Could open source be a better way for big pharma?

Big Pharma is in a bind. A big bind.

As James Surowiecki explains in this excellent piece there are some really big problems looming for pharmaceutical companies. And like the saying about banks, when the problems are big enough, they’re our problems, not just the companies’.

You see they can be sued for the damage their drugs do. That seems reasonable, and some of the court cases against tobacco companies, and asbestos manufacturers and drug companies behaving similarly years ago – eg Distillers manufacturers of Thalidomide – couldn’t have happened to a nicer bunch of people.

As the theory goes some nice juicy payouts will improve the incentives these companies face.

But things are different now. For a long time it’s been clear that standards of legal liability do not tally particularly well with science. If you’re a company making something that harms someone, lawyers and the juries they direct can easily find you liable for harm done, even if you’ve taken reasonable steps to avoid that harm, and even if a bit of foresight would demonstrate that a finding of liability could jeopardise the commercial existence of a very worthwhile product that brings help to millions of people.

In theory of course even if there is no negligence on behalf of the company, getting it to fund the costs of mishaps is no bad thing it’s just internalising the costs of the drug. But the scale of damages awarded can be very capricious which is not very surprising when people are valuing lives. Blowed if I know how to value a life. Anyway, here’s Surowiecki.

One Wall Street analyst has estimated that the company could face a total bill of more than fifty billion dollars. The impending parade of jury verdicts and out-of-court settlements may render a kind of rough justice. But you may not realize just how rough. . . .

According to the Harvard law professor W. Kip Viscusi, more than half of all “blockbuster awards”¢â¬âthose totalling more than a hundred million dollars¢â¬âhave been decided since 1999. The system that produces these awards is often perplexingly arbitrary. Where a case is tried, for instance, can have an enormous effect on how much a company ends up paying. (Two states, Texas and California, have been responsible for almost half of all blockbuster awards.) Nor is the level of scientific rigor in such cases always high: litigation over silicone breast implants cost Dow Corning $2.3 billion and forced it into bankruptcy even though the implants have never been proved to cause immune disorders, as plaintiffs alleged.

Merck would seem to have one big thing in its favor: the company voluntarily withdrew Vioxx from the market. But while Merck executives may have hoped to persuade people that they were acting responsibly, plaintiffs’ attorneys have taken the withdrawal as an admission of guilt. Questions about Vioxx’s potential risks have been common since its introduction, six years ago, especially after a 2000 trial suggested that the drug increased the risk of heart disease. Merck did not hide these data, and beginning in 2002 the drug’s label included a warning about the possible cardiovascular risks. . . .

Internal company documents show that Merck employees were debating the safety of the drug for years before the recall. From a scientific perspective, this is hardly damning. The internal debates about the drug’s safety were just that¢â¬âdebates, with different scientists arguing for and against the drug. The simple fact that Vioxx might have risks wasn’t reason to recall it, since the drug also had an important benefit: it was less likely to cause the internal bleeding that aspirin and ibuprofen cause, and that kills thousands of people a year. . . .

While that kind of weighing of risk and benefit may be medically rational, in the legal arena it’s poison. Nothing infuriates juries like finding out that companies knew about dangers and then “balanced” them away. In fact, any kind of risk-benefit analysis, honest or not, is likely to get you in trouble with juries. In 1999, for instance, jurors in California ordered General Motors to pay $4.8 billion to people who were injured when the gas tank in their 1979 Chevrolet Malibu caught fire. The jurors made it plain that they did so because G.M. engineers had calculated how much it would cost to move the gas tank (which might have made the car safer). Viscusi has shown that people are inclined to award heftier punitive damages against a company that had performed a risk analysis before selling a product than a company that didn’t bother to. . . .

I’m not trying to guess the econmically or morally right outcome in the Vioxx case. As Surowiecki argues

Companies like Merck, which spend hundreds of millions on ads targeting consumers, have themselves to blame, too. Instead of getting people to think about drugs in terms of costs and benefits, these ads encourage people to think of medicine in the same way they think of other consumer goods. It would be one thing if Merck had marketed Vioxx only to people who really needed it¢â¬âpeople who couldn’t take ibuprofen or aspirin safely. Instead, the company marketed it aggressively to everyone, so that some twenty million Americans had Vioxx prescriptions. That’s why the potential damages against Merck are so vast. If juries have a hard time accepting a risk-benefit trade-off when it comes to drugs, it’s in part because the drug companies have convinced them that no such trade-off has to be made.

Still I think you can see the problem and throwing around moral judgement like A Current Affair won’t solve any problems. All of which leads me to two suggestions. One pretty straightforward, the other more radical, but given the circumstances, I think it may just be a matter of time before some pharmaceutical companies try it for all I know some have.

1. When we have tort law reform, how about a bit less arbitrarily curtailing people’s rights to compensation at law and a little more work on requiring courts to make decisions according to the principles of science and of risk management.

2. No doubt we’ve lost oodles of potentially useful drugs already for fear of the potential liabilities. The situation that confronts the drug companies is such that you’d shut down most projects that demonstrated side effects even if further investment might provide ways of dealing with them, or failing that, the beneficial effects for some might justify the side effects (for the same or a different group). In future however, if you’re in a drug company and you’re making one of these invidious decisions should you continue with a project at any stage when new and negative information comes to light you’re in a pretty impossible situation.

So . . . if I were a pharmaceutical company, I’d be seriously considering whether to get consumers in on the act. I’d round up consumers at random (or perhaps according to some other procedure but not one that was biased) and see who’d be prepared to advise the company what to do. Surely that would protect one from a charge of negligence? If not that what would? And it would have lots of other nice properties in terms of educating the public about risks and costs and benefits.

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15 years ago

Broadly speaking this comes under the umbrella of epidemiological risk, like smoking and asbestos claims. What business needs is legal protection against tort, so long as we (the govt) allow the legal sale of a drug, chemical, mobile phone, etc, with the proviso that no company deliberately withholds pertinent research/facts from the regulator. This would encourage openness of the risk/return of such products and serve us better than the current open-ended supplier beware system. The James Hardie witch hunt is a classic example of the 20/20 hindsight disease, where current workers and shareholders are being asked to cough up social costs that were privately absconded with decades ago by the many. Hardies stopped using asbestos in the 70s while our bleating pollies nowadays allowed asbestos brake pads to be used in motor vehicles until a few yeras ago.(Dec92 as I recall) How do the hypocrites reconcile that?

15 years ago

Actually when you think about it, without reform in this area, big pharma will probably go down the JH path of protecting its assets. You could incorporate each new drug as a separate entity and it pays the parent company for ‘research, manufacturing and distribution , albeit that the solo name drug Co doesn’t own the ashtrays in its office.

derrida derider
derrida derider
15 years ago

These sorts of tort cases almost always are primarily about complex technical and economic issues, rather than moral issues that reflect community standards. Moral issues usually rightly belong with juries, but torts would be far more consistent and logical in their outcomes if payouts in torts were set by the judge, not the jury. The analogue is criminal cases where the juries do the verdict and the judge the sentence.

More broadly, though, it’s these sort of systemic problems that make me a raving socialist where pharmaceuticals are concerned.

15 years ago

Sorry, Dec 2003 the total national ban came in (I was thinking Dec 2002 originally although that would have been bad enough)