By Anna Louie Sussman
Feb 25 (Reuters) - Pharmaceutical executives play an
important, but often unseen role in how their companies react to
product liability lawsuits, says a new paper from the RAND
Institute for Civil Justice, a centrist research and policy
The paper, released last week, argues that drug industry
executives who evaluate legal liability and choose how to
respond to a lawsuit play a large role in determining the
economic impact of pharmaceutical product liability litigation.
Dr. Steven Garber, the author of "Economic Effects of
Product Liability and Other Litigation Involving the Safety and
Effectiveness of Pharmaceuticals," said most people assume that
court decisions lead directly to positive or negative outcomes.
For example, the business community might conclude that a large
payout in a mass tort case would chill innovation in similar
product areas, while consumer advocates might believe that such
a payout would enhance compliance with regulations.
Litigation itself does not cause those outcomes, howevever;
instead, it informs executives' decisions on how the company
should proceed, Garber says. Judges might consider how their
rulings will affect not just the plaintiff in question, but
other pharmaceutical executives at other companies.
In conducting the study, Garber analyzed half a dozen mass
tort claims that resulted in large payouts by defendants to try
to get inside the heads of company executives.
"If we want to understand how liability affects those
outcomes, we need to analyze carefully how we expect company
decisionmakers to respond to legal decisions," said Garber.
Hunter Shkolnik, a senior partner at Napoli Bern Ripka
Shkolnik, LLP who has represented plaintiffs in mass tort claims
against pharmaceutical companies, said litigation was an
important tool in keeping pharmaceutical companies compliant
with the law.
"Companies are making decisions about drugs through
marketing, and how much they can make with it. They are not
thinking at all about their risks," Shkolnik said.
John Beisner, co-head of the co-head of the Mass Torts and
Insurance Litigation Group at Skadden, Arps, Slate, Meagher &
Flom LLP, said litigation by nature is an inefficient way to
influence pharmaceutical executives.
"Whoever's making those decisions, if they're simply trying
to guess what litigation will arise down the road, that's not
very effective regulation because it's so hard to predict,
especially when most of the individuals who are bringing the
litigation are profit driven," Beisner said. "It's much more
efficient to tell someone in advance, 'Here's what you should do
or not do,' rather than after the fact."
Shkolnik said few pharmaceutical companies viewed litigatoin
as a deterrent.
"It's not the fear of it that changes them, it's the actual
lawsuit that changes them. Had they done the right thing with
these drugs, they wouldn't have had these billion dollar
Without the threat of product liability suits, Shkolnik
said, "There is no one guarding the henhouse."
Follow us on Twitter @ReutersLegal | Like us on Facebook