Litigation Challenges for Life Sciences Companies
There are numerous challenges that crop up for life sciences defendants. First, there is a prevalent anti-corporate sentiment pervading modern jury pools. This sentiment appears to be even stronger with respect to drug and device companies; the public seems to have little trust in drug and device companies and regards the FDA as a weak guardian of public health. Ultimately, this means that a life sciences company that enters a courtroom as a defendant in a products liability action must overcome this perception, in addition making its defense in the case, in order to prevail.
Joint & Several Liability
Another significant hurdle for life sciences companies is joint and several liability, which has an especially perverse effect when combined with juries’ negative perception of corporate defendants. Simply, joint and several liability, in its simplest form, means that each defendant, regardless of their share of fault, is responsible for the whole amount of damages. Thus, if the total damages are $100,000 and Party A is found to be 1% at fault and Party B is found to be 99% liable, Party A may still have to pay the entire $100,000 sum if Party B is unable to do so.
It is very rare that a jury won’t attribute some measure of fault, however nominal, to the drug or device maker, even if the doctor’s acts are deemed to be the principal cause of the plaintiff’s injuries. This makes potentially unjust results (in which the life sciences company pays a significantly greater share of the damages than its share of fault would dictate) very likely when damages caps are in place on doctors and hospitals, as they are in a majority of states under tort reform statutes.
Besides doctors and hospitals, other frequent co-defendants for life sciences companies are foreign-based manufacturers and suppliers. These entities are similarly problematic for drug and device companies, as obtaining jurisdiction over them can be impossible, thus forcing the domestic life sciences company again into the role of primary payer.
Transparency as a Regulated Industry
One unique aspect of the life sciences industry is the degree to which information on member companies is publicly available. This degree of transparency—a product of being under the purview of the FDA and the Food, Drug, and Cosmetics Act—has special implications for litigation involving life sciences products. One consequence of the wealth of publicly-available information is that FDA enforcement actions and medical device reports (MDRs), which describe suspected device-associated deaths, serious injuries, and malfunctions and are accessible by the public through the FDA’s MAUDE database, can often be the first alert to the plaintiffs’ bar that a product problem may exist. Frequently, plaintiffs’ attorneys will identify possible evidence to support a lawsuit (e.g., a Warning Letter) before hearing of any injury actually associated with the product.
Sensitivity of Potential Plaintiff Class
Another distinct component of life sciences cases is the class of plaintiffs. Because drugs and devices are most often used to diagnose or treat a condition, the class of people which might be injured by a drug or device necessarily have an adverse condition, making them especially vulnerable to harm. Under the law, however, and what’s known as the “eggshell plaintiff” doctrine, the defendant must take the victim as they find him or her. If the victim is more susceptible to injury than an average individual would be, the defendant is still liable for all the damages that occur. Additionally, this vulnerable population may for very sympathetic plaintiffs, sometimes making it difficult for jurors to deny them relief during litigation.
You’ve Been Sued, Now What?
Although being armed with knowledge of these particular challenges can help companies prevent claims, there is no way to eliminate their possibility altogether. Instead, life sciences companies are best served by preparedness. Part of that preparation means understanding what a lawsuit looks like and the components of a trial.
Very briefly, drug and device companies need to know the following basics:
- Venue and jurisdiction matter to the outcome of the claim. Your attorney should be conscious of the desirability of and alternative options to the court in which your case was filed. Most often, corporate defendants prefer to litigate in federal court when possible.
- Discovery is a lengthy and expensive process. Your company should be willing and ready to dispense a “litigation hold” (to preserve documents for trial) and have a document management system already in place to minimize the timely and costly process of producing hundreds of thousands of documents.
- Experts are critical. In most products liability cases, and especially in life sciences products liability cases, the role and weight of experts cannot be underestimated.
Working with Your Insurer – The Tripartite Relationship
One important aspect of products liability litigation is that defense counsel and defense strategy may be overseen by the defendant’s products liability insurer. In that counsel is hired by the carrier to defend the insured, counsel might be seen as serving both of these parties, and questions of conflicts of interest may arise. States vary on how and to what extent they have addressed carrier and counsel duties in the more complex questions of the tripartite relationship, but it is important for companies to understand that counsel owes no greater rights to the carrier than to them, and that independent counsel may be desirable—depending on the state—in the rare situations in which their interests and those of the insured diverge.
Responding Effectively When Your Product Is Under Attack
Products liability claims against life sciences companies can often be public, and whether the public attack precipitates or results from litigation, it is critical that companies know how to respond effectively and manage their messages in order to minimize damage to their brands, reputations, operations, and bottom lines. Perhaps it is the FDA issuing a Warning Letter or demanding the initiation of a product recall. It could be a very observant member of the plaintiffs’ bar watching reports of adverse events and seeking patients injured by the product. However, regardless of how a crisis arises, it is vital to a company’s survival that it be prepared for effective message management.
Crisis Management: Steps You Can Take Now to Be Prepared
Many actions life sciences companies can take to minimize the impact of litigation and ensure the best outcome must happen before litigation has begun, or, many times, before it is even on the horizon. The foremost among these is having a crisis management plan to address document management and retention, recalls, media and press relations, and lawsuit responses. Document management is critical. A sound document retention policy should be in place, which contains guidance on document creation and procedures for document retention and destruction. The latter should include finite limits of time on the retention of documents routinely created in the course of business but it must also be compliant with FDA rules related to document retention.
A recall plan should be established for each product and should include, not only the actual FDA-sanctioned procedures for undertaking a recall, but also the identities of all parties who need to be informed in the event of a recall and a path of legal review for public documents. Beyond recall plans, life sciences companies also need to ensure they are able to identify their product if it is of a type being manufactured by more than one company. For these products, it is not uncommon for adverse events, and even lawsuits, to be reported to and filed against the incorrect manufacturer. The burden is then on the manufacturer to establish that the product in question is not their own. It is for this reason, along with being able to effectively identify and remove product on the market in the event of a recall, that life sciences companies must keep detailed product records to ensure traceability.
Adopting a Safety Policy and Assembling a Safety Team
An integral part of a crisis management plan is the team that is charged with executing it in the event of a product crisis. Either independent of or combined with the crisis management team should be a product safety team or committee. Ideally, this team should be cross-functional with the appropriate legal and operational leaders. In compiling the group, management may also consider whether the team needs a budget, how many members the committee should have and which departments will be represented, how often they will meet, and what authority the team will have to make procedural changes. The development of a product safety committee reinforces the business’s interest in producing safe and effective products, educates employees and managers, and promotes the exchange of ideas and cooperation and coordination among departments.
Managing Litigation Expenses: Ebbing the Tide
One facet of litigation—and perhaps life sciences, products liability litigation in particular—that companies need to be aware of and prepared for, is that it is hugely expensive. There are obvious expenses—attorney fees, document production—that cannot be avoided, but there are also several strategies companies can employ to minimize the financial burden and hardship that litigation can impose.
Litigation guidelines are your “rules” related to how outside counsel may conduct your litigation in order to comport with certain billing requirements or restrictions. Although litigation guidelines may be regarded as appropriate only for insurance carriers or massive corporations, a company is never too small to have them in place. These guidelines should address counsel’s reporting duties (frequency and level of detail), billing requirements, disclosure of budget, and staffing parameters.
Electronic discovery, or the electronic collection, processing, and release of electronically-stored information (ESI), has become one of the costliest aspects of litigation. That said, there are measures companies can take to constrain the costs. In addition to the document retention policy mentioned previously, companies should have a policy that provides preferred methods of communication—perhaps an intra-office instant messaging service (which does not preserve transcripts of conversations) or phone calls. Second, to hamper the creation of unnecessary documents, the company should have a policy that provides preferred methods of communication—perhaps an intra-office instant messaging service (which does not preserve transcripts of conversations) or phone calls. Finally, it is important that the company engage competent life sciences counsel who can ensure that the size of production required in the case is proportional to the suit, and can help in curating the mass of ESI.
Insurance Issues that Arise in Life Sciences Litigation
If companies have products liability insurance when a claim arises, much of litigation will be handled by the carrier. Some of the facets of the claim’s handling, or indeed the application of the limit and/or deductible, may come as a surprise to even the most astute life sciences companies. It is preferable, however, for companies to understand—before claims arise—the particulars of how policies function. . Some issues to explore are relation language and batch clauses, prior knowledge provisions, and stipulations regarding control of the defense.
Batch clauses and other language that groups claims together take a variety of forms and can render unexpected results. Because of the significant variance in how the batching mechanism operates among various policies, as well as the sizable impact its operation has on an insured’s available coverage, it is crucial for companies to understand its scope in their particular policy at the time of policy inception. Another clause that can cause life-sciences insureds and their brokers serious headaches when a claim arises is what is called “deemed-known” language. This language functions to exclude coverage of claims of which the insured is “deemed” to have had prior knowledge. While this sounds reasonable, it is in its application that divergence from coverage expectations can take place, and a claim that a company would reasonably assume would be covered under their current policy can turn out to be excluded. Finally, one more aspect of the policy that can play a significant part in litigation and, thus, should be explored carefully when purchasing products liability insurance, is the insurer’s right to control the defense in the event of a claim. Although control-of-defense language is relatively uniform among carriers, the specifics are distinct and deserving of attention.
Case Resolution Strategies: Considering the Alternatives
Beyond the most obvious means of case resolution—settlement and trial—there are alternative dispute resolution (ADR) proceedings that should be considered. The most common of these are mediation and arbitration.
Mediation is the more informal of the two chief ADR proceedings. In mediation, a neutral third party—typically a trained mediator—presides over and facilitates discussions between the plaintiff and defendant. Though informal compared to trial proceedings, mediation does have a structure and timeline that distinguishes it from usual negotiation.
Though it is similar to mediation in many ways, arbitration is more formal than its counterpart and has two significant distinctions: (1) in most cases, the result is binding upon the parties; and (2) whereas the role of the mediator is to facilitate compromise and discussion among the parties, the adjudicator that presides over arbitration is mostly removed from settlement discussions and, instead, merely issues a determination of liability and damages.
While litigation is always unwelcome, undertaking the steps and exploring the elements above help to ease its negative impact. Perhaps the most important action life sciences companies can take to ensure that products liability litigation goes as smoothly as possible, with minimal disruption to their business operations and reputations, is to partner with a knowledgeable broker and a specialist life sciences carrier.