Consumer Law & Policy Blog

Liability (or not) for injuries from generic drugs

Following up on our recent post about whether state law permits brand-name drug manufacturers to be held liable for injuries caused by mislabeled generic drugs, take a look at Who (If Anyone) Should Be Liable for Injuries from Generic Drugs? by law professors Ezra Friedman and Abraham Wickelgren. Here is the abstract:

Two recent Supreme Court decisions (PLIVA, Inc. v. Mensing (2011), and Mutual Pharmaceutical v. Bartlett (2013)), have essentially removed the threat of liability from generic drug manufacturers. In this paper, we consider three possible liability regimes in two simple models of drug market competition and safety research. Specifically, we compare the Everyone Liable (EL) regime, where generics face the same liability as branded manufacturers, the No Liability for Generics (NLG) regime, resulting from PLIVA and Mutual, where generics face no liability, and a third, Branded Fully Liable (BFL) regime, where a branded developer faces liability from injuries caused by a generic version of a drug it has developed. We find that the BFL regime generally provides the most efficient incentives to identify side effects and develop an efficient warning. However, the BFL regime can lead to overconsumption of the generic drug by patients who should not take the drug at all. For this reason, the EL regime may be preferable for a drug where the danger of side effects may outweigh the clinical value, as was alleged in Mutual Pharmaceutical v. Bartlett. We find that the NLG regime that resulted from the recent Supreme Court decisions is unlikely to be optimal, because it is dominated by BFL when the consumption decision is not important, and inferior to EL when it is very important.

Alabama Supreme Court and Sixth Circuit weigh in on whether plaintiffs injured by generic drugs may recover from brand-name drug manufacturers

Back in January 2013, we told you about the ruling of the Alabama Supreme Court in Wyeth v. Weeks. Weeks held that, under Alabama state law, a patient harmed by a generic drug may recover from the brand-name drug manufacturer (on whose branded drug the generic drug is based) for failing to warn about the drug’s risks. Shortly after Weeks was issued, the Alabama Supreme Court decided to rehear the case. This past August, that court reaffimed its orginal decision.

In June 2011, the U.S. Supreme Court held in Pliva v. Mensing that injured patients' state-law failure-to-warn claims against generic-drug manufacturers are preempted by federal law because the federal Food and Drug Administration requires those manufacturers to use labeling that is the same as the brand-name labeling. Therefore, a suit against the brand-name company may be the only way a patient can obtain compensation for injuries from a mislabeled generic drug.

Contrary to Weeks, most courts to have addressed the issue have held that a patient harmed by a generic drug may not recover from the brand-name company because that company owes no duty to an individual who was not its customer. Recently, in In re Darvocet, Darvon, and Propoxyphene Products Liability Litigation, 756 F.3d 917 (2014), the Sixth Circuit, interpreting the law of twenty-two states, joined the majority view. (The highest courts of those states are of course free to reject that holding down the road.)

Nathalie Martin Article Calls for Federal Usury Cap

Nathalie Martin of New Mexico has written Public Opinion and the Limits of State Law: The Case for a Federal Usury Cap, 34 North Illinois University Law Review (2014). Here's the abstract:

This Article calls on Congress to set a federal interest rate cap of 36%, applicable to all loans. Part II of this Article briefly describes the history of usury laws in the United States and then describes the patchwork nature of modem usury law. Part III describes various types of consumer loans, including high-cost loans like payday and title loans. Part III then reviews evidence of public opinion regarding interest rate caps for consumer loans, showing that Americans of both political parties favor caps of 36% or less by a wide margin. Given the broad and deep public support for interest rate caps, the question is not whether but how to accomplish these caps.

Part IV, the heart of the Article, describes the many ways in which state regulation of high cost lending has been inefficient and ineffective. Part IV.A describes the various forms of legislation that have attempted but failed to lower interest rates and curb other abuses in high-cost lending. It describes in detail the many work-arounds used by lenders to avoid whatever state law is enacted. These work-arounds include changing loan products to get around narrow definitions in state statutes, morphing lenders into another type of entity to get around the state statutes, or moving to lending online through Indian tribe affiliation or offshore entities. Part IV.B describes the difficulties with trying to enforce state statutes through judicial means. It discusses the unconscionability doctrine and its resulting inconsistent case law, the delays caused by lender bankruptcy, the difficulties posed by recent Supreme Court law on the enforceability of anti-class action clauses and arbitration clauses in high-cost loan contracts, and finally, the mere cost of enforcement litigation as a whole. 

On-Line Arbitration Clauses Common, NYT Reports

The furor last spring over General Mills's attempt to require anyone who used its websites to arbitrate all claims against the company, which led to a highly publicized return to sanity by the company, hasn't deterred on-line retailers from using both "browsewrap" and "clickwrap" contract terms requiring arbitration of claims arising out of on-line transactions. According to an on-line New York Times column, "The Upshot," about a third of the top 200 on-line retail sites make use of either arbitration agreements or class-action bans (or both). Amazon, eBay, and Dropbox are leading examples, as is the Wall Street Journal. But according to the Times piece, Google, Facebook and the New York Times itself have not yet imposed such requirements. The Times report notes that Travelocity has successfully invoked its arbitration clause to derail an antitrust class action, but also that individual consumers have, on a few occasions, actually invoked eBay's arbitration procedure.

OT: Civil Procedure Humor

by Jeff Sovern

This is not consumer law, but perhaps readers of the blog will appreciate some Civil Procedure humor. I asked my CivPro students to write haikus about the course. Some samples: 

Minimum contacts

Then to hell with sovereignty

Now it's personal!

 

I think about you

In substance and procedure

Isn't that Erie?

 

More after the fold

 

Wilson on Prepaid Cards

Catherine Lee Wilson of Nebraska has written Making Prepaid Safe for Consumers:  A Framework for Providing Deposit Insurance and Regulation E Protections, Forthcoming in the University of Pennsylvania Journal of Business Law.  Here's the abstract:

General purpose reloadable prepaid cards are part of a larger trend toward a cashless society.  This market offers significant benefits to both traditional depository institutions and new non-bank entrants in the payments industry.  Electronic transfers significantly reduce the costs associated with paper-based payment systems.  To balance the benefits received by payment providers, consumer protections must be established to prevent consumers from becoming the sole bearers of the risks inherent in any payment system.  Simple protections, those traditionally afforded to mainstream banking clients using checking accounts and debit cards, must be adopted for the GPR prepaid product to ensure long-term product safety for consumers.  GPR prepaid cards are a new product, so deposit insurance should simply be extended to maintain the historical principles underlying deposit insurance.  Likewise, the extension of Regulation E protections to GPR prepaid cards would simply complete work initiated by the Federal Reserve eighteen years ago.  Both the EFTA and Dodd-Frank give the CFPB the authority to extend these consumer protections.  Part I of this paper will provide a brief overview of the prepaid card industry and consumer use of the GPR prepaid product.  In Part II, the paper outlines the gaps in the regulatory scheme for prepaid cards and highlights the initial steps federal regulators have taken to close the gaps. Part III outlines reasons for extending consumer protections to GPR prepaid cards by illustrating that consumers are unable to protect against risks inherent in GPR prepaid card programs.  Finally, Part IV outlines the existing statutory provisions giving the CFPB broad authority to regulate GPR prepaid cards and includes an analysis of recent proposed legislation that would provide additional support to the CFPB’s work to ensure the safety and transparency of the general purpose reloadable card for consumers.  This section highlights the CFPB’s broad power under Dodd-Frank to regulate consumer financial products to insure the consistent application of federal consumer protection laws. Ultimately, consumer safety and transparency goals will be supported by the CFPB’s comprehensive regulation of GPR prepaid cards.

The conservative's case against forced arbitration

...is laid out persuasively here, by fellow CL&P blogger Paul Bland of Public Justice. He demonstrates why forced arbitration contravenes Tea Party principles.

Consumer Advisory: Vehicle Owners with Defective Airbags Urged to Take Immediate Action

From the National Highway Traffic Safety Administration (NHTSA):

October 20: NHTSA urges owners of certain Toyota, Honda, Mazda, BMW, Nissan, and General Motors vehicles to act immediately on recall notices to replace defective Takata airbags. The message comes with urgency, especially for owners of vehicles affected by the regional recalls in the following areas: Florida, Puerto Rico, Guam, Saipan, American Samoa, Virgin Islands and Hawaii.

More than 4 million vehicles are implicated, reports the Washington Post here. As the Post describes the safety issue, "At least four people have died when inflator mechanisms ruptured on the air bags, spraying the passengers with metal fragments."

Look and see if your vehicle is affect by entering the VIN at www.safercar.gov/vinlookup. (Seriously. You should do this.)

 

Employment rights and arbitration

Law professor Imre Szalai has written More than Class Action Killers: The Impact of Concepcion and American Express on Employment Arbitration. Here is the abstract:

This Article highlights how two recent U.S. Supreme Court decisions, AT&T Mobility LLC v. Concepcion and American Express Co. v. Italian Colors Restaurant, although involving class actions, could impact individual employment arbitration proceedings and destabilize the broader legal framework supporting arbitration in the United States. The shrinking scope of judicial review of arbitration agreements should prompt a broader debate about the relationship between the courts and a system of arbitration. If employment arbitration is to have any legitimacy, judicial review of arbitration agreements should be increasing in scope rather than decreasing, to ensure that employees knowingly and voluntarily entered into arbitration agreements.

CFPB issues final rule on annual privacy disclosures

The Consumer Financial Protection Bureau has issued this final rule concerning the requirement that financial institutions provide an annual disclosure of their privacy policies to their customers. In some situations, financial institutions will be able to post the information online rather than provide them individually to customers, but only if the institution informs consumers annually about the availability of the online disclosures. Here's how the CFPB summarizes the key attributes of the new rule:

• Constant access to privacy policies: Previously, consumers would receive a copy of their financial institution’s privacy policies once per year. If financial institutions choose the new alternative delivery method, consumers will be able to view their institution’s privacy policies at any time, while still receiving notices through existing delivery methods if the policies’ terms change. The online privacy notices will not require a login to view. For those customers with limited or no internet access, financial institutions will have to mail annual notices within 10 days to customers who request them by phone. 
• Limited data sharing: If an institution shares data with unaffiliated third parties in a way that triggers customers’ rights to opt out of such sharing, then that institution generally would not be allowed to use the alternative delivery method. For this reason, financial institutions have an incentive to limit their sharing to reduce their costs.
• Educating consumers: When financial institutions post their privacy policies on their websites using the new delivery method, they must use the model disclosure form designed by federal regulators. The model disclosure form allows consumers who are concerned about their personal information to easily understand their financial institution’s privacy policy. Consumers can thus better educate themselves about the various types of privacy policies.
• Cheaper for companies to notify consumers of privacy practices: The CFPB anticipates that the rule will reduce the cost for companies to provide annual privacy notices. The Bureau estimates that about $17 million could be saved by the industry annually if institutions choose the new online disclosure method.