March 26th, 2008

Punitive Damages: Why America is Different than Europe

In the New York Times, Adam Liptak writes that in Europe punitive damages are not viewed the same way they are here (see: Foreign Courts Wary of U.S. Punitive Damages). The idea of punitive damages “was so offensive to Italian notions of justice that it would not enforce [an] Alabama judgment” in a case Liptak uses to illustrate the point.

In the U.S., of course, punitive damages are a crucial part of our judicial system, where private litigants can punish others for reckless wrongdoing that causes injury. Not so elsewhere, where the idea of punishment and deterrence is strictly a government function. The essence of Liptak’s piece is this:

Most of the rest of the world views the idea of punitive damages with alarm. As the Italian court explained, private lawsuits brought by injured people should have only one goal — compensation for a loss. Allowing separate awards meant to punish the defendant, foreign courts say, is a terrible idea.

Punishments, they say, should be meted out only by the criminal justice system, with its elaborate due process protections and disinterested prosecutors.

Why the difference? I think it’s easy. America was founded from the time of the Revolution on limiting the power of government. The political tension between those that want larger government and those that want smaller is seen to this day, and will likely be seen so long as the republic exists. It is seen every time the issue of taxes is broached, for example, because larger government means more payments to government employees, and the money has to come from somewhere.

While I don’t profess to be a scholar of European governments, I think most would agree that they are significantly more interventionist in the private lives of the people than here. You see that in nations that restrict free speech or grant universal health care, as two examples. Our notions of freedom are not always the same as elsewhere.

Intervention means not only larger government with larger powers. It also means higher taxes to pay for it. So wrongdoing is handled by the government, which the people pay for.

While comparing tax rates is exceptionally difficult because of all the exemptions and complications, not to mention state and local tax issues, I see that the top rate in Italy is 43%. Our top rate is 35%. And Italy isn’t spending bazillions on two wars. A comparison of tax rate changes in the 80s and 90s can be seen in this government report (chart on p. 17). We are clearly at the low end of industrialized nations, despite our significantly higher military expenditures.

So we could, in theory, create criminal penalties to take the place of civil wrongs, and spend much more on criminal prosecutions of those wrongs as they do elsewhere. But we have to pay for that, and money has to come from somewhere if you care about fiscal responsibility.

Or we could let the private sector regulate itself by empowering people to bring the wrongdoers to court themselves, and let the private sector handle the costs. And the public, instead of paying, receives not only the benefits of stopping reckless conduct, but the financial benefits by taxing the punitive damage award.

Now here is the irony in this: Those that want to kill off punitive damages in the U.S. come from the right side of the political spectrum. But in doing so, they are not advocating changes in laws to criminalize civil wrongs and increase taxes to pay for enforcement.

It seems to me that a little ideological consistency is in order, because all I see when arguments pop up for eliminating punitive damages, is hypocrisy.

Your thoughts on the subject are welcome in the comments….

 

March 26th, 2008

California Delays Plan to Track Prescription Drugs

Bad news for prescription drug users out of California. The pharmaceutical industry has once again beaten back attempts at greater consumer safety.

The state had put together a bill to electronically track prescription drugs from the manufacturer all the way to the consumer, to insure that the supply chain was not infiltrated by counterfeit drugs. Every bottle of pills sold to consumers would be tagged. The plan was to go into effect on January 1, 2009, but according to today’s New York Times, the drug companies have been given a two year reprieve. The electronic pedigrees were first supposed to have been in place on January 1, 2007, so this is the second delay that they have won.

Drug manufacturers and wholesalers complained that such safety would cost them money.

But if you think the battle for increased safety is over with the new date in place, you would be wrong. Pfizer is claiming they need another five to seven years, though they have somehow managed to put such practices in place for their high revenue drug Viagra.

And for those looking at the big picture of trying to determine when drugs will finally have documented pedigrees from manufacturer down to consumer, the first legislation on the subject was the Prescription Drug Marketing Act of 1987. That dealt with paper pedigrees and was never put into place.

So the industry has thus far succeeded in delaying for 21 years. And I’m guessing that 21 years from now we still won’t have it. As Stan Goldenberg, a Los Angeles pharmacist and member of the state’s Board of Pharmacy said in today’s Los Angeles Times, “In 2011, they’ll want 2013. In 2013, they’ll want 2015. They’ll keep the ball in the air until something bad happens.”

And when something bad does happen (as it did to Tim Fagan), you can be sure, as sure as the lord made little green apples, that the drug companies will find ways to ask for immunity from the inevitable lawsuits. And they will try to blame “greedy plaintiffs’ lawyers” for the fall out.

For more info:

 

March 25th, 2008

NY Medical Malpractice Task Force and the "Illusion of Inclusion"

New York’s new governor, David Paterson, was sent a joint letter yesterday by several consumer groups over the state’s medical malpractice insurance issues. Contention arose when former Gov. Eliot Spitzer, in response to a 14% malpractice rate hike (see: Why New York Medical Malpractice Insurance Jumped 14%) created a task force under the supervision of Insurance Superintendent Eric Dinallo to come up with solutions. The commission, however, was stacked with more than 20 medical and insurance interests and just three consumer interests.

A press release was issued yesterday from the Center for Justice and Democracy indicating that the groups were “gravely concerned that any recommendations that are the product of such process will not serve the public interest” due to the stacked deck.

The letter itself details a failure by the task force to turn over information to consumer advocates and that a “major reform proposal” will be unveiled shortly despite the fact there have been no meetings for months. Consumer groups, it appears, are only superficially a part of the task force. The groups claim they are “mere window dressing, to be used as stage props to create the illusion of inclusion.”

Given Spitzer’s pro-physician bias, the conduct of the task force comes as no surprise (see Eliot’s Mess: The Ramifications for Medical Malpractice “Reform” in New York). Hopefully, Gov. Paterson will deal with issues with an even hand.

The letter was sent by: Center for Justice & Democracy, Center for Medical Consumers and Citizen Action of New York (members of a task force) as well as by the statewide consumer group NYPIRG, medical malpractice victim group PULSE, and CURE-NY, a statewide coalition of 13 public interest groups.

See also: It’s Not Just Wall Street That’s Happy To See Spitzer Go (Mother Jones Blog)

 

March 20th, 2008

Counterfeit Heparin and Baxter Liability


Counterfeit heparin may be responsible for at least 19 deaths in the United States and hundreds of allergic reactions. The news came from federal regulators yesterday that part of the anti-clotting drug made by Baxter was an unapproved ingredient from China that was altered to mimic the real thing. Baxter has pulled the drug from the market.

In exploring the potential liability of Baxter below, I first offer up this personal background: I previously represented Timothy Fagan, a 16 year-old New Yorker who had been injected with counterfeit Epogen after an emergency liver transplant. It was one of the few counterfeit drugs cases ever brought in this country, which gives me a unique perspective on the issues that may be encountered should suit be brought against Baxter. His experience was part of a 60 Minutes segment (as well as many other news reports) and featured in a book by Katherine Eban, Dangerous Doses. Legislation named for him, Tim Fagan’s Law, is pending in Congress. I have a page at my web site devoted to the subject (Counterfeit Drug Resource Page), have written on the subject here a number of times (though not in the last nine months), and spoken at pharmaceutical conferences on the subject.

Tim’s experience, like the one with Baxter’s heparin, resulted from problems in the pharmaceutical supply chain. For Tim, the counterfeiting took place after the drugs left the hands of drugmaker Amgen, and low dose vials were “uplabled” with counterfeit labels to appear to be 20x the strength, reportedly by a criminal gang in Florida. The vials were also mishandled, leading to apparent adulteration. Tracing how the drugs moved through a web of secondary wholesalers was a critical part of the investigation.

Baxter now faces a similar problem of supply chain management, though the problems exist upstream instead of downstream. The problems result from outsourcing critical manufacturing to others while also failing to verify the integrity of the product. Any investigation as to Baxter liability will no doubt turn on whether the company turned a blind eye to the product’s sourcing, perhaps because the price was so good.

Litigants will also face a critical set of problems that will arise in any drug counterfeiting case:

  1. The evidence was destroyed at the time it was injected or ingested and the packaging discarded.
  2. Doctors will generally assume that a failure to get better is the result of the underlying condition, not a counterfeit drug.
  3. Since the patient was already sick (or they wouldn’t be getting the drug), proving that death or further disability came from the counterfeit, as opposed to an underlying cardiac condition that they were perhaps being treated for, will represent a real causation issue even if you know the counterfeit was injected/ingested.
  4. The drug may not be trackable back to Baxter due to shoddy record keeping regarding the supply chain, which still contains loopholes that allow the “pedigree” of a drug to be washed by “authorized distributors of record” so that prior owners of the drug are unknown.

Litigants will start with an essential fact: It is a prohibited act to sell counterfeit drugs and Baxter appears to have done just that. Most lawyers refer to that as negligence per se.

Since Baxter appears to have committed that prohibited act (assuming the accuracy of press reports), it must therefore try to defend itself with a claim that the company owed no duty of care to the end-user, as there was no direct relationship between the two.

A savvy litigant will respond, however that the since the Food, Drug and Cosmetic Act prohibits introducing defective drugs into interstate commerce, it is not enough to say that Baxter simply didn’t know that this is what their sourcing companies were doing. The United States Supreme Court, in the little known 1975 case of US v. Park, has already stated that the Act “imposes not only a positive duty to seek out and remedy violations when they occur but also, and primarily, a duty to implement measures that will insure that violations will not occur.” The Act, according to the Court, punishes “neglect where the law requires care, or inaction where it imposes a duty.”

Since the measure of Baxter’s duty to the end-user will be measured by the foreseeable risk, and counterfeiting is not only a clearly foreseeable risk (see the links back at my resource page), but one that has received much attention lately due to counterfeits coming out of China in particular, the foreseeability issue is easily approached.

Thus, a plaintiff would argue that it is not whether Baxter owes its customers a duty of care, which has existed for decades, but rather, the scope of that duty.

The legal issues of whether a duty of care exists between manufacturer and consumer also might be addressed from the breach of warranty angle. In that respect, relief may exist (among other places) in its uniform commercial code. New York’s UCC 2-318, for example, provides that: “A seller’s warranty whether express or implied extends to any natural person if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty. “

Baxter counsel will argue, in essence, that the company deserves immunity, and will scratch around for any argument that fits that bill. Since any case will likely be faced with a motion to dismiss right away, it is critical that each of the potential issues be addressed in the complaint with proper allegations. There are no cookie cutter forms for this type of complaint, and each of the allegations and potential responses must be thought through and specifically tailored.

Update:

  • Baltimore Sun says 21 deaths and 700 injured)
  • Senator Edward Kennedy released a statement that said, in part:

    “It is unacceptable that Americans have died and been seriously injured by what appears to be deliberate tampering. Whether this contaminant was introduced intentionally or by accident, the full force of the law must be brought to bear to bring those responsible to justice. To guard against future abuses, every drug manufacturer needs to inform FDA of where it sources its ingredients and what it is doing to ensure that these ingredients are pure and potent.”

General counterfeit drug links:

Counterfeit heparin links:

Update 3/27/08: