USA: 'Pre-emption' principle

Friday, June 13

Costly litigation has long served as a substitute for strong federal regulation in the United States.  In the healthcare industry, which is largely based on a system of private insurance, this may have helped drive up prices.

However, this could be about to change.  Recent US Supreme Court rulings on medical devices, and a potentially landmark pharmaceutical case scheduled for decision this autumn, have found that certain federal statutes and agency regulations 'pre-empt' product liability suits.

This could lead to a major improvement in the legal climate for medical device manufacturers, drug companies and insurers.

The Supreme Court is expected to hand down a ruling this autumn in Wyeth vs Levine, that may 'pre-empt' product liability suits when a drug has been approved by the Food and Drug Administration (FDA) -- even if it is subsequently determined that the drug caused injury.

The ruling would cap a series of recent pharmaceutical industry victories, often on pre-emption grounds.

• On May 28, separate state appellate courts handed down two significant decisions in Vioxx litigation, which largely dismissed significant jury verdicts for the plaintiffs.

• Merck withdrew its Vioxx painkiller from the market in September 2004, following release of a study that linked the drug to increased heart attack risk.

Yet the ruling would have a negative impact on the legal industry.  Plaintiffs' lawyers will find it even more difficult to bring significant claims, while corporate law firms may see a significant drop-off in their revenues, of which pharmaceutical claims comprise a significant share.