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OCR for page 118
8
Products Liability and
Contraceptive Development
This chapter examines recent trends in contraceptive products liability litigation
and insurance and evaluates their effect on the pace of development of new
contraceptives in the United States. The chapter begins with an overview of the
legal environment in which contraceptive products are developed. This discussion
is followed by a description of the trends in litigation involving contraceptives, a
discussion of current products liability rules, and a summary of selected
contraceptive cases. The chapter continues with a description of the products
liability insurance environment and, finally, presents the committee's conclusions
and recommendations.
THE LEGAL TERRAIN
When a pharmaceutical company or nonprofit organization contemplates
development of a new contraceptive, it does not look at products liability rules
and cases as isolated phenomena, but at the legal landscape they create. From the
perspective of those developing or thinking about developing or marketing a new
contraceptive, that landscape can appear intimidating.
First, since all the pharmaceutical firms with the resources to make substantial
investments in contraceptive development are national firms that market products
on a national basis, they face the prospect of different rules with regard to
products liability in each of the 50 states. In practice, there is a good deal of
uniformity among the jurisdictions because of the adoption by courts of the
Restatement (Secorut) of Torts (American Law Institute and National Conference
of Commissioners on Uniform State Laws, 1965), a text containing a general
118
OCR for page 119
PRODUCTS VIABLY AND CO=~CEPT~E DEVE~PME ~1 19
statement and analysis of products liability law, and the Uniform Commercial
Code (1976), a model set of statutes. Nonetheless, companies operating in a
national market continue to face the costly uncertainty that arises because 50
different jurisdictions have the power to make and change products liability rules.
Second, a manufacturer involved in a products liability action will almost
always have its case decided by a judge and jury who, although scientifically
untrained, must evaluate highly technical and complex scientific issues, often on
the basis of only the conflicting testimony of experts retained by the parties.
Moreover, judges and juries are much more inclined to be sympathetic to injured
plaintiffs, especially mothers and children, than they are to corporate defendants.
Third, if a manufacturer becomes involved in a products liability action, it is not
shielded from liability by Food and Drug Administration (FDA) approval of the
product. This is so despite the rigorous testing required by the FDA before a new
product is marketed, the practice of the FDA to give great weight to safety
considerations (see Chapter 7), and the warnings and instructions that the FDA
requires be given.
Fourth, both the number of suits and the size of the awards are widely perceived
to have increased dramatically in recent years, and future trends are unpredictable.
Developers and manufacturers of contraceptives feel that they are substantially
more likely to be sued today than in the past and, if they lose, to have to pay (in
real terms) more than they would have had to pay in the past. Litigation expenses
can be high and are incurred even when claims are meritless. Commercial
liability insurance has sometimes proven impossible for some developers and
manufacturers to obtain, and very expensive for those who have been able to
secure it. The adverse media attention often associated with products liability
claims and contraceptive-related injuries may independently discourage
manufacturers from research, development, and the marketing of contraceptive
products. Apart from the effect of such publicity in stimulating legal claims, the
manufacturer may suffer a loss of public confidence in its other unrelated products,
even if the manufacturer is not found liable.
SOURCES OF DATA
In an attempt to assess the magnitude and frequency of contraceptive products
liability claims in the United States over the past two decades, the committee
Recent legislation in New Jersey, Ohio, Oregon, and Texas allows a manufacturer of an FDA-
approved product to assert an "FDA defense" in response to a claim for punitive damages~hat is,
generally the manufacturer cannot be held liable for punitive damages if the product has been
manufactured and labeled in accordance with FDA standards unless the manufacturer withheld from
or misrepresented to the FDA material and relevant information. Ohio Rev. Code Ann. §2307.80(C)
(Page Supp. 1987); 1987 Or. Laws ch. 774 §5, Prod. Liab. Rep. (CCH) pare. 93,835; Tex. Civ. Pract.
and Rem. Code Ann. §81.001 et seq. (Supp. 1989); 1987 NJ. Laws, ch. 197.
OCR for page 120
120 DEVELOPING NEW CO=RACE~IVES
examined a number of data sources. Legal counsel and products liability attorneys
were contacted at companies currently marketing contraceptive products in the
United States: Ortho Pharmaceutical Corporation; G.D. Searle & Co.; Wyeth
Laboratories; Syntex Laboratories, Inc.; Parke-Davis & Co.; Mead Johnson
Laboratories; ALZA Corporation, Berlex Laboratories, Inc.; Schmid Laboratories,
Inc.; Whitehall Laboratories, Inc.; and GynoPharma, Inc. Representatives of
A.H. Robins Company were contacted regarding liability for the Dalkon Shield.
Company annual reports and quarterly reports were also reviewed for information
on liability claims and recent settlements for contraceptive products. Some drug
companies provided fairly detailed information on the number of cases and the
magnitude of the awards, while others were reluctant to provide any information.
In order to identify court cases involving products liability of contraceptives,
several computer searches were performed using Mead Data Central, Inc.'s LEXIS
Service, a computer-assisted legal research service. The LEXIS computer data
base consists of decisions of federal courts and most state courts. From the
searches it was possible to identify contraceptive products liability cases in which
judicial opinions were issued. The number of reported cases, however, is only a
subset of the total number of such cases because LEXIS does not identify pending
cases or cases decided or settled without a judicial opinion. LEXIS also does not
generally produce references to state trial-level cases.
Other traditional legal research sources, such as state and federal topical
digests, law review articles, and articles containing case annotations, were also
consulted to obtain and confirm data on products liability cases involving
contraceptive products. Pharmaceutical Litigation Reporter, OBlGYN Litigation
Reporter, and Jury Verdict Information Reports were also reviewed. A number of
independent consumer organizations, lawyers' associations, and victims' network
organizations were contacted for additional information on contraceptive liability
cases.
Clearly, the committee's search of available data sources did not yield all the
products liability actions initiated against contraceptive manufacturers. It also did
not identify many of the claims that were settled without initiation of litigation.
Because the vast majority of cases are settled out of court for dollar amounts that
are unreported and for reasons that are not publicly known, the committee was
unable to obtain access to much of the potentially relevant data. In addition, cases
decided at the state trial level, whether resulting in judgments for manufacturers
or for injured plaintiffs, are usually unpublished; such cases may be published
only if and when they are appealed.
Nonetheless, the committee believes that the information assembled on the
number of reported cases is broadly indicative of the much larger number of such
cases settled without even a court filing, filed but settled, or tried but not appealed.
The information gathered is important because it is available to contraceptive
manufacturers and may affect their behavior (e.g., changes in labeling) and is also
used in settlement decision making to assess the likelihood of success in a
particular case.
OCR for page 121
PRODUCTS LIABlL~Y AND CONTRACEPTIVE DEVELOPMENT ~ 2
TRENDS IN LITIGATION INVOLVING CONTRACEPTIVES
Intrauterine devices, om1 contraceptives, spermicides, diaphragms, and condoms
have all been the subjects of products liability litigation. The IUD litigation has
been characterized by extremes: massive liability in the case of one product, the
Dalkon Shield, but, with one significant exception of a case still under appeal,
limited recovery by plaintiffs in most cases involving other IUDs. The litigation
concerning oral contraceptives is characterized by its long-running nature, the
adjustments manufacturers have made in response to the lawsuits, and the difficult
issues regarding adequate warnings. The one reported case involving a spermicide
surprised the legal and scientific communities with a decision that was contrary to
currently accepted theories of causation.
Intrauterine Devices
Figure 8.1 shows the number of products liability cases by year that were filed
against manufacturers of IUDs and oral contraceptives and reported by the sources
surveyed. Prior to 1970 there were no reported products liability cases involving
manufacturers of IUDs. The number of reported IUD cases reached its peak
during the 1984-1986 period, the same period in which several IUDs were
withdrawn from the market and A.H. Robins Company filed for bankruptcy.
Prior to 1986, Dalkon Shield cases predominated, representing well over half the
30
28
26
24
LL 22
CD
20
18
A:
o 16
AL
~ 14
a:
11 12
o
10
m
8
z 6
4
2
O
Pill
Non-Dalkon Shield IUD
_ · Dalkon Shield IUD
,~
Am\
Hi
it's %~
,,
4~~
77 78 79 80 81 82 83 84 85 86 87 88
YEAR
71 72 73 74 75 76
FIGURE 8.1 Yearly reported oral contraceptive and IUD cases.
OCR for page 122
122 DEVELOPING NEW CO=RACE~IVES
IUD cases reported by the data sources surveyed. Although the vast majority of
cases reported in the sources we surveyed have been settled out of court, a number
of cases have gone to trial and punitive damages have been awarded to plaintiffs.
At least six firms have distributed IUDs since the introduction of the first IUD
in the United States in 1964. In 1975, A.H. Robins Company stopped selling its
controversial Dalkon Shield, and in 1985 Robins filed for bankruptcy after more
than 4,000 lawsuits concerning the IUD had been filed against the company.
Schmid Laboratories, Inc., withdrew the Saf-T-Coil in 1983. In 1985, Ortho
Pharmaceutical Corporation discontinued marketing the Lippes Loop, and in
1986 G.D. Searle & Co. discontinued marketing the Copper-7 and the Tatum-T.
With the exception of the Dalkon Shield, all those devices were withdrawn even
though the FDA did not raise questions about their safety and very few successful
lawsuits had been brought against the manufacturers. Only two firms are currently
selling IUDs in the United States. ALMA Corporation has been marketing the
Progestasert IUD since 1976, and GynoPharma, Inc., has been marketing the
ParaGard IUD (Copper T380A) since 1988. Both {UDs are accompanied by
detailed informed consent guidelines.
Oral Contraceptives
Figure 8.1 also shows the number of products liability cases by year that were
filed against manufacturers of oral contraceptives and were reported in the sources
surveyed. The patterns in reported oral contraceptive cases appear to correspond
closely to the patterns in reported IUD cases, with the number of cases peaking
during the 1984-1986 period. Assuming the number of reported oral contraceptive
cases fairly represents the larger number of such cases filed that are settled or tried
but not appealed, they present a picture of manufacturers continuing to market
products despite numerous lawsuits.
The litigation against manufacturers of oral contraceptives has persisted over
the past 17 years. In sharp contrast to the situation with respect to II3Ds, however,
oral contraceptives continue to be marketed by seven companies, although over
the past two decades manufacturers have complied with an FDA request to
remove some standard and high-dose oral contraceptive formulations from the
market. Despite the litigation costs, these products continue to be profitable
because the market is relatively large and the monthly cost of the pills is high.
Other Contraceptives
Our review of litigation sources identified one case brought against a spermicide
manufacturer (1984), one case brought against a diaphragm manufacturer (1988),
one case brought against a condom manufacturer (1981), and no cases reported
concerning other contraceptive drugs or devices. The plaintiff in the spermicide
case was awarded over $5 million in damages. The plaintiff in the diaphragm
OCR for page 123
PRODUCTS [lABIL~Y AND CONTRACEPTIVE DEVELOPMENT 123
case received damages of $1.5 million. The condom case, in which the plaintiff
sought damages for the "wrongful birth" of twins allegedly caused by the product's
failure, was eventually dismissed and the plaintiffs received no damages.
To assist in understanding the impact of such litigation on contraceptive
development, we provide a brief introduction to products liability law and
substantive summaries of selected cases involving IUDs, oral contraceptives, and
other contraceptives.
PRODUCTS LIABILITY RULES
The legal rules regarding products liability that have been applied to the
manufacturers of contraceptives are the same ones applied to all other
manufacturers, whether of lawnmowers, bicycles, or electric drills. These rules
generally have their source in common law, not statutory law; that is, they are
rules made for the most part by judges rather than laws enacted by Congress or
state legislatures. The objectives of products liability rules are to compensate
people injured by unsafe products, to deter the marketing of dangerous or defective
products, and to resolve fairly disputes between persons injured by a product and
the manufacturer of that product (Smith, 1987~.
If, in creating or applying the common law liability rules, courts fail to
properly balance the interests of the injured person and the manufacturer, or fail to
consider adequately the impact of their rulings on the interests of persons beyond
the immediate parties to the litigation, then it is the responsibility of Congress or
the state legislatures to correct the balance or account for the wider interests by
enacting appropriate laws. Any nonfederal corrective legislation has to be enacted
state-by-state, since products liability rules-as with tort law generally-are the
subject of the laws of each of the 50 states and the District of Columbia. A federal
products liability law, which would preempt state laws, has been proposed (U.S.
Congress, 1987), but political agreement on the content of such a measure-and
indeed on the wisdom of such a law whatever its form and substance has been
lacking. In the absence of federally mandated uniformity, state legislatures may
choose to adopt the Uniform Product Liability Act2 (U.S. Department of Commerce,
1979; see also Schwartz, 1980), which was drafted to serve as a set of model
standards for state products liability law.
A manufacturer of a product may be held liable to an injured user of the
product under any one of five legal theories: express warranty, implied warranty,
fraudulent misrepresentation, negligence, and strict liability. In most lawsuits,
2Section 106 of the Uniform Product Liability Act provides that a product seller cannot be found
liable on the basis of defective design or failure to warn if the product conformed to an applicable
administrative or legislative regulatory standard. This provision does not apply, however, if the
claimant can prove by a preponderance of the evidence that a reasonably prudent product seller could
and would have taken additional precautions.
OCR for page 124
124 DEVELOPING NEW CONTRACEPTIVES
plaintiffs endeavor to base their claims on two or more of these theories. The
elements of the five theories of liability are summarized below.
Warranty
A warranty claim may be based on an express or an implied warranty theory, or
both. An express warranty is a written or oral affirmation of fact or promise made
by the seller of the product to the buyer about the condition, efficacy, or safety of
the product. An express warranty claim arises when a plaintiff-buyer asserts that
the purchased product does not conform to the defendant-seller's representations.
Thus, the arguments in many express warranty cases concern (1) whether the
seller actually made a statement of fact to the buyer about the product if the
seller merely expressed an opinion, an express warranty claim is not supportable;
(2) the meaning or interpretation of any such statement; (3) whether such statement
was true or false; and (4) whether the product caused the plaintiffts harm.
An implied warranty is a representation by the seller that is implied in a
contract for the sale of the product that the product is "merchantable," that is, `'fit
for the ordinary purposes for which such goods are used." To recover under the
theory of implied warranty, the seller must be a merchant within the statutory
definition, and in most states manufacturers have been held to be so (see Gillespie
v. Thomasville Coca-Cola Bottling Co., 17 N.C. App. 545, 195 S.E.2d 45, cert.
denied, 283 N.C. 393, 196 S.E.2d 275 [19731~. Because all sales are contracts,
this theory presents a broad avenue for recovery against sellers of defective
goods. Although recovery under a warranty theory against the manufacturer of a
defective product in many states has been available in common law for roughly
100 years (Birnbaum, 1980), recovery in most states today is governed by the
relevant provisions of the Uniform Commercial Code, as adopted by each state.
Fraudulent Misrepresentation
Fraudulent misrepresentation is akin to the warranty theory of liability but has
an additional requirement that the plaintiff prove fraud and deceit. In a products
liability suit based on fraudulent misrepresentation, the plaintiff must prove the
following elements: (1) the defendant made a false representation about the
product; (2) the defendant knew the representation was false; (3) the defendant
intended to induce the plaintiff to act or refrain from acting on the basis of the
representation; (4) the plaintiff justifiably relied on the representation; and (5) the
plaintiff was injured thereby [American Law of Products Liability 3d (1987), Vol.
2, §25: 1 (Lawyers Co-op. Pub. Co., Rochester, N.Y.~. Some courts have held
that the plaintiff must prove fraud and deceit by "clear and convincing" evidence,
rather than by the usual standard of "more likely than not." For this reason, and
because of the difficulty of proving that the defendant knowingly misrepresented
a fact about the product, products liability lawsuits are not usually based on
fraudulent misrepresentation (Id. §25.2~.
OCR for page 125
PRODUCTS LIABl~Y^DCO=RACEPT~EDEVELOPME ~125
Negligence
In products liability suits based on negligence theory, plaintiffs must show
that the defendant-manufacturer owed the plaintiff a `'duty of care"; the defendant
breached this duty of care (acted "unreasonably," was "negligently; the plaintiff
was injured; and the defendants lack of care was the proximate cause of the
injury (Harper et al., 1986~. As these rules have been developed in products
liability cases, it can be said that today a manufacturer owes a duty of care to
avoid an unreasonable risk of harm to the user of the product (Harper et al., 1986~.
A manufacturer can breach this duty of care in three broad respects: (1) by
adopting a design for the product that causes it to be unreasonably dangerous; (2)
by making mistakes or omissions in the manufacturing process that result in a
properly designed product becoming unreasonably dangerous; (3) or by failing to
provide adequate warnings about the product's hazards and instructions concerning
its use (Ha~per et al., 1986~. In most jurisdictions the manufacturer must warn
only the medical profession, not the patient~he "learned intermediary" rule-
and the adequacy of the warning is a matter frequently in contention (Ha~per et al.,
1986~.
Strict Liability in Tort
The use of strict liability theory in products liability cases is a relatively recent
development, dating from a 1963 decision of the California Supreme Court
(Greenman v. Yuba Power Products, Inc., 59 Cal. 2d 57, 377 P.2d 897 [19631)
and the publication in 1965 of section 402A of the Restatement (Second) of Torts
(American Law Institute and National Conference of Commissioners on Uniform
State Laws, 1965~. Under a strict liability theory an injured user of a product may
recover from the manufacturer without showing that the manufacturer was negligent
(breached a duty of care). A strict liability claim may be based on three independent
theories: design defect, which includes defective testing; manufacturing defect;
and failure to warn. To recover under any of these theories, the plaintiff must
show something more than that he or she used the product and was injured by it-
but both courts and commentators show a remarkably high degree of uncertainty
over the meaning and scope of the doctrine (see Harper et al., 1986; Keeton, 1984;
Owen, 1980; Schwartz, 1979~.
Section 402A of the Restatement (Second) of Torts has had a profound impact
on the development of strict liability in the courts. Although intended as a
summary statement of common law rules and in no way binding on courts, the
Restatement has been widely adopted by many jurisdictions. Section 402A
imposes liability on a manufacturer if it sells a product "in a defective condition
unreasonably dangerous to the user or consumer . . . for physical harm thereby
caused to the ultimate user or consumer...." That the manufacturer exercised
"all possible care" in designing and manufacturing the product does not absolve it
from liability.
OCR for page 126
126 DEVELOPING NEW CO=RACE~IVES
Two explanatory notes or comments to section 402A, comment j and comment
k, have played important roles in cases involving drugs and medical devices.
Comment j states that the manufacturer may prevent the product from being
considered "unreasonably dangerous" within the meaning of section 402A by
giving appropriate directions or warnings, and (as in negligence cases) a much-
contested issue is the adequacy of the warning. Comment k sets forth a special
risk-benefit policy applicable to certain drugs that are considered unavoidably
unsafe. In particular, provided that the product is properly prepared and marketed
and a proper warning is given, a drug that puts the user at a significant risk of
harm is not to be considered unreasonably dangerous if the consequences of not
using the drug also entail substantial risks; thus, the manufacturer should not be
held responsible. The rationale of comment k, as explained therein, is that the
seller-manufacturer should not be held strictly liable for unfortunate consequences
attending a product's use, "merely because he has undertaken to supply the public
with an apparently useful and desirable product, attended with a known but
apparently reasonable risk." Courts in products liability cases involving drugs
frequently employ comment k, and in such cases the only significant issue is
usually the adequacy of the warning.
CASE STUDIES
Depending on the facts of the case, one or any combination of these five legal
theories can be used by an injured plaintiff as a basis for liability claims against a
contraceptive manufacturer. A review of selected contraceptive cases provides
insight into the dynamic nature of the legal process. Many of the principles of
these cases are reviewed by plaintiffs and defendants to assess the likelihood of
success of potential cases. Often, manufacturers appear to adjust product warnings
in response to case opinions. Frequently these cases show an alertness by
plaintiffs' attorneys to locating and using new scientific studies that may not have
achieved general scientific acceptability to contend for more extensive warnings.
Cases involving IUDs, oral contraceptives, and other contraceptives are discussed
separately, since each product's litigation has exhibited its own distinguishing
characteristics.
The Dalkon Shield Intrauterine Device
The development and subsequent withdrawal from the market of the Dalkon
Shield merits separate discussion for several reasons: it shows the risks associated
with nonregulation of contraceptives because, at the time of its introduction, the
Dalkon Shield was not subject to premarketing approval by FDA; it may have
influenced the calculations of liability insurers in establishing premiums for
OCR for page 127
PRODUCTS [lABl~TY AND CONTRACEPTIVE DEVELOPMENT 127
contraceptive manufacturers generally and manufacturers of IUDs in particular;
and it illustrates the operation of the legal system in addressing the problems
raised by a defective product, particularly the compensation of injured persons
and the imposition of penalties on the manufacturer of a defective product.
The IUD that was to become known as the DaLkon Shield was invented in 1968
by Irwin S. Lerner, who modified an earlier design by Dr. Hugh J. Davis (Palmer
v. A.H. Robins Co., Inc., 684 P.2d 187 [solo. 19841~. Later that year, Davis began
a one-year test of the shield at the family planning clinic he directed. According
to Davis, 640 insertions resulted in 5 pregnancies, the equivalent of a 1.1 percent
rate during the testing period (Davis, 1970~.
In June 1970, A.H. Robins Company purchased all rights to the shield, although
two members of its medical department had questioned the validity of Davis's
study (Palmer at 195~. The first reported that the pregnancy rate had climbed to
5.5 percent after 14 months, and the second stated that the period of the study was
"not long enough . . . to project with confidence to the population as a whole"
(Palmer at 195~.
A.H. Robins Company began national marketing of the shield in January
1971.3 In promotional advertising to both the medical profession and the public,
Robins made the following claims for the shield: "the modern superior I.U.D.";
"lowest pregnancy rate [of] 1.1 %"; and "provides safe, sure, sensible contraception"
(Palmer at 195-196~. In June 1971, a quality-control supervisor at the subsidiary
that assembled the shield reported to management that he had performed an
experiment that demonstrated that the multifilament tailsaing on the shield would
wick fluid its entire length, thereby drawing bacteria from the vagina into the
uterus of a woman wearing it. No changes were made in the product (Palmer at
195-196~. Prom June 1972 to November 1973, Robins received 22 reports of
spontaneous septic abortions in shield users, one of which resulted in death, but
the firm continued to advise physicians, as late as April 1973, to leave the shield
in place in the event of pregnancy (Palmer at 196~.
In May 1974 the Centers for Disease Control reported to the FDA the results of
a survey of physicians regarding IUD-related disease and injury. The survey
found that, among patients who conceived with the IUD in place, the incidence of
complications was 61.6 percent for the Dalkon Shield, 29.6 percent for the Lippes
Loop, and 6.9 percent for the Saf-T-Coil; the majority of these complications
were related to pelvic infection (Kahn and Tyler, 1976~. One month later, Robins
3As discussed in Chapter 7, in 1971 the Federal Food, Drug and Cosmetic Act did not require
approval by FDA before a medical device could be marketed. FDA could take enforcement action
against a device if it could establish that the device was adulterated or misbranded (21 U.S.C. §331 (a)-
(c), 351, 352 [1970]). ~ 1976, Congress enacted the Medical Device Amendments, which require
premarketing approval for such devices as the Dalkon Shield (Pub. L. No. 94-295, codified at 21
U.S.C. §360-360K).
OCR for page 128
|28 DEVELOPING NEW CO=~CE~~ES
proposed to the FDA that it voluntarily suspend sales of the Dalkon Shield, and
the FDA accepted the proposal. In January 1975, Robins recalled all unsold
Dalkon Shields in the United States (A.H. Robins, 1983~.
The first verdict in a Dalkon Shield case was returned in February 1975 against
Robins for $10,000 in compensatory damages and $75,000 in punitive damages
(Couric, 1986~. During 1980, Robins incurred over $4 million in litigation
expenses and settlements related to the Dalkon Shield (A.H. Robins, 1980~. In
September 1980, Robins issued a letter to physicians recommending removal of
all Dalkon Shields that were still being worn.
After paying $250 million to settle approximately 4,400 suits and after juries in
11 cases had awarded $24.8 million in punitive damages against it, Robins
petitioned for protection from creditors under chapter 11 of the Bankruptcy Code
on August 21, 1985 (Bureau of National Affairs, 1987~. Approximately 320,000
claims were filed by April 30, 1986, the deadline set by the bankruptcy court for
filing Dalkon Shield-related claims (Bureau of National Affairs, 1987~. In
December 1987, Judge Robert Merhige, Jr., of the U.S. District Court for the
Eastern District of Virginia, ordered the company to set aside $2.475 billion in its
bankruptcy plan of reorganization to compensate claimants injured by the shield
(A.H. Robins, 1988~.
It is very unlikely that the Dalkon Shield would be approved for distribution
and sale today, and it is certain that it would not be approved on the basis of the
single premarketing test conducted in 1968. The history of the shield illustrates
the operation of the legal rules of products liability, functioning in the absence of
premarketing review by FDA, to achieve the objectives of compensation,
deterrence, and dispute resolution by causing a defective device to be taken off the
market and by providing a mechanism for compensating thousands of women
injured by it.
Other Intrauterine Devices
With the exception of one recent case, there has been very limited recovery by
plaintiffs from manufacturers of IUDs other than the Dalkon Shield. In the cases
summarized below, the manufacturer-defendants prevailed. The fast two cases,
involving the Copper-7 IUD, show judges and juries struggling with the difficult
issue of what caused the plaintiff's injury. The third and fourth cases, involving
the Lippes Loop, show plaintiffs seeking recovery from the manufacturer under
different theories of liability.
In Marder v. GD. Searle & Co. (630 F. Supp. 1087 [D. Md. 19861) aff'd sub
nom. Wheelahan v. GD. Searle and Co., 814 F.2d 655 [4th Cir. 19871), lawsuits
by 17 plaintiffs were consolidated into a single case. The plaintiffs alleged that
they had suffered three kinds of injuries from wearing the manufacturer-defendant's
Copper-7: pelvic inflammatory disease (PID), ectopic pregnancy, and perforation
OCR for page 136
36 DEVE~Pl~G NEW CO=^CE~IVES
Some have contended that the insurance crisis was fabricated by the insurance
industry. In 1988 the attorneys general's offices in 19 states filed antitrust
lawsuits against major insurance companies, charging that they conspired to limit
the availability of commercial general liability insurance (Reske, 1989~. Others,
pointing to the competitive structure of the insurance industry, have argued that
the crisis was caused by the unpredictability of the tort law system and other
factors (e.g., Clarke et al., 1988; Priest, 1987; Winter, 1988~. It will be years
before this issue is resolved; the committee does not take a position in this
controversy.
One often-cited factor in the rising cost of liability insurance over the past
decade has been the rising size of awards and settlements paid to plaintiffs and
litigation expenses (Danzon, 1988~. One measure of trends in total costs of
liability insurance is incurred losses. Losses incurred on general liability policies
rose steadily from about $3 billion in 1975 to $8 billion in 1983 and increased
dramatically to $14 billion in 1985 (U.S. Department of Justice, 19863. Harrington
(1988) has estimated that the rate of growth of insurance losses incurred between
1984 and 1986 was over 40 percent per year.
The cyclical patterns in insurance markets in the early 1980s have been more
extreme than in previous cycles, particularly the swing to a hard market for
commercial general liability insurance in 1984-1985. A major distinguishing
feature during this period has been increased uncertainty in predicting future
liability costs. Two factors are largely responsible: (1) unanticipated trends in
tort law, especially the unpredictable size of awards, including awards for punitive
damages and (2) judicial interpretations of insurance contracts (albeit in cases
other than products liability cases) that have threatened the ability of insurers to
contractually limit their exposure. (For environmental liability, see, for example,
Jackson Township Municipal Utilities Authority v. Hartford Accident and Indemnity
Co., 186 N.J. Super. 156, 451 A.2d 990 [19821; for directors' and officers'
liability, see, for example, Federal Insurance Co. v. Oak Industries, Sec. Law
Rep. [CCH] pare. 92,519 [S.D. Cal. 19861.)
By the nature of the insurance product, the price is set before the costs are
known. The ability to form reliable predictions about future costs is therefore
critical to the willingness of insurers to write a particular coverage and to the price
at which they will write it. The liability system is unpredictable because different
courts and juries arrive at different findings with respect to the facts and the
appropriate amount of compensatory and punitive damages in similar cases relating
to the same product. Unpredictability is particularly severe when liability extends
many years after the product is manufactured, introduced into the market, and
used. Unpredictability tends to create a risk that cannot be readily diversified
through standard insurance mechanisms. Insurers require higher prices for bearing
undiversifiable risks.
This climate of unpredictability applies to comprehensive general liability
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PRODUCTS [lability ID CO=^CEPT~E DEVE~PME ~ 37
insurance, which includes products liability. In addition, certain Apes of insurance
have been particularly adversely affected. Contraceptive liability tends to be a
high-risk category because contraceptives are used by so many women over long
periods of time, can create risks that may be latent for years after the product has
been discontinued, and can cause severe injuries-birth defects and loss of
fertility that tend to result in very large awards.
Cost and Availability of Liability Insurance for Contraceptives
Contraceptive developers and manufacturers found it difficult to obtain liability
insurance coverage during the mid-1980s. This problem was an acute manifestation
of the industry-wide price increases and lack of availability of liability insurance.
For some pharmaceutical companies and private nonprofit research organizations,
the cost of liability insurance coverage more than doubled in a period of only one
or two years. For example, liability insurance costs for Family Health International
(1985 to 1987) and the Population Council (1982 to 1984) more than doubled
during a two-year period (~llaway, 1988; Lynch, 1988~. From 1984 to 1988,
Stone Research and Development Corporation gradually decreased its development
work on new IUDs, while it continued to observe the IUD liability situation in
other companies (Lewis, 1988~. According to an FH! representative, the future
availability of products liability insurance coverage at PHI is uncertain (Lynch,
1988~. For some manufacturers of IUDs, liability insurance was unavailable at
any price during the mid-l98Os (G.D. Searle & Co., press release, January 31,
1986~.
Sharply increased costs of liability and liability insurance can have substantial
disruptive effects on the supply of established contraceptives and on the
development of new ones. The effects of unanticipated liability costs for products
that have already been marketed can be severe. New liability costs associated with
products previously marketed cannot be passed on to current consumers of current
products. These costs must be paid out of current profits, and thus they erode the
flow of funds available to fund research and development.
The effects of dramatic increases in insurance costs for new products can also
be severe. Such costs may ultunately be passed on to consumers through higher
product prices, but this pass-through is not immediate, particularly when prices
for contraceptives are set by public agencies. Nonprofit research organizations
involved in contraceptive development are particularly adversely affected; because
they do not market products directly to the public, they do not have the power to
raise prices, nor do they receive immediate increases in funding to accommodate
substantially higher insurance premiums
In general, if a manufacturer cannot charge a price for a product that is
sufficient to cover all costs, including expected liability costs, the product will be
withdrawn from the market. In He contraceptive area, G.D. Searle & Co.
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|38 DEVELOPING NEW CO~RACE~IVES
withdrew the Copper-7 IUD from the market in 1986 because the "escalating cost
of defending unwarranted product litigation makes continuing in the IUD business
in the U.S. no longer economically feasible" (G.D. Searle & Co., press release,
January 31, 1986~. The company stated that the costs of successfully defending
four jury trials exceeded $1.5 million, while the total annual sales for the Copper-
7 amounted to only $1 1 million. Almost 500 cases were still pending when Searle
withdrew the product from the market, and several hundred more cases have been
filed against Searle since the withdrawal of this product.
In the unprecedented hard market situation of the mid-1980s, most insurance
companies that previously provided liability insurance for special classes of
products such as contraceptives were no longer willing to do so. As the market
again softens, it is reasonable to expect that insurance coverage for contraceptives
will become more readily available, conditioned on a thorough risk assessment of
the product by the insurance company's engineers and scientists, and possibly
with limits on the dollar amount of coverage and on other terms of the contract.
To some extent, what is reported as a problem of availability of liability insurance
for contraceptives may at bottom be a problem of affordability. In theory, there
should be some price at which the insurance market would be willing to write
coverage for any risk. However, in some cases this price may be unacceptably
high to contraceptive developers and manufacturers, given their budgets and the
prices that they can charge for their products.
Responses to the Crises
In response to the liability insurance crisis, a number of adjustments were
made in the insurance market. The problems of cost and availability have been
resolved in part by a contraction in the market for risk spreading: policy holders
are retaining a larger share of the risk through higher deductibles and upper limits
of coverage. There is increased use of innovative insurance mechanisms, including
self-insurance, captive insurance companies, and risk retention groups, which
provide alternatives to traditional insurance and offer advantages to certain types
of policy holders. The 1986 amendments to the Product Liability Risk Retention
Act have expanded the range of options available and substantially reduced the
regulatory costs of using these alternatives.
The contraction in the market for risk spreading seems surprising at first, since
the increase in defendants' potential exposure to liability might normally be
expected to increase their demand to spread risk through the purchase of insurance.
The "solutions" that are being adopted in insurance markets are less than ideal to
the extent that they leave the policy holder-or the claimant- bearing more real
risk. They do nothing to alleviate the underlying problem of high and unpredictable
liability exposure. However, greater risk retention and use of self-insurance may
be a preferred second-best solution for some policy holders, given the costs of
liability insurance in the face of the unpredictability of future liability costs.
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PRODUCTS [lABl~Y ID CO=~CEPT~E DEVE~PME ~139
Responses by Insurers
In some situations, insurers have reduced their risk by shifting from the
occurrence policy form to the claims-made form. An occurrence liability policy
covers claims, no matter when they are made, as long as the injury occurred
during the period in which the policy was in effect. A claims-made liability
insurance policy covers claims filed within the policy period, for injuries that
occurred during the policy period or within the retroactive period defined by the
policy. The price of future coverage for claims that may be filed after the policy
period but arising from injuries that occurred within the policy period is not
guaranteed, but the insurer usually at least guarantees that "tail" coverage will be
available. Thus, a claims-made policy shifts the uncertainty of the future liability
costs from the insurer to the insured (Danzon, 1985~. The claims-made approach
was widely adopted for medical malpractice following the difficulties associated
with medical malpractice insurance in the mid-1970s, but it has so far not been
widely adopted for other commercial classes. Other responses by the insurance
companies have been to increase the deductible, increase the premiums, or no
longer offer liability coverage for what they consider risky products.
Responses by Policy Holders
The simplest response to high price or lack of availability of liability insurance-
short of ceasing to manufacture the product is self-insurance. The manufacturer
sets aside a reserve fund for contingent liabilities; if liability costs turn out to be
larger than anticipated, so that the fund is inadequate, any shortfall must be paid
out of the manufacturer's other funds or future profits. A manufacturer who self-
insures must therefore anticipate liabilities with some degree of accuracy in order
to set the price of the product at a level sufficient to finance an adequate reserve
fund. To achieve a less extreme form of risk retention, the manufacturer can self-
insure for the lower levels of risk and buy coverage only for costs above some
very high threshold, provided such "excess" coverage is available.
Representatives of each of the contraceptive manufacturers and developers
who spoke to the committee stated that their organizations were unable to obtain,
or found it very difficult to obtain, liability insurance and consequently were
resorting to some forth of self-insurance. Some large pharmaceutical companies
are now self-insured for their contraceptive products, for example, G.D. Searle &
Co.; Syntex Laboratories, Inc.; Parke-Davis & Co.; and Ortho Pharmaceutical
Corporation.
Another form of self-insurance is for a business firm or group of firms to create
their own "captive" insurance company. They enjoy regulatory advantages not
available to domestic insurers and tax advantages not available to self-insurers.
The Planned Parenthood Federation of America and ALZA Corporation
(manufacturer of the Progestasert IUD) use captive companies.
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140 DEVELOPING NEW CO=~CE~~ES
A third alternative is the formation of a risk retention group. The federal
Product Liability Risk Retention Act of 1981 permits business firms and nonprofit
entities that are engaged in similar activities or share similar risks to form a risk
retention group solely for the purpose of insuring members of the group. The
group may provide product liability and other types of liability insurance. The
1986 amendments extended the scope of the act to cover all commercial liability
risks except worker's compensation, and it eased the regulatory requirements on
such groups. Essentially, the act preempts state insurance regulation except in the
state in which the group is chartered, thereby eliminating the need to be licensed
in every state in which a member of the group is located. Several states have
enacted special enabling statutes to facilitate the formation of these groups.
Captives, risk retention groups, and other forms of self-insurance share the
common feature that more risk is retained by the insured than in traditional
commercial insurance. Although there may be some savings to the insured, if
these quasi-insurance mechanisms are to be viable in the long run, they must set
aside reserves to cover the cost of claims and litigation expenses. Thus, such
solutions do not reduce the real risk or cost of tort liability that is faced by
contraceptive developers and manufacturers.
Responses by State Legislatures
In some states, legislatures have acted to require increased data reporting by
insurance companies and to regulate insurance rates (Danzon, 1988~. Such
measures do not address the fundamental causes of the problems of cost and
availability of liability insurance and could in fact prove to be cumbersome and
counterproductive in such a diverse area of insurance as commercial general
liability. Even if rate regulation were feasible, evidence in other areas indicates
that it tends to exacerbate the problem of lack of availablility of insurance. For
example, when malpractice insurance rates were regulated in many states in
response to the malpractice insurance crisis of the mid-1970s, at rates below
levels considered adequate by insurers, a massive withdrawal of commercial
insurers from that market took place (Danzon, 1985~. In states in which malpractice
rates remain heavily regulated, coverage is still available only through mutual
insurance companies and joint underwriting associations, whereas coverage is
readily available from commercial carriers in unregulated states. Rate regulation
is not a solution that appropriately addresses the underlying problems of
unpredictability.
So far, products liability insurance, including liability insurance for
contraceptives, has generally not been subject to rate regulation by state insurance
departments. Thus, direct regulation of rates cannot explain the lack of availability
of liability insurance for some contraceptives in the mid-1980s.
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PRODUCTS [IABlL~Y AND CONTRACEPTIVE DEVELOPMENT i4 1
CONCLUSIONS AND RECOMMENDATIONS
From the evidence available to the committee, we conclude that recent products
liability litigation and the impact of that litigation on the cost and availability of
liability insurance have contributed significantly to the climate of disincentives
for the development of contraceptive products. Two aspects of the litigation are
especially significant in the context of contraceptives. The first is the unpredictable
nature of litigation, which results in part from the absence of stable and uniform
national products liability rules and in part from the often erratic character of the
litigation system. The second is that, although manufacturers may introduce
evidence of compliance with FDA regulations in a contraceptive products liability
lawsuit, this evidence is given no special status in most states, such as entitling the
manufacturer to a presumption that it acted with due care.
Because of the length of time necessary for development of a new contraceptive
product and the costs of development, manufacturers, in considering whether to
remain in the contraceptive field, are likely to give the prospects of extensive
litigation special importance. Without changes in the products liability rules and
procedures, it appears likely that even fewer firms will allocate even fewer
resources to contraceptive research and development. The committee makes no
recommendations for changes in liability insurance mechanisms. However, concern
over the cost and availability of liability insurance is one of the reasons for the
recommendations with respect to products liability for contraceptives.
The impact of products liability litigation on contraceptive research and
development is a matter of great concern. As noted in Chapter 2, continued
contraceptive research and development by U.S. firms is important to the health
and welfare of people in the United States and in other, especially less developed,
countries. The committee believes that the products liability rules can be changed
to remove most of their undue negative consequences for contraceptive
development without increasing the health risks of contraceptive users. The
committee concludes that an aspect of a contraceptive drug or device that complies
with the requirements of federal food and drug law should not be determined to be
a defect or a breach of warranty under state law; that the manufacturer of that
contraceptive product should not be held negligent for complying with FDA-
approved designs or warnings; and therefore that the manufacturer of a specific
contraceptive drug or device should not be the source of compensation to someone
injured by that aspect of the particular contraceptive drug or device.
Three qualifications are in order. First, the committee has not made a
comprehensive study of the products liability system, but has limited its
investigation to that system as it affects contraceptive products. It is possible that
the committee's proposal could have applicability to all FDA-regulated drugs and
medical devices, but our investigation did not go beyond contraceptive drugs and
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142 DEVELOPING NEW CO=RACE~IVES
devices. Second, the committee's proposal addresses only the safety, or deterrent,
function of products liability law; the important issue of providing adequate
compensation to persons injured by defective products is part of the much broader
question of the adequacy of existing private and social insurance mechanisms.
There are significant gaps and overlaps in the network of insurance programs, and
it appears that if different systems of social and medical compensation or insurance
existed, the liability rules would be implemented differently. It goes beyond the
scope of this report, however, to recommend reforms in these programs or to
suggest alternative programs. However, we note that, for purposes of providing
compensation, the tort system is much more costly and less equitable than alternate
private and social insurance mechanisms. Third, we assume that the FDA will
continue to apply high standards in its review of the safety and effectiveness of
contraceptives, and that changes made in its requirements for contraceptives
(whether those recommended in this report or others) will be fully justified by an
appropriate weighing of risks and benefits and are in accordance with statutory
mandates.
On the basis of these considerations, the committee therefore recommends that
Congress enact a federal products liability statute that gives contraceptive
manufacturers credit for approval of contraceptive drugs and devices (and their
labeling) by the FDA.
The first part of this recommendation is straightforward: the enactment of a
federal products liability statute is intended to deal with the unpredictability and
uncertainty caused by requiring manufacturers of nationally marketed contraceptive
products to face the possibility of 50 different state liability rules. Of course, a
single products liability statute for contraceptives will not completely solve the
problem of a diversity of standards in trial courts, both state and federal, across the
country. Such a statute, however, would reduce the problem, especially if Congress
amended the statute when necessary to assert national uniformity on important
points.
The key contribution that a federal statute would make, however, is not so
much the reduction of diversity at any given time, as the reduction in
unpredictability over time. A system governed by Congress, the Supreme Court,
and the 12 federal courts of appeals will produce fewer unpredictable doctrinal
trends than one governed by 50 legislatures and state supreme courts.
The second part of the recommendation is intended to address the fact that
contraceptive products, as drugs or medical devices, are regulated by a national
agency charged with the responsibility of weighing their risks and benefits and
having the scientific expertise to execute this charge. Pharmaceuticals and
medical devices are unique among products in the United States in the degree to
which quality is regulated before they are released into the market. Given that a
system of premarketing reviews exists, the necessity for liability as a quality
control mechanism is greatly reduced. When the FDA has considered the relevant
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PRODUCTS [lABluTY AND CONTRACEPTIVE DEVELOPMENT 143
health and safety data on a contraceptive product, has approved the product, and
has required warnings and instructions to accompany the product, it is sound
national policy to make this approval available to manufacturers as a defense and
not to penalize them for something they could not have known at an earlier point.
In the remainder of this chapter, we describe and explain the sort of statute the
committee recommends and discuss the effect such a statute would have on
several of the cases discussed earlier in this chapter. Because the statute would
interact with postmarketing surveillance efforts, our recommendation would be
more compelling if formal postmarketing surveillance studies were generally
required.
Possible Elements of a Statute
The extent of the credit that the committee proposes be given for approval of a
contraceptive drug or device by the FDA is that, as a general matter, there be no
liability for design defect or inadequate warning if the FDA has reviewed and
approved the contraceptive product or the warning and has addressed the
characteristics of the product that caused the plaintiff's injury. The defense
should not be available if the manufacturer withheld relevant information from
the FDA in the approval process or if inflation developed after approval was
not reviewed by the FDA for the purpose of determining whether the product or
its labeling should be changed. The committee suggests that the proposed statute
have five major provisions.
First, if it is established that the injury-causing aspect was in compliance with
all applicable requirements of the FDA at the time the contraceptive drug or
device was made or sold, then a manufacturer or seller of a contraceptive drug or
device would not be liable under any of the relevant legal theories
(misrepresentation, negligence, warranty, or strict liability) for any injury related
to design; nor would it be liable for a failure to provide an adequate warning or
instruction regarding any danger associated with its use; nor would it be liable if
the FDA had not asserted that the contraceptive drug or device was not in
compliance.
Second, a determination by the FDA that an aspect of a contraceptive drug or
device complies with the requirements of federal law or with FDA requirements
would be considered conclusive evidence of such compliance.
Third, the defense would not be available if a claimant is able to establish that
the manufacturer should have made design modifications or given different or
additional warnings or instructions. Specifically, the defense would not be
available if the manufacturer or seller knew or should have known of studies
showing an increased risk of harm from the contraceptive drug or device and if
consideration of these studies would have led to the conclusion that, without
design modification or different warnings, there was an increased likelihood of
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|= DEVELOPING NEW CO==CE"~ES
serious injury occurring to the claimant or persons sharing the claimant's medical
characteristics.
Fourth, the defense would continue to be available to contraceptive
manufacturers for action after initial FDA review and approval. That is, if a
contraceptive manufacturer or seller complies with the FDA directions on the
basis of information developed after initial FDA review and approval, then the
contraceptive drug or device could not be found defective with respect to any
aspects in compliance with the FDA.
Fifth, the defense would not be available if a claimant establishes that the FDA
was not informed of dangers regarding the contraceptive drug or device that were
known to the manufacturer or seller but not to the FDA and that the claimant's
injury is attributable to such dangers.
The FDA Defense
In operation, the FDA defense provided by He proposed statute would work as
follows. If a lawsuit is brought alleging injury caused by a contraceptive, the
manufacturer of the contraceptive product would have the opportunity to
demonstrate that the alleged injury-causing aspect of the product had been reviewed
by the FDA and that the agency had not asserted that, by reason of that aspect, the
product was adulterated or misbranded or otherwise not fully in compliance with
the laws and regulations administered by the FDA. The FDA review may have
occurred in connection with an application for Remarketing approval (for example,
an NDA or PMA), in connection with a §510 submission, or otherwise. If the
FDA had not reviewed the alleged injury-causing aspect, then the defense would
not be available. This limitation would ensure that state law remains applicable to
aspects of contraceptives that have not been subjected to actual FDA review.
If the manufacturer establishes the defense, and the plaintiff does nothing
more, the manufacturer would have presented a complete defense, and the lawsuit
could be decided before trial by pretrial motion. If, however, the plaintiff seeks to
maintain that the manufacturer or seller should have made design modifications
or given different warnings, then the burden is on Be plaintiff to show by a
preponderance of the evidence that: (1) reports or studies showing an increased
risk of harm were available to the manufacturer, (2) these reports or studies were
scientifically valid or had received acceptability in the relevant scientific
community, and (3) a review of these reports or studies should have led a
reasonable manufacturer to conclude that design modifications or different or
additional warnings or instructions were necessary to avoid He increased likelihood
of serious injury to the plaintiff or persons sharing the plaintiff's medical
characteristics. If He substance of the new reports or studies proffered by the
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PRODUCTS [UBlL~Y AND CONTRACEPTIVE DEVELOPMENT 145
plaintiff were considered by the FDA and the manufacturer had complied with the
FDA's directions as a result of that new information, then the manufacturer would
be found to have acted reasonably and would prevail.
Effect on Products Liability Cases
What would be the effect of the proposed FDA defense on the specific
products liability cases discussed in the chapter? For the most part, the answers
must be speculative because of the limited information available: it is difficult to
assess the quality of the plaintiff's evidence from an appellate opinion. Moreover,
if the FDA defense had been in effect in each case, the plaintiff might have been
able to overcome it with other evidence that was available but not adduced at trial.
With this qualification in mind, we examine several cases in light of the FDA
defense.
In MacDonald v. Ortho Pharmaceutical Corp. (394 Mass.131,475 N.E.2d 65,
cert. denied, 106 S.Ct. 250 [1985]), the court held that the warning regarding
possible adverse effects of oral contraceptives must be given to the user and that
the adequacy of the warning was a question for the jury, even though it was in
compliance with FDA regulations. The plaintiff contended that the warning was
inadequate because it did not contain the word stroke. This case would almost
certainly have been decided in the manufacturer's favor under the FDA defense,
because both parties agreed that the warning complied with FDA regulations.
In Ortho Pharmaceutical Corp. v. Heath (722 P.2d 410 [solo. 1986]), the
court held that the plaintiff was entitled to a jury instruction regarding liability for
design defects even though the drug had been approved by the FDA. This part of
the Heath case would be changed by the FDA defense; under the evidence
presented, there could be no finding of a design defect.
In McEwen v. Ortho Pharmaceutical Corp. (528 P.2d 522 tOre. 1974]), the
court held that in 1966 and 1967 when the plaintiff took the defendant's drug,
there existed British studies and U.S. animal studies showing that injuries such as
the one the plaintiff suffered were caused by oral contraceptives. These studies
should have caused the defendant, as a reasonable manufacturer, to change its
warning. This case would probably have been decided the same way under the
FDA defense; that is, it appears that the plaintiff's evidence would have been
sufficient (under the provision that the manufacturer or seller should have made
design modifications or given different warnings) to overcome the defense.
In Wells v. Ortho Pharmaceutical Corp. (615 F.Supp 262 EN.D. Ga. 1985],
aff'd, 788 F.2d 741 [11th Cir. 1986], cert. denied 93 L.Ed.2d 386 [1986]), the
court found the defendant liable for failure to warn of possible teratogenic effects
from its spermicide despite FDA approval of the warning and despite the fact that
two FDA expert panels had reviewed the evidence of causation and had concluded
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146 DEVELOPING NEW CO=RACE"IVES
there was no basis for changing the warning. The proposed statute would change
the result of this case; compliance with FDA directions would have been a
complete defense.
CONCLUSION
The operation of the legal system in this country makes it difficult to make
precise forecasts of the extent to which enactment of such a statute would change
the perception of the risk of liability, and therefore what contraceptive developers
and insurance underwriters will do. As a first step the proposed statute is
important, but we recognize that it would take several years before its impact
could be evaluated, and modifications may be needed in the future.
We believe that it is important to preserve tort liability for contraceptive
products with a few exceptions. The committee did not find that more extreme
approaches, such as those proposed by others examining specialized drug
development, are called for in the case of contraceptives. For example, an
Institute of Medicine (1985) committee studied the problems of vaccine
development in the United States; its report proposes a series of options for
dealing with problems arising from vaccine-related injury, which includes the
option that vaccine-related liability be taken out of the tort law system. We do not
believe such action is appropriate with respect to contraceptives. That said, the
committee recognizes that, if the proposed FDA defense is enacted and no
changes took place in the pace of contraceptive development, other steps might be
needed.
The committee believes that the proposed statute constitutes a modest reform
and is by no means a radical proposal. It is our belief that a change in the products
liability law would change the climate of disincentives for the development of
contraceptive products, without compromising the safety of contraceptive use.
Representative terms from entire chapter:
liability insurance
