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Federal regulations provide vehicle for tort reform efforts

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WASHINGTON--Manufacturers have found themselves shielded from product liability suits by a relatively new source.

With the Bush Administration blocked in its efforts to enact tort reform legislation, federal agencies have attempted to shield businesses from such suits, observers say.

They have done so by inserting language in the preambles of federal regulations that pre-empts state product liability suits. The basic idea is that federal laws and regulations supersede state laws and regulations when they conflict.

Opponents say that by pre-empting litigation in state courts, the practice upsets the valuable symbiosis between federal regulation and the civil justice system.

They also argue that pre-emption puts too much power in the hands of unelected bureaucrats working at federal agencies.

But proponents, who object to characterizing the preambles as a major break with previous administrations' actions, say pre-emption avoids jury decisions that may overlook or ignore federal regulators' expertise and, particularly in the case of pharmaceuticals, diverting valuable resources from research and development toward litigation.

The issue of federal pre-emption has been a focus of three congressional hearings in recent months, and some believe Congress may ultimately try to limit it.

It is also the focus of a case, Wyeth vs. Diana Levine, that will be heard by the U.S. Supreme Court in its next term (see story, page 28).

According to the Washington-based American Assn. for Justice, formerly the Trial Lawyers Assn. of America, limits on lawsuits have been included in 52 rules proposed or adopted by federal agencies since 2006.

Most have been issued by the Food and Drug Administration, but others include the National Highway Traffic Safety Administration, the Department of Homeland Security and the Federal Railroad Administration.

The FDA was the first to insert the pre-emption language in a January 2006 regulation regarding prescription drug labeling, according to the AAJ. The rule's preamble says the FDA "believes that under existing pre-emption principles the FDA approval of labeling...pre-empts conflicting or contrary state law."

The preambles have had an effect, said James M. Beck, a product liability defense attorney with Dechert L.L.P. in Philadelphia, who tracks the issue. Since pre-emption language has been included in FDA preambles, it has been asserted successfully in about half the court cases in which it has been proposed, "which is a much better ratio than the industry enjoyed in pre-exemption cases prior to that rule," Mr. Beck said. He said the percentage is not higher in part because "some plaintiff attorneys get appointed to the bench."

Plaintiff attorneys, consumer groups and state legislators are among those that oppose federal pre-emption.

Until this development, "the tort system has co-existed quite peacefully with the federal regulatory system for decades and decades," while businesses have innovated and thrived, said Brian Wolfman, director of the Public Citizen Litigation Group in Washington.

This symbiosis has led to incremental regulatory changes, "while at the same time, consumers harmed by faulty products" have been able to recover damages and be compensated under the legal system, Mr. Wolfman said.

Dr. Aaron S. Kesselheim, an internal medicine instructor at Brigham Women's Hospital in Boston, said, "The threat of lawsuits helps, or at least should help, encourage manufacturers to act appropriately when new data emerges" about a drug's side effects after being approved by the FDA.

The basic problem is that the FDA has neither the resources nor the authority to step into manufacturers' shoes "to warn patients and physicians about new information that emerges after the drug hits the marketplace," Dr. Kesselheim said.

Utah state Rep. David Clark, R-Santa Clara, said the FDA has a defined role in ensuring the safety of medicines and foods. "It does not allow (the FDA) the opportunity to supersede and retract existing state laws" that give citizens the right to redress their grievances through the courts, said Rep. Clark, who is chairman of the National Conference of State Legislatures' standing committees.

There is a "lack of accountability that is built into the regulatory process" with pre-emption, said Susan Parnas Frederick, NCSL federal affairs counsel. "It oversteps the boundaries of what the role of a regulatory agency ought to be."

Others, however, believe pre-emption is warranted.

"The basic pre-emption argument is really a matter of common sense," said James A. O'Neal, a product liability defense attorney with Faegre & Benson L.L.P. in Minneapolis. "It doesn't make sense to impose on manufacturers a (lot) of different, and sometimes conflicting, regulations, even when that regulation is in the form of state tort verdicts."

Michael D. Shumsky, a product liability defense attorney with Kirkland & Ellis L. L.P. in Washington, said litigation ties up resources. Particularly in the drug context, product liability suits are a barrier to bringing more affordable medicines to market. "So really, businesses and consumers alike have a strong interest in pre-emption issues," he said.

John E. Calfee, resident scholar at the American Enterprise Institute in Washington, said pre-emption of litigation under state laws, particularly in the case of the FDA, is a good idea.

"Juries are more hostile to both the FDA and the industry than they were years ago," he said. "I think there's a bigger risk than there used to be that juries will force the manufacturers to add unnecessary or unwise" warnings concerning use of prescription medications.

"Agencies are carrying out the responsibility delegated to them by Congress," said Alan E. Untereiner, a defense attorney with Robbins. Russell, Englert, Orseck, Untereiner & Sauber L.L.P. in Washington. "They're not free agents. They're implementing federal statutes and carrying out federally authorized programs."

Observers say that while the technique of using a preamble to establish pre-emption may have started in 2006, it does not represent as dramatic a break with the past as its opponents contend.

The FDA has been filing amicus briefs asserting pre-emption with regard to medical devices since at least 1999, Mr. Beck said. "It's not really political as much as a reaction by the administrative agency to the plaintiffs lawyers making new claims that directly attack administrative actions" that seek to undermine FDA decisions, he said.

The problem with amicus briefs, though, is that "courts don't have to follow them," and they have been "ignored as often as listened to," he said.

However, since it began publishing pre-emption preambles in the federal register, "the FDA's position has been accorded respect" by the courts, Mr. Beck said.