Medical Device Link.

Originally Published MX March/April 2003

GOVERNMENTAL & LEGAL AFFAIRS

Several areas of personal-injury litigation may foreshadow future trouble for unwary medical product manufacturers.

Kevin M. Quinley

The early months of each new year bring lists heralding what's in and what's out. Spinning is out, but hot yoga is in. Hemlines may be high or may be coming down. Some restaurants are trendy while others are passé.

There are even hot spots and trends in the area of medical product liability, more significant for medical device company executives than fashions in dining. Being able to discern the patterns as they start to materialize allows medtech leaders to avoid the tort liability minefields. Savvy corporate managers can anticipate legal dangers latent in certain mergers and acquisitions and in new-product development, and can devise risk management strategies with full awareness of potential corporate liabilities.

Trend forecasting is neither scientific nor infallible. Nevertheless, this article prognosticates some future trends in medical device claims and litigation from recent history. Its observations involve vulnerable technologies, avaricious lawyers, and susceptible juries. Discussed in some depth are matters of greatest immediate concern, while a few sleeper areas that could become troublesome later are also noted (see sidebar).

Gene Therapy

The development of gene therapies to treat disease is burgeoning. However, advances in this uncharted field could spawn product liability claims and lawsuits.

Since the field is new, assessing possible health risks and adverse outcomes is difficult. A recent adverse case involved an experimental gene therapy that initially seemed to cure infants born with life-threatening autoimmune disease. The therapy instead apparently induced a leukemia-like syndrome in a French patient. In response, health officials suspended such treatments for autoimmune disease in France and the United States. FDA is now considering more closely regulating a wider array of gene therapy studies.

Further, a 2002 Institute of Medicine study cited concerns about human medical experimentation.¹ The report recommended heightening federal regulation of research involving human subjects. Suggested possible actions included:

• Instituting federal oversight of privately funded studies.
• Upgrading the nation's ethics review boards that evaluate proposed experiments.
• Financially compensating people injured in experiments.
• Creating a federal agency to assess issues relating to human experimentation.

These developments do not mean that gene therapy initiatives should be aborted or that they are inherently dangerous. They do, however, portend future product liability litigation.

It is easy to envision plaintiff attorneys bringing suit against companies involved in gene therapy, alleging that their products were defective or that patients consenting to be treated with them were inadequately informed. "The company used my client as a human guinea pig"—such a dramatic line may play well to juries. Arguments in gene therapy lawsuits would turn on technical issues that tax the ability of the smartest layman to understand. Specifically, jurors may be intellectually unequipped to comprehend the daunting spectrum of science that a successful defense might require in gene therapy cases. Faced with such complexity, they could simply infer, from the existence of the lawsuit, that someone erred. And if that is so, then that someone must pay. The culprit may be the gene therapy company, perceived impersonally as located far away and likely to be backstopped by an insurance policy.

Nutritional Supplements

Legal claims targeting nutritional supplements can reasonably be expected to increase. Almost 60% of Americans report taking some kind of dietary supplement, including vitamins and herbs. These are not regulated in the same way as most medical devices. Companies generally do not need FDA approval before marketing dietary supplements. Nevertheless, the example of litigation over the health effects of nutritional supplements can be instructive for regulated medtech manufacturers.

For instance, consider ephedra, an herb found in many supplements and muscle enhancement products. FDA has reported nearly 1500 incidents of adverse health effects, including some 80 deaths, among consumers taking ephedra, and has launched an investigation.² As a dietary supplement, ephedra has been linked to stroke, heart attacks, hypertension and high blood pressure, and other serious health-related side effects.³

The Insurance Information Institute's chief economist reports that insurance premiums for ephedra manufacturers have increased, along with adverse-incident reports and lawsuits.⁴ In a recently filed court case, a woman taking an ephedra-based supplement allegedly had seizures caused by using the product and suffered brain damage. Herbal supplements received further negative publicity from a recent federal investigation of an ephedra seller, which sent the $4.2-billion market reeling.⁵

In December 2002, federal government officials announced new measures intended to encourage companies to accurately represent their products' health benefits, and to deter bogus assertions. FDA will require companies to prove that the weight of scientific evidence supports statements made on product labeling, and authorities will crack down on companies making false or misleading claims about their dietary supplements.⁶ Recently, federal marshals seized $100,000 worth of a dietary supplement marketed by a California company that claimed without substantiation that it was a so-called natural treatment for viral infections, including those caused by herpes virus.

Personal injury law firms actively seek clients willing to sue nutritional supplement makers. Some have created Web sites to market this specialized branch of litigation. How-to articles pertaining to such lawsuits appear in Trial magazine, the monthly publication for plaintiff personal injury attorneys. And information-disseminating firms run periodic legal seminars on ephedra and dietary-supplement litigation.⁷

The size of the "patient" population (that is, the number of supplement users), the relative lack of FDA regulation of the industry, and the potential for deleterious side effects constitute a recipe for future class action or mass tort lawsuits involving nutritional supplements. If or when these arise, the expense and logistical difficulties of waging legal warfare on multiple fronts could become so great for the manufacturers that the merits of the case might become moot. This is a potential hot spot for medical product liability litigation.

Home-Healthcare Kits

A rise in the number of litigations involving home-healthcare kits can be expected as the industry places more of them in consumers' hands. Many kits are marketed directly to consumers through the Internet and promotional Web sites. Often, purchasers buy these products without benefit of a physician to explain their limitations, possible contraindications, or the need for follow-up medical care.

Product liability claims in this area could arise from false positives or false negatives. Home-care kits may be highly accurate, but they can still be fallible in individual circumstances. In the case of false positives, plaintiffs could allege that they experienced mental anguish, distress, and suffering from believing, on the basis of a faulty test, that they had some disease or ailment. False negatives could allege that they missed an opportunity to seek or receive appropriate medical intervention because of the false sense of security imparted by the erroneous test result.

Tissue Banks

Recent safety concerns regarding tissue banks and their oversight augur possible product liability claims. In mid-2002, CryoLife Inc. (Kennesaw, GA) came under FDA scrutiny and had to recall tendons, cartilage, and ligaments. Regulators were doubtful that the company could guarantee that its banked tissues were contaminant free. A 23-year-old man had died in 2001 from a bacterial infection that developed after he received implanted tissue processed by CryoLife. Investigators from the Centers for Disease Control and Prevention subsequently identified some 60 instances of patients developing postprocedure infections after being implanted with CryoLife-supplied tissue.

This episode, which received national publicity, shone a harsh spotlight on an innovative niche market in the life sciences industry. Certain law firms are sounding the call for plaintiffs. Some, such as The Keenan Law Firm (Atlanta), have established Web sites devoted to such litigation.⁸

Other tissue-banking companies have also been subjects of regulatory actions. Osteotech Inc. (Eatontown, NJ), for example, recalled certain tissues in 2002 after finding higher than normal levels of sterility failure in its manufacturing processes. Incidents like this may serve as red flags to plaintiff lawyers.

FDA is developing new rules to govern this small area of the medical device industry that was perceived to be lightly regulated heretofore. Postimplantation complications and infections could spawn product liability lawsuits alleging defects in the products or in warnings of the dangers inherent in their use.

Jury Vengeance

A dramatic shift in jury attitudes toward corporate defendants can be expected in this post-Enron era. Juries now are more likely to believe that such defendants, since they have been accused, must have done something wrong.

Distrust of corporations in general is growing against the backdrop of the activities engaged in by Enron, WorldCom, and Tyco. Time's 2002 Persons of the Year are three whistleblowers who stood up to institutional wrongdoing. Their selection by the mass-circulation magazine reflects the readiness of society to see corporate malefactors punished. Add to this the widespread resentment over lavish CEO pay and other perceived corporate excess. The ingredients are in place for Robin Hood ethics, a counterreaction in which juries rob from the rich and give to the . . . more deserving.

Punitive Damages: How Juries Decide, a new book by a group of respected economists and legal scholars, attests that juries are quick to impose harsh penalties.⁹ Using mock trials, the authors found that jurors systematically ignore judges' instructions and are swayed by emotion. They are easily convinced that wrongdoing occurred by the damage amounts requested by plaintiffs, and then mete out excessive punishments to companies for failing to deal with low-probability risks that the jurors themselves might not have addressed had they been running the companies.

Product liability claims involving any of the following features will be volatile in litigation and risky to put before juries.

• Vengeful ex-employees.
• Smoking-gun documents involving admission of quality problems.
• FDA recalls or violations.
• Criminal charges or guilty pleas.

While each of these problems is theoretically manageable through aggressive legal advocacy, jury trials are tried not in theory but in reality—a courtroom reality in which skilled lawyers mold juror perceptions. There is boardroom reality and then there is courtroom reality.

Medical device companies that are facing claims while carrying any of the baggage listed above should pursue a course of damage control and claim resolution rather than rolling the dice in front of a jury. In any case, a company that is insured for product liability can expect its insurer to assert strong control over litigation strategy, given the stark risks involved in defending slippery turf in the post-Enron era. Right or wrong, fair or unfair, the legacy of the publicized recent corporate episodes of chicanery will be manifest in jury awards, out-of-court settlements, and the cost of medical product liability risk.

Tort Reform and Its Discontents

Tort reform of the type usually enacted can be problematic for medical device manufacturers. Limits placed on jury recoveries against doctors do help physicians, but they do nothing to aid device makers. In fact—illustrating the law of unintended consequences—they may hurt manufacturers.

Caps on recoveries against doctors—that is, noneconomic damages for pain and suffering—deflect attention to medical device companies as lucrative targets. Doctors, through their often-successful lobbies, have persuaded some state legislatures to pass laws limiting jury awards for noneconomic damages. California's Medical Injury Compensation Reform Act (MICRA) is illustrative. Hailed as an example of medical liability tort reform, the law limits recoveries for certain noneconomic damages. (Damages that are not strictly economic—lost wages, medical costs—are noneconomic—the endurance of pain or the loss of a loved one.) MICRA restricts awards for pain and suffering to $250,000 in medical malpractice cases. Device manufacturers, though, enjoy no such limitation on their product liability.

A plaintiff attorney weighing a case is thus much more inclined to see the medical device company as the target defendant now. Where tort reform has been effected, the money is not in suing doctors or hospitals but in suing medical device companies, against which jury awards are unlimited. What might have been a blended medical malpractice and product liability suit takes on more of the appearance of a product liability case. Often, when suits over adverse medical outcomes are brought against doctors and medical device companies, the physician defendant settles out—or even provides plaintiffs with damaging testimony of an alleged device defect—leaving the device company isolated as the sole defendant.

Some might take heart from Republican Party gains in the 2002 midterm elections since Republicans tend to favor tort reform more than Democrats. However, indications are that Republicans in Congress considering national tort reform will endorse only piecemeal measures, such as a $250,000 cap on pain-and-suffering damages in medical malpractice claims, rather than force an unwinnable fight over broad-scale tort reform.¹⁰ Such modest steps will attract more Democratic votes. If national tort reform is enacted in this piecemeal manner, medical device companies might find themselves in a harsher product liability tort environment.

The sad story in a nutshell: Protection for doctors against large jury awards makes medical device companies more tempting targets for liability lawsuits. Physicians show little interest in extending reforms to cover the device manufacturer. Piecemeal approaches to healthcare tort reform may leave medical product companies holding the bag, that is, shouldering a disproportionate share of costs for adverse medical outcomes.

Conclusion

Medical device executives can and should periodically peek over the horizon and then assess the liability potential of their various products and technologies, and even of the geographic areas in which their devices are marketed (see sidebar, page 48). They can steer their companies through the rocks and shoals of liability peril more skillfully if they know where the dangers lie. No one can be certain where the next big hot spot in medical product liability will arise. However, personal injury attorneys keep their antennas tuned to detect what might be the next litigation mother lode. Observation of their behavior can yield hints of coming liability claims.

The technologies and products cited in this article should not be regarded as defective owing to their candidacy for future losses. Allegation does not equal proof: prediction is not tantamount to indictment. But even groundless product liability lawsuits can consume many thousands if not millions of dollars in defense costs and tied-up corporate management resources. In an age when juries award money in recompense for hot coffee spills and plaintiffs sue fast-food restaurants for selling hamburgers that make them fat, there can be no doubt that medical device executives and their companies are operating in a perilous legal environment.

Prescience does only so much good, however. Action must follow. By means of a combination of sound risk management techniques and financial transfer through insurance, medical device executives can successfully sidestep product liability risks, or at least cushion their impact.

References

1. DD Federman, KE Hanna, and LL Rodriguez, ed., Responsible Research: A Systems Approach to Protecting Research Participants (Washington, DC: Institute of Medicine of the National Academies, 2002).

2. "Ephedra Makers Aim for Survival in a Hostile Climate," Washington Post, January 14, 2003, sec. F, p. 6.

3. "FDA Cracks Down on Ephedra Product," [on-line] (Basel, Switzerland: Swisstox.net, October 9, 2002 [cited 11 February 2003]); available from Internet: http://www.swisstox.net/en/news_e.php?st_lang_key=en&st_news_id=962.

4. Robert Hartwig, quoted in D Evans, "Herbalife, Other Ephedra Marketers Face Soaring Insurance Rates," in Quackwatch [bulletin board on-line] (Allentown, PA: Quackwatch, 2002 [cited 13 January 2003]); available from Internet: http://www.quackwatch.org/04ConsumerEducation/News/ephedrainsurance.html.

5. "A Squeeze on Supplements," in South Florida Business Journal, November 8, 2002.

6. "FDA Announces Initiative to Provide Better Health Information for Consumers," P02-54, in FDA News [on-line] (Rockville, MD: FDA, 2002 [cited 12 February 2003]); available from Internet: http://www.fda.gov/bbs/topics/NEWS/2002/NEW00859.html.

7. Mealey Publications, schedule of conferences, at http://www.mealeys.com/sem_agen.html.

8. See http://www.cryolifelitigation.com.

9. CR Sunstein, ed., Punitive Damages: How Juries Decide (Chicago: University of Chicago Press, 2002).

10. "GOP Plans New Caps on Tort Awards," Washington Post, December 29, 2002, sec. A, p. 5.

Kevin M. Quinley is senior vice president of Medmarc Insurance Group (Chantilly, VA).

Copyright ©2003 MX