Wednesday, December 15, 2004
How to shoot yourself in the foot, with some help
[Henry I. Miller, "How lawsuits can kill," Competitive Enterprise Institute, 10 December 2004.]
There is a conception, no doubt prodded on by trial lawyers, that companies have "plenty of money," and that there is no reason for the average person not to get a piece of the action. That sort of logic is clearly having an impact on the state of industry in this country, though. What seems to be taking place is a case of concentrated costs/concentrated benefits, and dispersed costs/dispersed benefits. Individual companies pay large sums of money to individual law firms, and consumers receive small settlements and will see a minor decline in innovation and availability of treatments on an individual level. That's hardly a sustainable model, and something will eventually have to give:
In spite of a generally high level of quality control in the industry and intense scrutiny by the FDA, drug and vaccine manufacturers are tempting targets for litigation. The threat of liability suits—even in the absence of evidence of any wrongdoing or product defect—makes these companies wary, but it also shifts their focus from whether the product actually is safe to how vulnerable the product is to lawsuits. A perfect example is a drug called Bendectin, which for many years was an excellent treatment for the morning sickness of pregnancy, until the manufacturer stopped selling the drug in the United States.
Safety problems? Unprofitability? Not at all. Frivolous, debilitating lawsuits killed this drug and relegated American women to munching crackers and quack cures. During the 1970s and 1980s, almost 2,000 lawsuits were filed, alleging that Bendectin had caused birth defects. Not a single judgment went against the manufacturer, but Bendectin was pulled from the market because of fears that an unreasonable and hostile jury might someday award huge damages.
Runaway litigation also drives up costs for health care, makes doctors practice medicine defensively and stifles innovation. A study by Price Waterhouse Coopers said it best: "In the last 20 years, personal injury lawyers have found litigation against health-care providers and pharmaceutical manufacturers to be a lucrative growth area in their practices. Litigation that has enriched personal-injury lawyers, however, is adversely impacting both the quality and the cost of health care for the rest of us." ("The Factors Fueling Rising Health-care Costs," April 2002)
The scare tactics used by some personal-injury lawyers trolling for clients frightens patients off their medications, discourages doctors from prescribing others and causes parents to withhold vaccinations from their children. How can we possibly have quality health care in such an environment?
[Henry I. Miller, "How lawsuits can kill," Competitive Enterprise Institute, 10 December 2004.]
There is a conception, no doubt prodded on by trial lawyers, that companies have "plenty of money," and that there is no reason for the average person not to get a piece of the action. That sort of logic is clearly having an impact on the state of industry in this country, though. What seems to be taking place is a case of concentrated costs/concentrated benefits, and dispersed costs/dispersed benefits. Individual companies pay large sums of money to individual law firms, and consumers receive small settlements and will see a minor decline in innovation and availability of treatments on an individual level. That's hardly a sustainable model, and something will eventually have to give:
In spite of a generally high level of quality control in the industry and intense scrutiny by the FDA, drug and vaccine manufacturers are tempting targets for litigation. The threat of liability suits—even in the absence of evidence of any wrongdoing or product defect—makes these companies wary, but it also shifts their focus from whether the product actually is safe to how vulnerable the product is to lawsuits. A perfect example is a drug called Bendectin, which for many years was an excellent treatment for the morning sickness of pregnancy, until the manufacturer stopped selling the drug in the United States.
Safety problems? Unprofitability? Not at all. Frivolous, debilitating lawsuits killed this drug and relegated American women to munching crackers and quack cures. During the 1970s and 1980s, almost 2,000 lawsuits were filed, alleging that Bendectin had caused birth defects. Not a single judgment went against the manufacturer, but Bendectin was pulled from the market because of fears that an unreasonable and hostile jury might someday award huge damages.
Runaway litigation also drives up costs for health care, makes doctors practice medicine defensively and stifles innovation. A study by Price Waterhouse Coopers said it best: "In the last 20 years, personal injury lawyers have found litigation against health-care providers and pharmaceutical manufacturers to be a lucrative growth area in their practices. Litigation that has enriched personal-injury lawyers, however, is adversely impacting both the quality and the cost of health care for the rest of us." ("The Factors Fueling Rising Health-care Costs," April 2002)
The scare tactics used by some personal-injury lawyers trolling for clients frightens patients off their medications, discourages doctors from prescribing others and causes parents to withhold vaccinations from their children. How can we possibly have quality health care in such an environment?
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