Ending drugmakers’ exemption will cost jobs

During the past 10 years, Michigan has had a declining population, a shrinking job market, and the worst personal income growth of any state. Now Michigan stands to lose even more jobs in one of the state’s remaining robust sectors.

The biopharmaceutical industry currently employs more than 100,000 Michiganders and pays more than $2 billion in salaries. It spends almost $1 billion annually in Michigan on research and development and pays more than $71 million in state taxes. The industry has also been an inviting target for personal injury lawyers.

In 1995, Michigan enacted a product liability standard that curbed abusive lawsuits against manufacturers of life-saving drugs. Called the FDA defense, the law says pharmaceutical manufacturers cannot be sued if their products are approved by the nation’s top drug regulator, the U.S. Food and Drug Administration.

In other words, if expert FDA scientists determine a drug is safe, the drug’s maker cannot be sued unless the company intentionally withheld information or misled the FDA or misrepresented the product in advertising. This was a smart, commonsense reform.

But personal injury lawyers have found a sympathetic audience in the Michigan House of Representatives, which voted recently to repeal the FDA defense. Unbelievably, legislators also moved the goalposts by making the change retroactive to 1996.

If personal injury lawyers are allowed to destroy the reform, it will expose the pharmaceutical industry to lawsuits retroactively. Faced with the possibility of spending billions on lawsuit defense, drug companies will scale back research and development spending.

The industry will also likely pack up and move out of Michigan to places with more sensible tort laws. Michigan, already in dire straits, will suffer further harm and drive out more jobs. This claim is not exaggerated — most vaccine manufacturers have already left the United States for Europe because of lawsuit abuse in America.

Some legislators in Lansing have lost sight of the fact that pharmaceuticals undergo the most rigorous testing process of any product. If drug companies do everything they can to ensure their products are safe by jumping through every FDA hoop (at an average cost of more than $1 billion), it makes no sense to expose these companies to further liability and make life-saving drugs even more expensive. Michigan already has the 8th-highest annual tort costs in America at more than $5 billion and the 9th-most lawsuits filed per resident. Michigan ought not to invite more litigation.

Michigan’s state senators should reject the bill that would repeal the FDA defense and reaffirm their commitment to commonsense reforms to the state’s civil-justice system. That will help Michigan’s embattled economy, promote medical innovation, and set a positive example for the nation.

A version of this story appears on page 14A of the Thursday, Oct. 15, 2009, print edition of the Detroit Free Press.

Lawrence J. McQuillan, PhD, is director of Business and Economic Studies at the California-based Pacific Research Institute and co-author of the U.S. Tort Liability Index and Tort Law Tally. Contact him at [email protected].

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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