Wyeth v. Levine, the Consequences for Innovation

The Wall Street Journal comments on “drug labeling by jury verdict” in an editorial, “Pre-empting Drug Innovation“:

Juries are presented with tragic plaintiffs who were injured, not the unknown patients who are helped, by a product. Hence, they tend to focus on risks more than overall benefits. By contrast, federal regulators are tasked to take the long view and factor in the interests of all potential users of a drug. Just as importantly, “the FDA conveys its warning with one voice,” writes Justice Alito, “rather than whipsawing the medical community with 50 (or more) potentially conflicting ones.”

A consequence of this ruling is an almost-certain spike in product-liability suits aimed at drug companies. Merck’s Vioxx litigation has already cost the company $4 billion, and Eli Lilly has paid out more than $1 billion to settle suits related to the antipsychotic drug Zyprexa. A legal standard that said the FDA, not a state tort jury, is responsible for regulating warning labels would have given both drug companies a stronger position in these lawsuits.

Yesterday’s ruling will expose drug companies to a kind of double innovation jeopardy. They typically spend $1 billion on research and development to bring a drug to market, with an 11% success rate on average. But they endure that burden on the understanding that FDA approval will give them a period to sell that drug with patent protection and that FDA approval provides some protection from lawsuits. Now they will have to contemplate paying up front — and paying later, even if the tragic mistake in applying the drug is someone else’s. Wyeth is a dream come true for the plaintiffs bar.

Ten years from now, when somebody dies because no drug was available to treat his illness, well, who will know? But that’s a result that can be anticipated thanks to a legal system that punishes innovation.

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