In the Wake of Wyeth v. Levine: Making the Case for FDA Preemption and Administrative Compensation
Publication Date: March 2009
Publisher(s): Manhattan Institute for Policy Research. Project FDA.
Keywords: FDA-approved drugs and medical devices; administrative compensation; State tort litigation; FDA preemption
Coverage: United States
Pharmaceuticals are subject to what are, in effect, two overlapping and often conflicting regimes for overseeing drug safety: mandatory regulation by the U.S. Food and Drug Administration and lawsuits seeking billions of dollars in damages in the common-law state tort system. This dual system is both irrational and destructive, particularly insofar as it discourages innovation, raises drug prices, and denies patients access to many medicines that are reasonably safe and effective.
To put an end to this dual regulatory regime, we recommend that Congress broadly preempt state tort lawsuits seeking to hold drugs and medical devices responsible for claimants' illnesses and injuries. Malpractice actions in state courts now available to plaintiffs would be unaffected by our proposal.
To deal with the consequences of serious and unforeseen drug side effects, we instead urge Congress to create a system modeled on the Vaccine Injury Compensation Program. Congress created VICP in 1986 in response to a wave of "junk science" litigation in the 1970s and 1980s that nearly destroyed the vaccine industry. VICP, while not without its own shortcomings, has since proven itself to be a scientifically credible mechanism for offering timely and fair compensation to the victims of rare vaccine side effects, while incurring much lower transaction costs than the tort system.
Initially the program should be funded by taxes levied on manufacturers on the basis of their market share. As the relative safety of their respective products emerged, manufacturers would be assessed taxes on the basis of their share of payments to successful claimants, which would be determined by the safety performance of the drugs they make.
Our argument rests on the conviction that the FDA's regulatory regime, while imperfect in many respects, is nonetheless better suited to weighing the benefits and risks of new medicines than state courts, which may consider only liability for harm to the particular plaintiffs before them. Far from ignoring the potential hazards of drugs under review, the FDA faces strong incentives to exercise excessive caution. The result is a system that promotes voluminous warnings on the labels of approved drugs and delays in approving or denying outright reasonably safe and effective medical innovations.
State tort litigation only exacerbates the effects of the FDA's biases and raises consumer prices. Moreover, many lawsuits allege that a drug manufacturer should have placed stronger warnings or even contraindications on a label, ignoring the fact that the FDA had explicitly considered the risk and then mitigated it by specifying the warning language to appear on the product label.