The Supreme Court and the One-Way Regulatory Ratchet
Earlier this month, the Supreme Court heard oral arguments in Merck v. Albrecht. At issue in the case is when the federal regime for regulating pharmaceutical products (principally through the Food and Drug Administration, or FDA) might preempt state regulatory regimes (principally through tort litigation). However the case is resolved, this area of law is certain to remain a mess—and Congress would be well-advised to clean it up through legislative action.
The Albrecht case concerns Merck’s drug Fosamax, which helps prevent osteoporosis in post-menopausal women. Osteoporosis makes bones brittle—and the drug typically lowers the risk of breaks and other bone injuries in the elderly. But years after Fosamax was approved, some evidence began to emerge that patients taking the drug may have an increased risk of “atypical femoral fracture,” essentially a breaking of the thigh bone from minimal trauma. In other words, a small subset of patients may be more vulnerable to this particular type of bone break, even though the drug successfully insulates most patients from bone breaks caused by osteoporosis.
All drugs have side effects, but some may not be immediately evident. Such was the case with Fosamax. The FDA requires pharmaceutical companies to exhaustively test their products before introducing them to the market, and Merck went through all of the mandated protocols before the FDA approved Fosamax in 1995. But after patients starting reporting the unusual thigh-bone breaks, the FDA asked Merck to submit additional information to the agency on this possible risk in June 2008. Three months later, Merck gave the agency new data and proposed two changes to the product’s labels.
Herein lies the rub: after reviewing the data, the FDA rejected Merck’s proposed addition to the “warnings and precautions” label. In a May 2009 letter to the company, the agency stated that the warning about the risk of thigh fractures was “not warranted” and “not adequately supported by the available literature and postmarketing adverse event reporting.” The following March, the agency issued a public safety announcement stating that “FDA’s review of these data did not show an increase” in the risk of atypical femoral fractures in Fosamax patients.
Yet the agency assigned the issue to a task force for further review, and in September 2010, it reversed course. The FDA now said that the unusual fractures were “more closely related to these drugs” than it “previously had evidence for.” The agency now deemed an additional warning label necessary, and Merck quickly complied.
After Merck changed its label, thousands of lawsuits were filed in multiple states, alleging that the company was liable for fractures purportedly caused by Fosamax, due to insufficient warning—even though the FDA had previously blocked the company from including any warning on the drug’s label. How can this be? The answer lies in America’s idiosyncratic system of parallel state and federal regulation.
Today, the tort law in all fifty states holds manufacturers responsible for injuries caused by their products. Albrecht is a “failure to warn” lawsuit, a type of suit that began to emerge in the mid-1960s after the California Supreme Court held manufacturers strictly liable for product defects in Greenman vs. Yuba Power Products (1963). Two years later, that idea was encoded in the Second Restatement of Torts, a legal treatise published by the American Law Institute that greatly influences state supreme court jurisprudence. All this occurred after Congress had adopted its most recent full revision of the Food, Drug, and Cosmetic Act governing FDA regulation in 1962—meaning that Congress revised the law without any sense of how federal regulations might butt up against state tort law.
So, even though the FDA oversees all aspects of drug labeling—including lengthy prescription-bottle warning inserts and the deadpan warnings you hear at the end of drug advertisements on television—a company like Merck may still be vulnerable to a state lawsuit claiming its Fosamax warnings are inadequate.
Consider Wyeth v. Levine, a 2009 case in which a divided Supreme Court upheld a Vermont jury “failure to warn” tort-law verdict against drugmaker Wyeth. Wyeth’s drug, the anti-histamine Phenergan, had been approved by the FDA in 1955 and has been commonly used to treat migraines and severe nausea. The FDA had long been aware that injecting the drug into an artery rather than a vein could lead to gangrene, but the agency deemed the benefit worth the risk and trusted medical professionals to heed agency-reviewed warnings when administering the drug intravenously.
In Levine, a physician’s assistant treating professional guitarist Diana Levine had inadvertently injected the drug into the patient’s artery, causing gangrene. Ultimately, Levine had to have her arm amputated below the elbow. Given her gruesome injury, it’s not surprising that a Vermont jury found Wyeth liable. But the warning labels were there; the physician’s assistant had simply missed the four prominent notices of the risk of gangrene from arterial exposure in Phenergan’s labeling, including, in two places, a direct, bold, uppercase warning: “INTRA-ARTERIAL INJECTION CAN RESULT IN GANGRENE OF THE AFFECTED EXTREMITY.” The company had worked with the FDA on the warning from 1973 to 1997, but the jury presumably thought that some other label might have been better or more prominent. And a majority of the Supreme Court agreed, determining that the federal regulatory review did not “preempt” the state tort law.
Defenders of this regulatory regime say that’s a feature, not a bug: state tort law fills in the gaps that the FDA can’t fully police. But safety isn’t unidirectional: drugs that vastly improve and save lives can have severe and even deadly side effects. There is a very real risk of over-warning, which discourages doctors and patients from using medications that improve health or save lives. And too many superfluous warnings can distract medical professionals from the ones that really matter—as in the Levine case.
FDA regulators try to measure these tradeoffs and decide whether the benefits of drugs like Fosamax and Phenergan are worth the risk—updating their assessments as new evidence comes in. The agency is of course prone to error, but allowing any jury to second-guess this regulatory judgment is a dangerous one-way rachet.
During oral argument in Albrecht, Justice Breyer questioned whether “50 different states . . . giving different signals to the manufacturers” could possibly make sense “from a health point of view.” It’s really only 49 states and the District of Columbia (Michigan precludes failure-to-warn lawsuits when a company complies with federal regulatory requirements)—but Breyer’s point still stands. Any jury in any state (except Michigan) might hit a manufacturer with a large damage award even when the company did exactly what federal regulators intended it to do—and indeed, even if scores of other juries across multiple states refused to hold the manufacturer liable for the same harm. However much we may wish to compensate people injured by drug side effects, permitting hefty jury awards against companies complying with regulatory protocols is in effect levying a heavy tax on medical innovation, which drives up health-care costs and lowers long-term human wellness.
Merck might get luckier than Wyeth did. Merck’s argument is that it was impossible to add the Fosamax warning to its label—it had tried, and the FDA had said no. The federal government supports Merck’s argument, but the plaintiffs suggest that the FDA might have accepted different wording, and the agency’s original rejection letter is far from clear on this point.
But even if Merck wins, most drug companies will still be vulnerable to state tort lawsuits, though they’ve followed the complex rules of the federal regulatory scheme. It’s possible to fix this problem. I have proposed that Congress put an end to this dual regulatory regime by broadly preempting most state tort lawsuits involving drugs and medical devices.
To deal with the consequences of serious and unforeseen drug side effects, Congress could model a compensation system on the already existing federal Vaccine Injury Compensation Program (VICP). Created in the 1980s when an avalanche of lawsuits threatened to drive child vaccines vital to public health from the market, the VICP has proven to offer timely and fair compensation to individuals harmed by rare vaccine side effects, while incurring much lower transaction costs than the tort system. We would have to modify the VICP to apply it to the broad run of pharmaceutical cases, and it wouldn’t be a perfect system. But there’s no perfect regulatory system; and the one we have costs far too many lives and too much money. There has to be a better way.
James R. Copland is a senior fellow with and director of legal policy for the Manhattan Institute for Policy Research.
Interested in real economic insights? Want to stay ahead of the competition? Each weekday morning, e21 delivers a short email that includes e21 exclusive commentaries and the latest market news and updates from Washington. Sign up for the e21 Morning eBrief.
Photo by Mark Wilson / Getty Images