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Products Liability Litigation Challenges for Life Sciences Companies, Part I

Medmarc Insurance Group

Introduction

The United States is widely regarded as the most litigious country in the world―and for good reason. The U.S. has the most lawyers per capita, and spends the most money—both in dollars and as a share of gross domestic product—on litigation. Doing business in a litigious society can be difficult for any business, but life sciences companies face some unique challenges related to litigation. The Litigation 360 series will describe these challenges and provide some general guidance to assist life sciences companies minimize the likelihood of litigation, and maximize the chances of success should litigation occur.

In this first article of the series, we begin by discussing two factors―jury bias and joint and several liability―that can negatively impact a life sciences company involved in products liability litigation.

Jury Biases: Negative Perceptions of Life Sciences Companies

One challenge that life sciences companies must grapple with is adverse jury biases. In general, there is a strong undercurrent of anti-corporate sentiment. This undercurrent has been percolating in the U.S. at least since the savings and loan crisis of the 1980s and is regarded by many to have intensified over the last fifteen years or so. (The Institute for Legal Reform (2012).) There have been several watershed events in the popular movement against “corporate America” in recent history, and each of these probably contributed to the difficulty corporations now face in overcoming jury bias that assumes they are solely motivated by profit and greed at the expense of consumer safety. Such events include the revelations over the last several decades that tobacco companies knew about the harmful effects of tobacco for a long time while advertising cigarettes as safe, the Enron scandal of 2001, and movies like Erin Brockovich (and the real-life experience it was based on). The “Occupy Wall Street” movement was the latest manifestation of this anti-corporate undercurrent. Recent polling of jury-eligible individuals confirms that such biases against companies are still a tangible obstacle for corporate defendants.

A nationwide juror survey in 2008 indicated the following of the jury-eligible public:

  • 90% felt that corporate executives often try to cover up the harm they do;
  • 80% agreed that corporations will lie if it benefits them financially; and
  • 77% felt that if someone sues a major corporation, the case must have some merit. 

Beyond the overt backlash against corporations, there is also a more basic juror perception that can be detrimental to companies. This perception is that companies have “deep pockets,” and thus will be relatively unharmed by having to pay substantial monetary awards. Where there is a harmed plaintiff—a victim—jurors may look to make them whole by utilizing the “deep pockets” of the corporation, whether or not the jury really believes the company is at fault for the plaintiff’s harm.

Beyond facing the general anti-corporate bias of juries, life sciences companies—and particularly pharmaceutical companies—have an especially uphill battle. Juror sentiment and popular distrust surrounding pharmaceutical companies seems to be especially strong. Though a majority of respondents to a nationwide poll held the belief that most suits against companies (in general) probably have merit, an even greater proportion of respondents felt that suits against pharmaceutical companies and oil and gas companies (notoriously mistrusted by the public) likely had merit.

Though it probably comes as a surprise to companies that fall under the oversight purview of the Food & Drug Administration (FDA), a majority of polled jurors actually felt that the FDA was too lenient a watchdog. Indeed, in one such survey, almost 80% of respondents felt that there was insufficient government regulation of pharmaceutical companies. (DecisionQuest (2008).) Much like the few, widely publicized recent events that probably underlie the anti-corporate sentiment currently permeating the national conscience, this view of the FDA as merely a “rubber-stamp” organization can be largely attributed to a few significant incidents that received dramatic media and popular attention.

The 1980s products liability litigation surrounding rupturing silicone breast implants that resulted in a $4.25 billion class-action settlement certainly could have contributed to this view. The Fen Phen disaster of the 1990s, in which the FDA-approved diet drug caused severe heart valve damage in a substantial portion of users is another event that likely painted the FDA as too lax a guardian. Though in the context of the thousands of safe drug and devices on the market these disasters seem all but inevitable, such stories resonated with the public and probably underlie the popularly-held opinion that medical products are not as rigorously tested prior to approval as they should be. Indeed, in another comprehensive set of juror surveys performed by DecisionQuest in 2006, the firm determined that 84% of jury-eligible individuals felt that that companies today need to do a better job of testing products before they sell them to consumers. The same proportion also said product manufacturers had a duty to make their goods 100% safe for all consumers.

Combating Negative Bias

At the heart of the anti-corporate sentiment are the beliefs that corporations are greedy, apt to put profits over people and the safety of consumers, and are willing to lie or cover up bad facts in order to be more profitable. To combat this, it becomes paramount that your company create and maintain a positive “story” and demonstrate your commitment to patient safety and transparency as often as possible. This can be accomplished through careful document creation and incorporating an appropriate document retention policy. Including dedication to patient safety in the company’s mission statement is also an easy but effective way to integrate a regard for patient safety into the company’s “story.” (Document creation and retention policies will be discussed in greater detail in the next installment of the Litigation 360 series.)

Joint & Several Liability

When an adverse event occurs in a healthcare setting, the injured party—or more accurately, the injured party’s attorney—is unlikely to “zero in” on only one defendant. Instead, plaintiffs’ attorneys generally cast a wide net and bring suit against any and all persons and entities that were involved in the plaintiff’s care when the adverse event occurred. This generally includes the healthcare facility where the injury took place, the doctors and/or other healthcare professionals treating the patient, and the manufacturer and/or distributor of the product(s) being used to treat the patient. This frequently places life sciences companies alongside healthcare providers (doctors and hospitals) and their own vendors, suppliers, contract manufacturers, or distributors, as defendants in the plaintiff’s case. Though technically on the same side, things may quickly become adversarial between the drug or device company and other defendant(s) as the success of each often depends on imputing liability to the other.

Joint and several liability is the doctrine that makes each defendant liable for the entire amount of a plaintiff’s award, regardless of each defendants’ proportional fault. The doctrine is intended to ensure that a plaintiff obtains their whole damages award against multiple defendants, even if one or more of the defendants goes bankrupt or is otherwise unable to pay. It is retained today in some form (pure or modified) by the majority of (36) states. The application of joint and several liability can be more or less onerous depending on the liquidity, location, and, occasionally, legal protection of each co-defendant independently and relative to one another. There are a few situations in which the application of joint and several liability can be an especial hardship for the drug or device company.

The most common scenario in which joint and several liability can result in one defendant paying a disproportionately large percentage (perhaps all) of a plaintiff’s award is when a co-defendant has declared bankruptcy or no longer exists (e.g., is deceased or has gone out of business). It is this situation, in fact, for which joint and several liability was devised to address. Rather than the wronged party—the plaintiff—not receiving its due compensation, joint and several liability shifts the burden of a co-defendant’s inability to pay to the other co-defendant(s) on the grounds that, in sharing some part of responsibility for the plaintiff’s harm, other co-defendants are the just bearers of the payment or non-payment burden.

Examples are most effective at illustrating how joint and several liability operates in practice. Imagine an adverse event involving a metal-on-metal hip implant for which the plaintiff brings suit against the original equipment manufacturer (OEM) of the implant as well as the contract manufacturer that made a component part in the implant. If the jury awards the plaintiff $1 million and determines that the proportional fault of the OEM and contract manufacturer is 80% and 20%, respectively, the OEM would be responsible for $800,000 and the contract manufacturer, $200,000. Now, in a state with joint and several liability, if the contract manufacturer has gone bankrupt by the time of the trial, the OEM is responsible for the entire $1,000,000 award to the plaintiff.

Joint and Several Liability in the Drug and Device Context: Foreign Judgments & Statutory Damage Caps

Besides a co-defendant’s bankruptcy or other inability to pay, there are two other types of co-defendants—both of which are particularly common in the life sciences products liability context—that can result in the drug or device company defendant paying a disproportionate amount, relative to fault, where joint and several liability exists. The first occurs when the co-defendant is foreign, such as a supplier or manufacture based outside the United States. There is often substantial difficulty in asserting jurisdiction over foreign companies in order to bring them into court and even more in enforcing a judgment against such a foreign operation. Again, joint and several liability may dictate that the burden of finding the foreign party and enforcing a judgment against them be shifted from the plaintiff to the available defendant. Because so many medical device OEMs utilize foreign suppliers and contract manufacturers, this can be a common scenario in the context of medical device litigation.

The second situation that is of particular significance for life sciences companies arises when there is a statutory cap on the damages a particular defendant must pay. Many states, through tort reform efforts, have enacted such caps for doctors and other health care providers. When a statutory cap limits the damages a doctor must pay to an amount less than the plaintiff’s award, the co-defendants must pay the difference (regardless or proportion of fault) in a pure joint-and-several liability state.

To illustrate how this works, imagine a physician and manufacturer are co-defendants in a joint-and-several-liability state. A plaintiff is injured after the failure of her hip implant and brings suit against the surgeon and the implant manufacturer. The jury finds that the surgeon’s own negligence in implanting the hip implant was responsible for 80% of the plaintiff’s adverse outcome, and a design defect in the implant was responsible for the other 20%. The jury awards the plaintiff $1 million. Though the proportion of damages attributable to the surgeon is $800,000, the state has enacted a statute limiting physician liability to $200,000. This means that, being liable for the entire award under joint and several liability, the manufacturer must pay the entire difference—$800,000.

Nine states retain pure joint and several liability (each defendant is liable for 100% of the award regardless of proportional fault). These are:
  • Alabama
  • Delaware
  • Maryland
  • Massachusetts
  • North Carolina
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • Virginia

Twenty-seven more states retain what’s known as “modified” joint and several liability, where each defendant is liable for the entire verdict only if they are found to be above a specific percentage at fault (often 50%). These are:

  • California
  • Colorado
  • Hawaii
  • Idaho
  • Illinois
  • Iowa
  • Louisiana
  • Maine
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Hampshire
  • New Jersey
  • New Mexico
  • New York
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • South Dakota
  • Texas
  • Washington
  • West Virginia
  • Wisconsin

Life sciences companies facing claims should consider whether the state in which the claim is brought has joint and several liability and what tort reform efforts have been passed there. These considerations may be one of many factors to consider in deciding whether it is more prudent to settle a case or proceed with trial and risk an adverse jury award.

Conclusion

Although the challenges discussed are inherent in the environment in which life sciences companies operate, their effect can be mitigated by the creation of and dedication to the company’s positive story that regards patient safety as paramount, and careful consideration of the various factors at play in each claim in devising the corresponding defense strategy.

The second installment of the Litigation 360 series will explore how the transparency mandated by the FDA can serve to increase the likelihood of claims and be a hindrance during litigation for life sciences companies, as well as how appropriate documentation practices can be the most successful means of nullifying the weight and effect of the environmental challenges faced by life sciences companies.

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