Top Five Drug and Device Developments of 2018

It’s that time of year again—the end of one and beginning of another—when we pause, reflect and look forward to the year ahead. In this retrospective, we consider the past year’s legal developments in the drug and medical device sphere, with brief summaries of those we believe to have significant implications for our clients and colleagues. Here are our top five picks for 2018.

1. FDA’s Proposed 510(k) Overhaul

This past year saw a dramatic increase in mainstream media focus on the medical device industry and the U.S. Food and Drug Administration (FDA). This was exemplified in the release of The Bleeding Edge documentary on Netflix at the end of July, a self-dubbed “searing exposé of the medical device industry,” and the November publication by the International Consortium of Investigative Journalists entitled “Medical Devices Harm Patients Worldwide as Governments Fail on Safety.” Industry responded to the documentary in particular, decrying it as sensationalized fearmongering. The Advanced Medical Technology Association (AdvaMed), the industry’s lobbying group, stated: “[The] film does a disservice to the hundreds of millions of patients worldwide who have benefited from medical technology. The filmmakers could have crafted a thoughtful and balanced piece that explores the latest in medical innovation, including the risks and benefits of any medical technology and how to help patients make informed choices. Instead, they chose the easy route with an irresponsible film that might cause patients to forgo what could be life-saving procedures. Where are the voices of the millions of patients who can see, hear, walk and live normal, healthy everyday lives thanks to medical technology?”

This sharpened media focus comes seven years after the Institute of Medicine released its controversial report in July 2011, originally commissioned by FDA. The report criticized the 510(k) regulatory pathway, which is the process through which the majority of medical devices reach the U.S. market. The pathway allows certain devices that fit within a risk classification profile to seek clearance from FDA if they are deemed to be substantially equivalent to a predicate device already on the market.

On November 26, with less drama and fanfare than the journalism reports but potentially more actual impact, the FDA announced a proposal to overhaul the 510(k) pathway. The proposal engendered immediate reaction from commenters on all sides of the issue. There are questions aplenty about how the proposals will be implemented, the one-size-doesn’t-fit-all plan, and what input the industry can suggest for the new framework.

The FDA was quick to point out that the use of older predicates “doesn’t mean the products are unsafe.” Rather, FDA reiterated that it “believe[s] firmly in the merits of the 510(k) process,” noting that the proposal is “aimed at continuing to ensure that new and existing devices meet our gold standard for safety and effectiveness.” With the overhaul, the FDA’s goal is to modernize the framework that has been in place for 42 years, with advances in technology creating devices that may not fit within the regulations first implemented in 1976. The proposal aims to promote the use of more recent predicates by emphasizing a 10-year cut off period with potential public disclosure of current devices that are based on predicates that are more than 10 years old, to update the De Novo pathway for low-to-moderate risk novel devices, and to create an alternative pathway called the “Safety and Performance Based Pathway” for manufacturers of certain well-understood devices to rely on objective safety and performance criteria instead of predicate devices.

Look for public feedback on certain aspects of this proposal and finalized guidance in early 2019.

2. Differing Results as to the Admissibility of 510(k) Evidence

In the past few years, several courts have held that evidence of FDA’s 510(k) clearance of devices was inadmissible at trial under Federal Rules of Evidence 402 and 403. The general rationale was that, unlike the more stringent Premarket Approval process, the 510(k) process is not relevant to a product’s “safety and effectiveness.”¹

The District of Arizona broke from this recent history, with its conclusion that the 510(k) evidence was both relevant and highly probative in Bard’s inferior vena cava litigation.² The inferior vena cava filter at issue, designed to catch blood clots before they reach the heart or lungs, received FDA clearance through the 510(k) process.³ The plaintiff had asserted design defect, failure to warn and punitive damages claims under Georgia law.⁴

The court found the 510(k) evidence to be relevant for two reasons.⁵ First, whether a manufacturer acted reasonably affects the risk-utility analysis that is crucial to design defect claims in Georgia.⁶ That Bard did comply with federal regulations is one factor the jury might consider in its reasonableness assessment.⁷ While “[c]ompliance with the regulations may not render a manufacturer’s design choice immune from liability, []it can be a ‘piece of the evidentiary puzzle.’”⁸ Second, whether a manufacturer acted with conscious indifference to the dangers posed by its device can impact a claim for punitive damages in Georgia.⁹ Again, the court found that a jury could consider Bard’s compliance with federal regulations as one factor in its assessment of whether Bard’s actions showed the requisite willful and wanton misconduct to justify punitive damages.¹⁰ According to the court, the evidence’s probative value outweighed any risk of confusion, and exclusion of this evidence would only add to the jury’s confusion.¹¹ “[I]f the evidence was half-baked, containing some references to the FDA but not explaining what role the FDA played with respect to the Bard filters, the jury would be left to speculate about the FDA’s involvement and conclusions.”¹²

However, not all courts have shifted their view. For example, a district court in Indiana did not find this rationale applicable, where the key issue was the product’s safety and the reasonableness of the manufacturer’s conduct played no part.¹³ More starkly, in Campbell v. Boston Scientific Corp., the Fourth Circuit reaffirmed its conclusion that 510(k) evidence was inadmissible under Rule 403 to show that the product was safe, even where reasonableness of the manufacturer’s conduct was an issue.¹⁴ Although Boston Scientific attempted to distinguish precedent by outlining how some products with 510(k) clearances are based on “a predicate device that was grandfathered in when the process was created” while others are based on “a predicate device that itself received a thorough safety evaluation,” the court was not persuaded, concluding the evidence would “invite a battle of the experts regarding the exact meaning of 510(k) approval,” which would only add to the confusion and waste time for the jury.¹⁵

Stay tuned to see how other Circuits decide this issue in the months and years to come.

3. A Few More States Take Positions on Tort Remedies for Generic Consumers Against Brand Manufacturers

Back in early 2015, we reported on the 2014 Alabama Supreme Court decision that made it possible for generic-drug consumer plaintiffs in the state to recover against brand manufacturers based on theories of fraud or misrepresentation, known as “innovator liability.” While Alabama has since done away with innovator liability through state legislation, we can now add Massachusetts to the short list of states (California and Vermont) that recognize the minority view that there are certain tort remedies available for generic consumers against brand manufacturers.

In Rafferty v. Merck & Co., the plaintiff, suffering from an enlarged prostate, was prescribed the drug finasteride to treat his benign prostatic hyperplasia in August 2010.¹⁶ The brand version of finasteride, Proscar, was manufactured by Merck & Co. Id. However, the plaintiff only ever ingested the generic version of the drug.¹⁷ Shortly after he started taking the drug, the plaintiff began to experience side effects including erectile dysfunction and a decrease in libido.¹⁸ The product label for the generic drug, which was identical to Proscar’s label as required by federal law, did warn of these potential side effects but represented that they would dissipate after discontinued use.¹⁹ When the plaintiff reduced and eventually discontinued use of the drug, his side effects not only did not dissipate but continued to worsen.²⁰ The plaintiff presented evidence that Merck knew of this possibility and even changed their label to reflect this in certain European countries as early as 2008.²¹ In filing suit against Merck, the plaintiff asserted claims based on negligent failure to warn and for a violation of the consumer protection statute²² In holding that a brand manufacturer can be held liable to a generic drug consumer plaintiff, the Massachusetts Supreme Court took a more nuanced approach than Alabama and California by making a distinction between claims based on ordinary negligence and those that rise to the level of recklessness.

[W]e conclude as a matter of public policy that allowing a generic drug consumer to bring a general negligence claim for failure to warn against a brand-name manufacturer poses too great a risk of chilling drug innovation, contrary to the public policy goals embodied in the Hatch-Waxman amendments. But we also conclude that public policy is not served if generic drug consumers have no remedy for the failure of a brand-name manufacturer to warn in cases where such failure exceeds ordinary negligence, and rises to the level of recklessness. In cases where, for instance, a brand-name manufacturer learns that its drug is repeatedly causing death or serious injury, or causes birth defects when used by pregnant mothers, and still fails to warn consumers of this danger, public policy does not dictate that these consumers be left with no remedy when those risks are realized, or that the manufacturer have little financial incentive to reveal these risks. We therefore hold that a brand-name manufacturer that controls the contents of the label on a generic drug owes a duty to consumers of that generic drug not to act in reckless disregard of an unreasonable risk of death or grave bodily injury. This recklessness standard strikes the most appropriate balance between competing public policy interests, limiting liability for brand-name manufacturers while also providing remedies for the most serious injuries and deterring the most dangerous forms of conduct.23

The Massachusetts Supreme Court vacated an order dismissing the plaintiff’s common-law claim and remanded to the trial court.²⁴ The parties subsequently reached settlement, and the case was dismissed at the end of November, with no tidy resolution of the legal import of the Supreme Court’s analysis for those of us keeping the innovator liability scorecard.

The Rafferty decision is in stark contrast to two other jurisdictions that addressed the issue this year, either rejecting or declining to consider the novel theory of innovator liability. First, West Virginia considered but ultimately rejected the theory, cementing its place in the majority.²⁵ And then the Seventh Circuit, in Dolin v. GlaxoSmithKline LLC, reversed a $3 million plaintiff verdict for the wrongful death of the plaintiff’s husband who only consumed a generic version of GSK’s anti-depressant Paxil.²⁶ It is important to note that the reversal was based exclusively on federal preemption. Regarding innovator liability, the court commented: “The parties and amici have briefed extensively whether Illinois law would impose a duty on a brand-name drug manufacturer toward a patient like Stewart Dolin, who took a generic form of the drug manufactured by a different company. The Illinois courts have not yet considered the new theory of liability that plaintiff advances. Because the evidence of federal preemption is decisive, we do not offer for that question of duty a prediction of state law . . . .”²⁷

The Rafferty decision continues a slow press on brand manufacturers – who hold only 10 percent of the drug market in the United States – into essentially insuring the generic products comprising a large part of the rest of the market. Hopefully the Illinois courts will answer the question the Dolin court left unanswered and put another tally in the majority in 2019.

4. Third-Party Financers and Plaintiffs’ Lawyers Pressuring Plaintiffs to File Lawsuits and Undergo Unnecessary Explant Surgeries

For some, the purpose behind certain mass tort litigation has moved from a means of obtaining a private civil remedy for loss or harm to a lucrative vehicle for investment. Third-party litigation financers have poured money into claims against drug and device manufacturers—to the point that financers are even willing to train lawyers to litigate in the mass tort space, having already exhausted the available interested plaintiffs and plaintiffs’ attorneys. Financers are now seeking to do two things: (1) recruit new plaintiffs and (2) drive up the “value” of existing plaintiffs’ damages claims.

This year, the New York Times reported on the growing phenomenon, examining “a network of doctors, lawyers, financiers and consultants lur[ing] women” into unnecessary surgeries in an effort to “improve their odds of winning large cash settlements in lawsuits against the manufacturers.”²⁸ Much about how this network operates remains a mystery. Especially concerning is how third-party financers are identifying these women in the first instance and getting a hold of their private, medical histories, potentially in violation of the Health Insurance Portability and Accountability Act. Meanwhile, third-party litigation funders are fighting hard to keep their operations in the shadows.

Several investigations are underway that may soon uncover more about how this network, and others like it, operates—including investigations by the United States Attorney’s Office for the Eastern District of New York and the Florida Attorney General’s Office.

And some device manufacturers involved in litigation over allegedly defective devices have been assertive in pursuing discovery into how some plaintiffs were led to file lawsuits or inflate their damages claims.²⁹ In its briefing, AMS summarized the issue as:

an illicit enterprise that targets and cold calls women who have received vaginal mesh implants, solicits those women (many of whom have limited education or health care options) to sue manufacturers regardless of whether the women have issues with their implants, pressures those women to obtain explant surgeries from out-of-state doctors at exorbitant prices regardless of medical necessity, creates high-interest loans secured by the women’s lawsuits to pay for the unnecessary procedures and associated expenses, and then waits for the cases to be settled to achieve a payoff.

Some courts are taking note of the implications of third-party funding and have permitted discovery into the arrangements. For example, in the opioid MDL, the judge ordered the attorneys to disclose to the court “any agreement under which any person, other than an attorney permitted to charge a contingent fee representing a party, has a right to receive compensation that is contingent on and sourced from any proceeds of an MDL Case, by settlement, judgment, or otherwise.”³⁰

This phenomenon of financed lawsuits or surgeries has serious implications for medical device manufacturers in general, potentially swelling the number of lawsuits filed and the damages claimed. In fact, “surgical funding,” where the litigation funders take it one step further than financing the litigation and actually “invest” in the plaintiffs’ operations (sometimes including “VIP” travel arrangements for plaintiffs to have the surgery) is specifically recognized as a breed of third-party litigation funding, so prevalent it has a term. If these government investigations and discovery through the court system uncover unethical efforts to convince patients to sue, the previously hidden efforts may help demonstrate the bias of any explanter’s testimony who removed a device that was either working properly or did not need to be removed and may significantly drive down the “value” of plaintiffs’ claims. It may also stem the tide of such activity in the next mass tort. There is too much to review in this year-end summary, but we have covered it more in depth and will be watching closely as it continues to unfold.

5. MDL Claim Separation Can Lead to Case Fragmentation

A decision by the Judicial Panel on Multidistrict Litigation this year reminds us that while the panel’s main goal is to centralize, it can do so by fragmenting cases—separating out claims that it deems do not belong in an MDL.³¹ Breaking up claims can streamline the issues for MDL consideration—but also may force some parties to litigate their claims in more than one forum simultaneously.

The decision arose in the Equifax data breach litigation, where one pro se plaintiff sought to vacate the Panel’s order conditionally transferring his gross negligence claim to the MDL in Georgia while at the same time separating out and remanding to the transferor court in Louisiana several of his other claims (violation of Fair Credit Reporting Act, defamation, and negligence).³² In addition to arguing that his gross negligence claim involved “unique factual issues that are not common to the MDL,” the plaintiff also argued that the transferor court had already considered and rejected the defendant’s request to sever that very claim, “finding severance would be a burden.”³³ The Panel was quick to point out “[we] are not bound by the transferor court’s ruling . . . [and] must consider not just the parties to Iraheta, but the parties in more than 400 actions pending in MDL No. 2800.” The fragmenting of cases in this way certainly poses a burden on both plaintiffs and defendants alike, but may help parties really tailor the claims they choose to plead and pursue.

Although this data breach class action decision might seem strange in a drug and device retrospective, products liability cases account for just about one-third of all pending MDL proceedings, and the decision has implications for those of us who are involved in that one-third.

Cheers to 2019—here’s to hoping another year of interesting legal developments lies ahead!