Should we waive legal liability for FDA-approved drugs?

So asks Megan McArdle.  The argument runs as follows:

I don’t understand quite why FDA approval of drugs and medical devices
hasn’t long provided legal safe harbor for their manufacturers. The
defects that show up, such as the Vioxx and Fen-Phen problems, are
discovered long after approval precisely because they’re so rare that
they don’t show up in ordinary clinical trials. If the government
experts, who are presumably highly motivated to avoid catastrophes,
can’t spot the danger, why do we expect the drug companies to?

I can think of three possible rebuttals:

1. We simply can’t trust the bureaucrats to find the flaws with drugs.  But note this is inconsistent with both the rhetoric of FDA defenders ("the FDA can work") and FDA critics, who argue we are overinvesting in drug safety as it is.

2. Lawsuits encourage the companies to look for problems once a drug is already approved.  Regulation does not.

3. People need lawsuits as a way of emotionally striking back.  If they are denied that privilege, they will demand ridiculously oversafe levels of regulation in the first place.  In this view regulation is as much about building consumer confidence in a health care system as it is about protecting people.

I do not currently have a view on this matter.  Do you?  Kevin Drum is opposed.


I tend to be opposed.

One other reason is that companies may know more from their internal testing than the FDA knows. If they withheld knowledge of a flaw they certainly should be culpable even if they successfully tricked the FDA.

That said, I think the burden of proof probably should be higher against companies that passed the FDA standard in good faith. If there's no reason a company did know or should have known about the flaw, the case should be dismissed.

My preference is to allow companies to put any drug they want to onto the market (with minimum toxicity testing) but be accountable via lawsuits for anything that goes wrong. Anything that goes through the full FDA-approval process should be off-limits from lawsuits.

However, my primary rationale for that position is to quicken the pace of medical innovation.

Seeing Tyler say "I do not currently have a view on this matter" helps me to maintain agnosticism on more issues. Even hearing Bryan Caplan say that several times, it's still hard to do...

I think that there is an assumption in Ms. McArdle's argument which is not true. The assumption is that if a drug which is approved has a hidden flaw which is discovered later, that the drug company is sued for something for which they no nothing about.

In fact when a drug company gets sued, it is not for a hidden side effect. It is only when a drug company KNOWS of a side effect, yet pushes the drug on the public anyway in large amounts, is when the lawsuits fly.

In the Vioxx example, the makers said that Vioxx was better than Aspirin, safer than Aspirin, and only 100 times as expensive as Aspirin. When in fact they knew there was small yet deadly cardiovascular side effect, they pushed the drug anyway and minted money. If the drug company had simply said "Vioxx is pretty good, but all new drugs have side effects, and you should only use it if Aspirin and other drugs don't work for you, and be careful of these side effects, etc." they would never have been sued. They also would not have made nearly as much money.

The real question that should be asked is:

Should a company who knowingly hides a side effect of a drug and makes a ton of money on it while killing it's customers be subject to lawsuits even if the drug has FDA approval?

I think that answer is yes.

Vouching for the safety of drugs is only one function of FDA regulation. Another is vouching that they are at least somewhat effective.


The one and only reason to be against FDA regulation. Many out of processes are still in use through pharma and biotech, simply because the cost of validating the new process in prohibitive. So a better safer way to manufacture the drug is not used.

Another lesser reason is off-label use. Once a drug is approved it can be used for anything, not only it's approved use. The FDA never evaluated the efficacy (phase III trials - the biggest and most costly) of the drugs for off label use, the market does.

Isn't this like saying you're not liable for damages caused by car accidents you get into if you're a licensed driver? By licensing me, the government said I'm a safe driver, so any accident is the DMV's fault.

Two ideas (probably already mentioned somewhere by someone else)

1) Turn the FDA into an "honest" broker of information. Provide expert clinical trials, witnesses, and the like.

2) Change the FDA's role to that of an Intrade-like betting market manager (and judge of contracts).

I believe drug companies can select which clinical trials to report and usually don't disclose the bad results. This reminds me of the hilarious quote from Anchorman, "60% of the time it works every time." I've never heard a compelling argument for letting the companies keep information on some of the trials private, and it seems like this allowance is probably the result of the pharmaceutical lobby.

Apparently Ms. Mcardle doesn't follow the Vioxx litigation very closely. The CV problems of Vioxx were identified in a clinical trial, and they even changed the label instructions to indicate that.

The most salient and important criticism I can come up with against an FDA approval safe harbor is that industry capture is too much of a reality.

The criticism of the FDA is not necessarily that it results in strict overinvestment in safety, but that it doesn't have incentives to avoid malinvestment or to do a proper cost-benefit analysis.

Isn't this like saying you're not liable for damages caused by car accidents you get into if you're a licensed driver?

No, because the quality of your driving is not consistent. The DMV can test the quality of your driving during the test, but there's no guarantee that you will continue to drive as safely after the test. The quality of drugs is far more consistent--a drug is likely to be as safe on the market as it is during the trial, unless the company cuts corners on the manufacturing process, in which case it should be held liable.

Banning lawsuits would decrease or eliminate altogether the mechanism through which third parties investigate and and test adverse effect claims. In other words, if someone suspects that they were hurt by a drug, there would be no incentive for lawyers to take on the case (unless they can pin the blame on someone else, see below) and therefore no money to pay experts to look into it. In the absence of this sort of investigation, it is likely others will also be hurt who would not have been had a lawsuit been possible.

Banning lawsuits against pharmaceutical companies would also increase lawsuits against healthcare providers and probably lead to new theories of liability.

"I don't understand quite why FDA approval of drugs and medical devices hasn't long provided legal safe harbor for their manufacturers."

The FDA approval process relies almost exclusively on data provided by drug manufacturers.

Anyone who thinks that FDA approval equates to a safe and effective drug is an idiot.

In products liability, the producer should (and usually is) held to strict liability for damage caused by the product. Yes this may result in liability being spread across the consumers, effectively requiring them to buy insurance. But it also aggragates the information on whether the product should continue to be produced (i.e. whether the benefits it produces are greater than the cost) in the one party in the best position to decide whether or not it is produced--the producer. It also gives that party the correct incentives necessary to lead to the correct result.

If there is no liability, most likely NOONE will ever know the true cost of the product, because the consumer injuries will be under-reported, since the consumer will have no incentive to report them, and the producer will have every incentive to down-play them. Thus, not only will the producer not have a reason to stop producing an unduly dangerous product, but the public will not have sufficient information to decide whether or not to continue purchasing the product.

Liability for the drug producer correctly aligns the incentives and information in such a way as to produce the best possible results, while no liability does not. It's that simple, and FDA approval does not change that.

However, even if I follow all of the laws of the road, I still have to pay damages if I get in an accident. It doesn't matter if the roads are icy, if I had right of way or if the accident was unavoidable.

Y'all are aware if torts were eliminated, it will likely be even harder for drugs to get approved than they are now. Political pressure will force "someone" to be responsible. If it's the government, their risk tolerance would approach 0. At that point, so would drug development.

"The problem with product liability is that it has predicted twelve out of the last five unsafe drugs."

The question is not whether product liability is perfect, its whether its better than the alternatives. Would you trade "12 out of 5" for "2 out of 5"?

"There is absolutely no incentive for trial lawyers to find the socially optimal level of liability or consider the benefits along with the costs."

The system does not need lawyers to find "socially optimal levels of liability," nor "consider the benefits along with the costs." That is the job of the drug maker. The lawyer ensures that ALL costs are born by the drug maker, regardless of the cost benefit analysis. The drug maker, who receives the income from selling the drug, then determines whether the income is greater than the costs it must bear. If it is, the drug will continue to be produced, and if not, it will not be produced. This is the optimal situation.

If, on the other hand, your complaint is that lawyers and juries are likely to find causation where none exists, or inflate damages, thereby imposing costs that are above those that were actually incurred (these are different questions from cost/benefit analysis) then the question is what institution would you trust to make these determinations better than a jury? Compared to regulatory agencies subject to capture and bureaucratic inefficiencies, I think the jury holds up well.

"The reason we don't have any contraceptive research in the US is because of tort liability, and the reason we don't have morning sickness drugs or Lyme disease vaccines in the US (when those drugs are safely available in Europe and Canada) is because of tort liability."

I think you are over simplifying things by blaming that solely on tort liability. I also think you are ignoring the possibility that the drugs and research you mention create legitimate costs that outweigh their benefit. In any event, I don't the inefficiencies created in those areas would come anywhere close to being great enough to justify scrapping liability and creating even more inefficiencies in its place.

"I don't understand quite why FDA approval of drugs and medical devices hasn't long provided legal safe harbor for their manufacturers."

Remember, it's tort law and the courts function to permit a legal safe harbor, not FDA's function....and in fact, the courts do provide a safe harbor by allowing the comment k defense of the Restatement (Third) of Torts. The comment k defense allows the manufacturer to escape strict liability if the risks of the prescription drug were unavoidable. Once falling under comment k's protections, the prescription drug manufacturer is not held strictly liable on the basis of defective design (including new drug testing during the approval process, during manufacturing or from inadequate labeling). Courts that have been confronted with claims of defectively designed/tested prescription drugs have generally adopted comment k.

The problem for manufacturers is the courts have selectively adopted the comment k defense in a strict liability regime.

Follow this link for a lengthy discussion

Some commentary seems innocently unaware that FDA doesn't have authority over the courts to determine the conditions for lawsuits.

Substitute "FDA" with "building inspections department"; "drugs with "houses"; and "drug companies" with "home builders."

Speaking anecdotally, home builders take the quality-control process less seriously because they are already paying a bureaucrat to let them know if something's wrong. Likewise, homebuyers assume that a home is good-to-go just because an inspector issued a Certificate of Occupancy.

My point is that the FDA (or the building inspections department) provides both the manufacturer and the consumer with a false sense of confidence in the soundness and safety of the product. Eliminate that false sense of security and manufacturers and consumers alike will become more focused on ensuring the quality of the products they make/purchase.

When a drug's bad consequences take 20+ years to show themselves, both consumers and the law need to just accept the fact that delaying approval of a new drug long enough to detect those consequences would kill more people (by denying them useful new drugs) than it saves. That's the bottom line.

Remember when the first home computers came out? I'm not talking the PC or even the Pet. The first were kits like the Altair, which you could get in the 1970s for close to the (then) price of a house. By today's standards it was a terrible machine -- slow, buggy, with very little memory, and with no pre-written software available for it, but a couple of thousand hobbyists with money to burn were willing to be guinea pigs just so they could say they had home computers before anybody else.

The fact may never have been very visible to the rest of us, but these first hobbyists funded the R&D that led to the desktop computers we have today.

This is how new drugs ought to get to market. And the way to enable that is to abolish the FDA and reestablish the notions of due diligence (on the part of consumers) and contributory negligence in product liability law.

The FDA's approval process is really at fault in this issue. It is the organization created to moniter risks, which it does not do well. The drug companies are the ones who conduct all the studies, not the "watchdog" of our national healthcare system. This means that they can test it as many times as they please, and only present the studies that show their drug in a positive light. This is what makes them so liable for litigation. Besides, outlawing lawsuits against these companies would be denying the people who fell victim to the drug's side effects any avenue of compensation.

I work for drug rehab facilities that strive to get people not just off of illicit drugs, but off of prescription drugs too. I think the pharmaceutical companies are not seeking to heal patients, they are seeking to hook customers. It's all for money...and that's dirty and such a negative energy to put out into the Universe.

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