate a no-fault or alternative system at much lower administrative cost.)

Why are these administrative costs so important? We have this peculiar �American rule� that means the losing party to a lawsuit doesn�t pay the other side�s expenses. So if Jane Roe is injured by a clearly avoidable error, but her injuries only amount to $25,000, she won�t be able to get a lawyer to take her case, since the lawyer won�t recoup enough to cover his own legal bills � and the defendant insurance company knows that.

A loser pays rule, like the rest of the developed world enjoys, dramatically changes this calculus. The lawyer can recover all his fees for a clearly avoidable injury, once he goes to court and wins. The insurance company knows that, too, so it offers to compensate her reasonably.

My colleague Walter Olson has written about loser pays for years, and it�s something we at the Manhattan Institute continue to work on. Unfortunately, like some of the other reforms � many potentially salutary � that you�ve advanced, the �political will� to implement loser pays in almost any U.S. state isn�t really there at the moment.

A quick caveat on point two: I agree that at least some severely injured claimants would suffer, at least somewhat, with damage caps. But it�s important to emphasize that other reforms adopted in conjunction with damage caps can soften this blow. California�s MICRA, for instance, has contingency fee caps on higher-dollar cases, in addition to damage caps. Some severely injured claimants make out better under this system precisely because their lawyers� fees fall, even though their noneconomic damages are capped. Some percentage of claimants � 7 percent, according to a RAND study � do see an actual reduction in damages received (presumably because their damages are predominantly noneconomic). This effect is a real negative for some, though not one in my view that trumps the generally sensible notion that society can decide a reasonable ceiling for noneconomic damages, which if that ceiling lowers costs is worth adopting.

2. Too many avoidable errors occur.

Again, one would think that capping damages alone would do nothing to reduce errors, and might increase errors by removing financial incentives for safety improvement.

Now, I can almost see the saliva dripping onto your keyboard as you mouth �defensive medicine.� I agree that defensive medicine matters; in fact, I co-authored the most recent empirical study of defensive medicine to appear in the health policy literature (JAMA, June 1, 2005). Defensive medicine is important for more than the aggregate-health-care-cost arguments intended to sustain political momentum for tort reform between crisis periods even though physicians have easy access to cheap malpractice insurance. Defensive medicine is important during malpractice crises because physicians who fear an imminent loss of affordable coverage treat patients worse as a result � not only engaging in wasteful �assurance behavior� such as expensive diagnostic testing, but also performing unnecessary invasive procedures that plausibly increase risks of physical harm and avoiding types of medical care and types of patients they consider unduly risky, even when those patients need services. But MICRA-style reforms are tangential to defensive medicine. The deeper causes of defensive practice are clinical uncertainty, fragmented medical practice, and a malpractice insurance system that is as isolating and unforgiving in bad economic times as it is oblivious to health care quality in good economic times.

I�m not sure I agree with you here. Yes, I agree that too many �avoidable errors� occur (though we may have a normative disagreement about what an �avoidable error� really means; I think individuals should be able to contract around liability rules that mandate an immutable standard of care consistent with the most cutting-edge technologies available). But in some sense it�s an �error� if there aren�t enough ER doctors, no? Moreover, the fear of unlimited liability undoubtedly keeps doctors from honestly admitting mistakes, and discussing them, and working to improve practices and procedures that could reduce mistakes. Limiting the scope of that liability would free doctors and hospitals to be more open. I think that most doctors genuinely want to help their patients. Most hospitals want to rectify errors. But they don�t want to risk crippling liability in the process.

As for defensive medicine, I�m not sure liability is � or caps are � tangential (again, you reduce the entire discussion here to the �MICRA boogeyman� so I feel I have to respond). Doctor surveys suggest otherwise. Kessler and McClellan�s seminal 1996 study, and many others, suggest otherwise. Kessler and McClellan found a 5 to 9 percent cost reduction from �MICRA-type� reforms. That�s pretty sizable.

3. Litigation is too slow, too costly, too uncertain, and too unpleasant.

Physicians and patients should be intimates, treating each other with respect, concern, and compassion. Third-party liability coverage turns them into strangers, and litigation turns them into adversaries. Caps do not help. At most, MICRA results in somewhat less of a bad process, not a better process. Ask any doctor in California.

I agree that litigation is too slow, costly, uncertain, and unpleasant. I disagree that �caps do not help.� A �somewhat less bad process� is a better process, in my book. But enough about that. For someone who complains that the tort reform debate is all about caps, you sure do want to talk about them a lot.

4. Premiums for primary coverage are too volatile and, for some physicians, too expensive.

This is an insurance market problem. Caps help, but very bluntly. Why not address risk-pooling problems and the clinical bottlenecks they create during crisis periods directly? For example, try revamping specialty- and geography-based rating practices for physician liability coverage and moving more of the market into stable, diversified institutional settings?

Now we�re getting somewhere. Time constraints prevent me from responding fully here, but I would like you to expand on this idea in your next post, if you�re willing. Precisely how do you propose �revamping specialty- and geography-based rating practices�? And what�s your mechanism � by reducing insurance regulations to permit more insurer innovation or by mandating how insurers work through a top-down central command?

5. Excess coverage and reinsurance are too costly for hospitals and other institutions.

The biggest insurance problem during the current malpractice crisis is high-dollar coverage for institutional defendants, say $10 million or more per claim. Even in the most severe malpractice crisis, hospitals can handle smaller cases just fine (a $250,000 cap is a rallying cry, not a policy prescription, and is irrelevant once one looks beyond individual physician defendants and the narrowly exposed liability carriers that insure them). Caps might help in the large cases, though again very bluntly, but not when applied only to non-economic damages as their proponents � bowing to political reality � generally urge. Economic damages, not non-economic damages, are the principal source of financial exposure in the largest malpractice cases � usually involving newborns or children who have suffered lifelong debilitating injury.

I certainly agree with your initial factual claim. And I also agree with an implication of your point, if I�m reading it right, that it might make some sense to cap economic damages in addition to noneconomic damages. While some economic damages shouldn�t be capped � say, the cost of medical care (which as you note can be exceptionally high in some cases) � I�m not sure why we shouldn't cap lost wages after a certain level. If someone�s earning over $100,000 a year, and fails to buy long-term disability insurance, I don�t have too much sympathy, and I�m not sure the tort system should bail him out. I think that capping lost wage recoveries � precisely because the only ones who�d suffer would be the better heeled � would add to the political salience of tort reform, and I wish someone would get behind the idea.

I�m less confident in your claim that noneconomic damages aren�t a huge part of the med-mal problem. Overall, we know that noneconomic damages exceed economic damages in the tort system. Is medical malpractice liability really that different � and if so, why?

Finally, I�ll touch on your �neutral, court-appointed experts� idea. I agree wholeheartedly that expert evidence is a huge part of this equation. My colleague Peter Huber wrote two books on the issue in the 1990s. In short, I enthusiastically support state experiments in this area. A caveat though. The political reality is that many state-court judges are captives of the trial bar. There isn�t good empirical evidence that I�m aware of that shows such reforms to be effective in practice. So while I�m all for such approaches, that�s in addition to � not in lieu of � traditional tort reforms (yes, Bill, including damage caps), which have a strong empirical track record of success.

I hope that�s enough to chew on for now. I will get into the �plaintiffs� bar business model� in the next post. For now, I�d refer you to our original 2003 report, which outlines the concept in more detail. This new report builds upon that idea.

I�ll also, in my next post, want to go into at least some more detail on drug and device products liability, not just medical malpractice. I�ll give some attention to the FDA preemption point, which you lampoon.

And in your next post, if you want to advance some of your other ideas that you�ve worked on in addition to court-appointed experts, please do. I�d love to discuss them.

Looking forward to your response,

Jim

P.S.: I�m not going to get into a universal health coverage debate, though I�m curious as to how it has much to do with tort reform � unless you want the government to take over health care and use its sovereign immunity. But maybe I�m missing something.


Learning the Wrong Lessons from "An American Tragedy" - PointOfLaw Forum

Cross-posted from Volokh Conspiracy:

New Article Posted on SSRN: My article, Learning the Wrong Lessons from "An American Tragedy": A Critique of the Berger-Twerski Informed Choice Proposal, forthcoming in the Michigan Law Review, is now available for download from SSRN. Comments are welcome. Here is the abstract:

This paper is a critique of Margaret Berger and Aaron Twerski, "Uncertainty and Informed Choice: Unmasking Daubert," forthcoming in the Michigan Law Review. Berger and Twerski propose that courts recognize a cause of action that would allow plaintiffs who claim injury from pharmaceutical products, but who do not have sufficient evidence to prove causation, to recover damages for deprivation of informed choice. Berger and Twerski claim inspiration from the litigation over allegations that the morning sickness drug Bendectin caused birth defects.

Considering the criteria Berger and Twerski suggest for their proposed cause of action in the context of Bendectin, it appears that a pharmaceutical manufacturer could be held liable for failure to provide informed choice: (a) even when there was never any sound scientific evidence suggesting that the product caused the harm at issue, and there was an unbroken consensus among leading experts in the field that the product did not cause such harm; (b) when the product prevented serious harm to a significant number of patients, and prevented substantial discomfort to a much greater number, even when there were no available alternative products; (c) when a plaintiff claims that she would not have taken the product had she been informed of an incredibly remote and completely unproven risk; and (d) when the defendant is unable to prove a negative - that the product in question definitely did not cause the claimed injury.

No rational legal system would allow such a tort. Putting the Bendectin example aside, the informed choice proposal has the following additional weaknesses: (1) it invites reliance on unreliable junk science testimony; (2) it ignores the fact that juries are not competent to resolve subtle risk assessment issues; (3) it reflects an unwarranted belief in the ability of juries to both follow limiting instructions and ignore their emotions; (4) it ignores the problems inherent to multiple trials - even if defendants were to win most informed choice cases, safe products could still be driven off the market by a minority of contrary verdicts; (5) it ignores the inevitable costs to medical innovation as pharmaceutical companies scale back on researching product categories that would be particularly prone to litigation; (6) to preempt litigation, pharmaceutical companies would overwarn, rendering more significant warnings less useful; and (7) FDA labeling requirements would arguably preempt the proposed cause of action.


A Day Late and a Dollar Short on Bendectin: - PointOfLaw Forum

Cross-posted from the Volokh Conspiracy.

There was once a safe and effective prescription remedy for morning sickness called Bendectin (Debendox in other countries). After a great deal of "phantom risk" hysteria, Bendectin was driven off the American market by thousands of lawsuits, unsupported by valid scientific evidence, claiming it caused birth defects. The litigation continued well after a consensus formed in the scientific community that Bendectin does not cause birth defects, and the evidence has since continued to accumulate that Bendectin is perfectly safe.

With Bendectin off the market, the rate of hospitalizations for morning sickness has doubled, and hundreds of thousands of pregnant women annually face "unwarranted and preventable suffering."* The withdrawal of Bendectin from the market, was, as one article puts it, "an American tragedy"**--Bendectin was never taken off the market in other countries or, as in Canada, quickly returned to the market after a short hiatus; you can easily get it in generic form from Canada or elsewhere (you can also make a home version from nonprescription ingredients, but physicians are understandably reluctant, given the litigation history of the drug, to recommend this). Meanwhile, Bendectin and other litigation fiascoes related to women's reproductive health has severely discouraged pharamceutical companies from researching new morning sickness drugs, contraceptives, etc.

No plaintiffs' attorney is more identified with the Bendectin litigation than former ATLA president Barry Nace [by the way, consider what it says about ATLA's members that they elected him president long after he helped drive Bendectin off the market]. He had many Bendectin cases, and was the one who took Daubert v. Merrell Dow Pharmaceuticals, which revolutionzed the rules for the admissibility of expert testimony, to the Supreme Court (though he hired Georgetown professor Mike Gottesmann to argue the case before the Supremes). At some point, Nace decided that one of his Bendectin cases wasn't worth pursuing, and his client sued him.

In August 1998, his attorney in this case filed a brief in support of a motion for summary judgment, in which he argued, among other things, that Nace wasn't liable to the client because "courts soundly and uniformly reject the notion that Bendectin causes birth defects." Two years later, Nace told the New York Times that he still believes that Bendectin causes birth defects. I guess he forgot to tell his lawyer.

Update: Kaimi Wenger points out that Nace's attorney is likely arguing only that courts have ruled that Bendectin doesn't cause birth defects, not that it actually doesn't. I initially read the brief (as did the source who sent it to me, and the source who sent it to him) as denying that Bendectin causes birth defects, not simply that many courts have rejected causation evidence. The wording of the entire paragraph is awkward and somewhat ambiguous. The argument also isn't very persuasive without the concession that Bendectin doesn't in fact cause birth defects; without the concession, the argument is that because many other courts that the New Jersey trial court, in a summary judgment context, where all facts are construed against the party who wants the case dismissed, should reject the notion that evidence that Nace originally planned to present would have been admitted. This despite the fact that the issue had never come up before in New Jersey, and New Jersey's admissibility test was, at best, consistent with but not identical to the test in other jurisdictions. But, on rereading the brief, I think it is just a bad argument, not (intentionally) an explicit argument that Bendectin doesn't cause birth defects. Nevertheless, one would have thought that Nace would be reluctant to have his attorney argue that his experts' testimony that Bendectin causes birth defects wouldn't be admissible in New Jersey which, in practice, is among the most plaintiff-friendly jurisdictions in the country.

* 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).

** Melanie Ornstein, et al., Bendectin/Diclectin for Morning Sickness: A Canadian Follow-up of an American Tragedy, 9 REPRODUCTIVE TOXICOLOGY 1 (1995)

March of Dimes wants Bendectin back - PointOfLaw Forum

The morning sickness drug was driven from the market in 1983 by a wave of lawsuits even though health authorities and most juries agreed then and now that it does not cause birth defects; it has been available in Canada all along under the name Diclectin. Bright Line notices that the March of Dimes, which specializes in birth defects prevention, wants the drug back. See Overlawyered, Jul. 21, 1999 and Sept. 27-28, 2000.

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