Replies to post #73949 on Biotech Values

[DewDiligence]

Supreme Court Ruling Ripples Beyond Drug Firms

http://online.wsj.com/article/SB123621455847235295.html

›MARCH 5, 2009
By AVERY JOHNSON in New York, and ALICIA MUNDY and JESS BRAVIN

The Supreme Court's ruling against drug maker Wyeth will affect a wide swath of pharmaceutical-industry cases, from antidepressants to hormone-replacement therapy.

It also strikes a broader blow against the edifice of federal regulation built up during the eight years of the Bush White House, which worked to shield federally regulated products from state negligence lawsuits.

Wyeth got strong backing from the former Bush administration in its long legal fight. Wyeth argued it met Food and Drug Administration guidelines in the label for its antinausea drug Phenergan, and shouldn't be held liable when Diana Levine, a 63-year-old guitar player from Vermont, lost her arm after receiving the drug.

One of Wyeth's strongest arguments drew on a 2006 regulation in which the Bush administration declared that permitting product-liability suits conflicted with the FDA's role "as the expert federal agency responsible for evaluating and regulating drugs."

But Justice John Paul Stevens wrote in his majority opinion that the Bush position "is entitled to no weight." He wrote that the 2006 regulation was "inherently suspect," because it provided no evidence to support its position and gave neither states nor the public an opportunity to comment before it was issued.

The White House strategy to pre-empt state laws, which got under way in 2001, used agency regulations as a way to sidestep Congress, according to former Bush domestic policy adviser Jay Lefkowitz, who was a leader of the strategy. The policy had strong backing from the U.S. Chamber of Commerce and its Institute for Legal Reform.

In early 2005, The Bush Consumer Product Safety Commission issued a regulation barring state product-liability suits against mattress makers whose products catch fire. By the end of 2008, the administration had inserted pre-emption language into 50 different regulations from agencies including the Federal Railroad Administration, the Pipeline and Hazardous Materials Safety Administration, and the National Highway Traffic Safety Administration.

Mr. Lefkowitz said he and other officials working for Mr. Bush had believed the rule changes would be hard to undo. But the move to adopt some pre-emption outside the formal rule-making process may have backfired. Justice Stevens's harsh criticism may hold "significant implications for areas other than the regulation of prescription drugs," Mr. Lefkowitz said. It will make certain pre-emption cases "far more difficult to maintain," he said.

Wednesday's ruling is likely to influence the next major pre-emption case at the Supreme Court in April. It will consider whether the federal Office of the Comptroller of the Currency can bar states from enforcing their own laws against national banks. The New York state attorney general wants greater powers to sue banks.

The impact on each industry will depend on the specific laws governing it. A year ago, for instance, an 8-1 Supreme Court found that medical devices were exempt from state product-defect lawsuits as long as the manufacturer had complied with the FDA approval process. In that case, Congress had specifically pre-empted state regulation of medical devices, and implied that private suits under state law were also barred.

Congress is currently considering legislation to nullify the medical-devices decision. House Energy and Commerce Chairman Henry Waxman (D., Calif.) said the Wyeth ruling gives patients a "critical check that helps ensure the safety of pharmaceuticals."

The biggest impact will be on the drug industry, which has been hammered by lawsuits, especially since Merck & Co.'s painkiller Vioxx was withdrawn from the market in 2004. Large settlements -- like Merck's $4.85 billion deal with patients who claimed the pain drug caused their heart attacks -- have helped drive down drug shares.

The specter of the Supreme Court's opinion has slowed some suits, including cases on Wyeth's Effexor antidepressant and GlaxoSmithKline PLC's antidepressant Paxil, noted James Beck, counsel at Dechert LLP, who represents drug companies.

AstraZeneca PLC's Seroquel antipsychotic drug is facing some 9,000 lawsuits from patients claiming the medicine contributed to their diabetes. Ed Blizzard, whose Houston law firm is among those leading the litigation, said, "I think this decision is a total and complete victory for consumers, including Seroquel consumers who have filed claims against drug companies."

Industry lawyers interpreted the high court's ruling more narrowly. "This is a finding that will clip pre-emption's wings, but there is nothing in here that makes it impossible," says Mr. Beck. Pre-emption could remain a valid defense for drug makers if the FDA has specifically looked at a particular risk and concluded that it's not necessary to warn about it, he said.

PhRMA, the drug industry's trade group, expressed disappointment. Paul Schmidt, the group's outside counsel at Covington & Burling, said the number of new lawsuits filed against drug makers rose from 2,700 in 2001 to 17,000 in 2005 -- an increase that threatens to cut down on innovation and increase prices. "Without some kind of protection for industry, it's a real risk," he says.‹

[flatlander_60048]

Might Levine influence FDA?

Hi Dew

I find the Levine case an extremely interesting study in the law of unintended consequence. During the trial the defense pointed to an executive branch policy memo that FDA approval restricted potential plantiffs from sueing in State Court. This was apparently sought to provide protection from what the Bush administration viewed as runaway frivolous lawsuits. The unintended consequence appears to have been an FDA that viewed the lack of plaintiff recourse in the State court system as reason to put the clamps down on the whole approval process by demanding numerous additional studies etc. There has been much discussion on this board on how conservative the FDA has become. This change in FDA attitude appears to correspond precisely with the executive branch policy memo issuance.

Now, might the Supreme Court decision have the unintended or maybe intended consequence of lifting some of the burden of infalibility off of FDA's shoulders? In short, if product liability can be determined in the State Courts- I believe FDA may see this as a positive since they may weigh that damaged parties will be left with a recourse, if an unknown side effect results in damages.

While I realize that high profile fumbles on the FDA's part (i.e., Vioxx) undoubtedly play into the level of conservatism they have exhibited over the past few years. However, I can't help but feel this has to be looked upon by FDA as taking some of the heat off.

Do you think this could result in some level of reduction in the ultra conservative mindset at FDA?

Regards FL