During the past 10 years, Michigan has had a declining population, a shrinking job market, and the worst personal income growth of any state. Its unemployment rate is an incredible 15.4 percent, but 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 Michiganians 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 also has been an inviting target for personal injury lawyers.
In 1995, Michigan enacted a new product liability standard that curbed abusive lawsuits against manufacturers of life-saving drugs. Called the “FDA defense,” the law says that pharmaceutical manufacturers cannot be sued if their products are approved by the nation’s top drug regulator, the U.S. Food and Drug Administration (FDA).
In other words, if expert FDA scientists determine a drug is safe and approve it for sale, the drug’s maker cannot be sued unless the company intentionally withheld information or misled the FDA about the drug or misrepresented the product in advertising. This was a smart, common-sense reform but, not surprisingly, personal injury lawyers found this restriction on litigation frustrating.
They also found a sympathetic audience in the Michigan House of Representatives, which voted recently to repeal the FDA defense (House Bill 4316). Unbelievably, legislators also moved the goalposts by making the change retroactive to 1996. It is as though the state decided to lower the speed limit to 35 miles per hour and sent Michigan residents thousands of retroactive speeding tickets.
During the 1990s, Michigan showed strong leadership by enacting the FDA defense. 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.
That’s bad news for the millions of patients with cancer, Alzheimer’s and other deadly diseases who are hoping for a cure. The industry also will 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 eighth-highest annual tort costs in America at more than $5 billion and the ninth-most lawsuits filed per resident. Michigan ought not to invite more litigation.
The U.S. tort liability system costs more than $865 billion each year. Of that, an estimated $589 billion is waste: excessive legal fees, outrageous jury awards, settlements for nuisance lawsuits, lost innovation, and unnecessary “defensive medicine” to name a few.
If you divide that $589 billion among all Americans, each one would get more than $1,900 if lawsuit abuse was stopped. That $589 billion isn’t going to increase salaries and health care benefits, create new jobs, or, in the case of the pharmaceutical industry, develop new path-breaking medications. It’s pure waste and a lot of it lines lawyers’ pockets. Less than 15 cents of every tort-cost dollar goes to compensate injured people.
Ensuring that patients are protected from harmful drugs is a noble goal and the responsibility of the FDA, not Michigan courts. Michigan cannot afford to bleed more jobs and businesses-especially pharmaceutical companies, growing businesses of the future. Michigan’s state senators should reject the bill that would repeal the FDA defense and reaffirm their commitment to common-sense 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.