Center for Legal & Responsible Commerce

A Cure We Cannot Afford

Congress Should Not Force Americans to Indemnify Pharmaceutical Manufacturers

Too often we hear the business community complain that the legal system is out of control and that jobs are moving overseas and the U.S. economy suffers because of "lawsuit abuse."  One need only turn on their radio or television to hear the U.S. Chamber of Commerce's new round of ads attacking the legal system and the "greedy trial lawyers."  When listening to those ads, remember who it was that spent millions lobbying for the Private Securities Litigation Reform Act of 1995 and Securities Litigation Uniform Standards Act of 1998 and the damage done to the stock market by the Enron, Worldcom, Global Crossing and Adelphia scandals, just to name a few. While the jobs argument sounds good, the reason jobs are leaving the U.S. is due to the high cost of labor in the U.S. and the unfavorable regulatory environment.  Moving the location of manufacturing overseas does nothing to limit the liability of a company for a product sold in the U.S..  Further, unemployment rates in the U.S. are at or near historic lows, and the U.S. unemployment rate is somewhere between 33-50% that of foreign countries with legal systems that are hostile to individual litigants who seek compensation for harm resulting from another's negligence.  Finally, perhaps the business community has not noticed this, but the Federal Reserve Board keeps raising interest rates because of fears of inflation resulting from a growing economy.  

Congress should be concerned about the avian flu mutating and becoming capable of human to human transmission.  Even without the possibility of a flu pandemic, our country needs to rebuild its domestic vaccine production capabilities.  The problem that Americans face is that the domestic vaccine industry collapsed because it producing vaccines was not profitable.  It was not profitable to produce vaccines because the largest purchaser, the federal government, was unwilling to pay much more than cost and was not willing to guarantee the purchase of all the vaccine that was manufactured.  Even during the 2004 flu vaccine shortage, manufacturers discarded millions of unspoiled vaccine doses that were not used.  Instead of being dependent on foreign suppliers who still make vaccines in eggs, America needs to build new facilities in the U.S. that are based on 21st century cell technology. Facilities that are capable of reliably producing enough vaccine, in a short period of time, to cover our needs. Taxpayer indemnification of a vaccine manufacturer's negligence is not the solution.

There are several bills pending in Congress that propose to solve our vaccine shortfalls by either prohibiting lawsuits against vaccine manufacturers and the pharmaceutical industry generally, or making the federal government the industry's insurer against ordinary negligence.  Without the threat of liability for one's negligence, vaccine and pharmaceutical manufacturers would have no incentive to make sure their product is safe.  The thousands of Vioxx lawsuits currently pending demonstrate two key points: 1) we cannot count on the FDA to rigorously scrutinize drugs before the FDA approves the drugs for release to the market; & 2) even in the current "unfair" civil justice system, drug manufacturers are willing to sell products that they do not believe are safe or are improperly labeled.  By making the U.S. taxpayer the party responsible for a manufacturer's negligence, there is no incentive for the manufacturer to avoid unnecessary risks with the public's safety.  On the upside there is the potential for huge profits, and since the government will absorb any liability for negligence, there is no downside to the manufacturer. While most bills will not absolve manufacturers of gross negligence, there is the question of how many clinical trial participants have to die or be seriously injured, and those results ignored, in order for gross negligence to exist?  The pharmaceutical industry argues that legal reform is necessary because any profit realized from the sale of vaccines will be wiped out by any lawsuits that are filed.  Given that drug manufacturers continue to release new drugs into the U.S. market, something other than the legal system is the cause of America's domestic vaccine production shortage.

Are there frivolous lawsuits being filed every day in America?  YES!  
However that problem can be solved, and usually is solved, by the judiciary. Tort law serves the very useful purpose of keeping everyone, from individuals to large corporate entities, responsible for their actions.  When Congress has acted as an insurer against corporate malfeasance and nonfeasance, both have occurred.  One example would be Pension Benefit Guarantee Corporation, which is severely underfunded because the PBGC never raised premiums to account for the massive underfunding of pensions.  The existence of this government guarantee program has been used to justify allowing a company to escape their pension liabilities.  Not only does this government program allow companies to escape responsibility, but it saddles the taxpayers with paying pension benefits. It also leaves the pensioners with a fraction of what they were promised and had worked for.  All this occurs while the executives who underfunded their employee pension plan(s) retain their luxurious retirement packages.  It is a well established fact that when Congress externalizes the costs of negligence, the incidence of negligence increases.

Call your members of Congress and tell them you want reasonable vaccine reform that consists of providing economic incentives, not liability reform that prevents those who are legitimately injured from seeking compensation.