June 21, 2005
The Honorable Bill Frist
The Honorable Harry Reid
The Honorable Mike Enzi
The Honorable Edward Kennedy
United States Senate
Washington, DC 20515
Re: Liability Implications of Drug Importation Bills S. 109 & S. 334
Dear Senators:
I am writing to you about the unintended, but clear, liability implications of two bills proposed to legalize the importation of drugs into the United States — S. 109, the Pharmaceutical Market Access Act of 2005, and S. 334, the Pharmaceutical Market Access and Drug Safety Act of 2005.
Let me briefly state my background and introduce myself. I am currently the General Counsel of the Center for Individual Freedom, a non-partisan, non-profit organization with the mission to protect individual freedoms and individual rights by promoting limited government, free markets, and fair competition. In advancing this mission, the Center has played an important role in the ongoing public policy debate about the litigation and liability crisis facing
The Center realizes that the drug importation debate has evolved over the past few years, and that two bills currently introduced in the Senate, S. 109 and S. 334, attempt to address the obvious safety and liability concerns associated with drug importation by extending the regulatory reach of the federal Food and Drug Administration (FDA) beyond U.S. borders to anyone who supplies medications to Americans. But such a move will neither ensure the safety of imported drugs nor prevent American pharmaceutical companies, pharmacies, pharmacists, hospitals, and physicians from being sued and held liable for prescribing and dispensing imported medications that injure patients. Indeed, adding legalized imported drugs to the FDA’s already lengthy oversight obligations will only stretch the agency beyond its limits. As a result, the FDA’s ability to adequately monitor and protect the safety of the American drug supply will be seriously undermined, leading to the very real possibility that unapproved, mislabeled, counterfeit, or contaminated drugs could reach American consumers. To make matters worse, since many, if not all, of the suppliers of these imported drugs will be outside the jurisdiction of U.S.-based courts, it will be difficult, if not impossible, for American consumers to hold these exporters legally responsible. Thus, even though the fault for harm might lie outside the
As attorney and co-author of the leading tort law casebook Victor E. Schwartz wrote in a letter to the Speaker of the U.S. House of Representatives discussing another federal drug importation proposal: “Common sense would suggest that an American company should not be liable for harms caused by either counterfeit drugs or for drugs that have been altered or modified. Unfortunately, as with many aspects of modern tort law, common sense does not provide the true liability picture.” Indeed, if either of these drug importation bills (S. 109 or S. 334) becomes law, the litigation and liability picture in
1. Pharmaceutical Manufacturers
A pharmaceutical manufacturer whose label appears on counterfeit drugs could be subject to lawsuits and liability based on the resulting injuries. And, while it would be a defense — though a difficult one — for the company to prove that the harmful medication was not its own, the legal costs of doing so could run into millions of dollars. Of course, the company would be liable for damages on top of those legal costs if it could not prove such a defense.
Manufacturers could also be liable for drugs that have been altered or modified sometime before reaching the patient. With legalized drug importation this is a particular concern since both domestic manufacturers and the FDA will find it much more difficult to exercise control over the chain of distribution. Under the majority of American case law, as stated in the Restatement (Third) of Torts: Product Liability, manufacturers are liable for “reasonably foreseeable” alterations or modifications of their products, and some courts have broadly interpreted what is “reasonably foreseeable.” Moreover, a court could submit the question of what is “reasonably foreseeable” to the jury, leading to even greater uncertainty. As a practical matter, given the inability of manufacturers or even the FDA to exercise control over the entire pharmaceutical distribution chain, it may be impossible to prevent drugs from being altered, modified, or contaminated during the importation process. Indeed, a case in Kansas City where a pharmacist had changed and diluted a chemotherapy drug demonstrates this problem. In that case, two drug companies were sued and reportedly settled because of substantial liability exposure even though the pharmacist had engaged in criminal conduct by tampering with the pharmaceutical.
2. Pharmacies and Pharmacists
American pharmacies and pharmacists that dispense imported drugs could be subject to liability if the medications turn out to be altered, modified, or contaminated. Indeed, these pharmacies and pharmacists could be subject to strict liability even if another point in the distribution chain was responsible for the alteration, modification, or contamination of the drugs.
According to the a comment in the Restatement (Third) of Torts: Product Liability: “[A]ll commercial sellers and distributors of products, including nonmanufacturing sellers and distributors such as wholesalers and retailers, are subject to liability for selling products that are defective.” (Emphasis added.) The comment goes on to explain that “[l]iability attaches even when such nonmanufacturing sellers or distributors do not themselves render the products defective regardless of whether they are in a position to prevent defects from occurring.” (Emphasis added.)
There can be little question that if a drug has been altered, modified, or contaminated, that medication would be different than the pharmaceutical as designed by the manufacturer. And, according to the Restatement, “a manufacturing defect is a departure from a product unit’s design specifications.” Indeed, a comment in the Restatement goes on to explain that “occasionally a defect may arise after manufacture,” and that, “as long as the plaintiff establishes that the product was defective when it left the hands of a given seller into the distributive chain, liability will attach to that seller.” Thus, in product liability terms, an imported drug that has been altered, modified, or contaminated would be deemed to have a “manufacturing defect,” and any subsequent distributor or seller of such a dangerous medication would be strictly liable for injuries caused by the “defective” drug.
There are virtually no defenses for pharmacies and pharmacists in such manufacturing defect cases. For example, the Restatement notes that a hospital pharmacy is liable even when it exercised “all possible care … in the preparation and marketing of the product.” In other words, pharmacies and pharmacists will be liable when they dispense altered, modified, or contaminated drugs, and that liability will result even if the pharmacy or pharmacist was not at fault and took all possible precautions to protect consumers from “defects.”
Pharmacies and pharmacists also could be subject to liability if they dispense counterfeit drugs and fail to use reasonable care in detecting that the medications were not genuine. Indeed, pharmacies and pharmacists must meet a much higher standard of care than a layperson in exercising their duty to detect counterfeits among the drugs they dispense.
Liability might also result from a pharmacist’s failure to warn patients that the drugs dispensed to them were imported. Specifically, in the Report on Prescription Drug Importation issued in December by the U.S. Department of Health and Human Services, the Task Force on Drug Importation explains that “[a]n additional, and relatively novel, cause of action for failure to warn could arise under drug importation.” The Task Force notes that, while “pharmacists are generally not required to provide warnings [about drugs] because the law views the doctor as best suited to give advice about side effects and risk of injury[, a] few states have adopted an unusual exception to this no-liability rule for pharmacists.” According to the Report, “In these jurisdictions, pharmacists can be held liable for injuries resulting from an unwarned substitution of a generic drug for a brand name drug.” As a result, the Task Force concludes that the “same rationale might be applied to create a new duty to warn in the case of importation,” and that the “pharmacist (internet or otherwise), as the party most aware that the patient was receiving imported drugs, might bear the burden of warning of these dangers.”
3. Hospitals and Physicians
If the federal government legalized drug importation, the liability of hospitals and physicians would depend upon how often and under what circumstances they dispensed drugs. In their general practice of medicine, hospitals would be liable if they failed to exercise reasonable care in detecting counterfeit, altered, modified, or contaminated drugs. And, as discussed earlier, drug importation raises new and special liability concerns in this area. (See discussions in Parts 1 and 2, above.) In addition, hospitals would bear greater responsibility and face an increased likelihood of liability when they engage in the sale of such drugs through hospital pharmacies. In this circumstance, the hospital pharmacy would be considered a “product seller” and, just as in the case of any other pharmacy, would be exposed to liability. (See discussion Part 2, above.)
Physicians, on the other hand, are generally not treated as “product sellers” and do not face the same liability concerns as manufacturers, pharmacies, pharmacists, and hospitals, which all face liability in connection with being part of the distribution chain. However, physicians could still face liability in a couple contexts based on imported drugs that lead to harm. First, if the cost of the pharmaceutical was a major part of the physician’s fee and the medication was dispensed on a regular basis — as in the case of chemotherapy, etc. — then the court may deem the physician to be a “product seller,” subjecting him or her to liability similar to that of a pharmacy. Second, physicians would be subject to liability generally for their negligence and for their failure to act as a reasonable doctor under the circumstances. This means that physicians would not face liability if they had no reason to know that the imported drugs were counterfeit, altered, modified, or contaminated. However, if the physician noticed or should have noticed suspicious qualities of the imported medicine, then the doctor would be subject to liability. Thus, if a physician dispensed a medication that was fading or the packaging was noticeably different or damaged, then liability would be possible. Moreover, liability could result and would be more likely if multiple patients became ill after taking the same imported drug and the doctor failed to make the connection between the harmful medication and the resulting injuries.
In conclusion, I urge you to consider the fact that any new litigation or liability that results from legalizing the importation of drugs from foreign countries will only add to the litigation and liability crisis that currently plagues our courts at both the federal and state levels. This problem is all the more serious since the American medical industry, including hospitals, doctors, pharmacies, pharmacists, and drug makers, has already been especially hard hit by litigation and liability, increasing the costs for those who provide medical care and those who depend upon it for their good health. Now is not the time to open the door to new litigation and more liability. I hope this letter is of assistance to you and your Senate colleagues as you debate these important public policy matters and the implications of legalizing drug importation.
Sincerely,
/s/
Reid Alan Cox
General Counsel