Medtech Product Liability in 2010: In Like a Lion, Out Like a Lamb

In the world of products liability litigation, 2010 was arguably more noteworthy for what did not happen than for what did.  At the end of 2009, Congress was poised to dismantle two U.S. Supreme Court decisions that had dramatically altered the landscape for medical products liability:  Riegel v. Medtronic (2008), which upheld preemption of tort claims involving premarket approval (PMA) devices, and Bell Atlantic Corp. v. Twombly (2007), which set higher standards for pleading claims in federal court.  Seemingly overnight, Riegel and Twombly extinguished thousands of mass-tort cases, including more than 8,000 claims against Medtronic over its Sprint Fidelis defibrillator leads.  With a Democrat in the White House, Democratic majorities in both houses of Congress, and a reinvigorated FDA, new legislation repealing or modifying Riegel and Twombly seemed likely.  Yet Twombly and Riegel survived and, given the 2010 mid-term election results, appear to be safe for the foreseeable future.  Meanwhile, 2010 did bring important court decisions on class actions, federal preemption, and whistleblower actions that will have repercussions – both positive and negative – for the medtech industry.

As Legislation Flagged, Regulation Gathered Momentum

The Medical Device Safety Act of 2009, introduced by Sen. Edward Kennedy and Rep. Frank Pallone and supported by the American Bar Association and the New England Journal of Medicine, would have nullified Riegel by eliminating preemption of product liability claims against medical device manufacturers.  That legislation is now dead, so personal injury tort claims involving PMA devices remain barred by federal law.  Similarly, the Notice Pleading Restoration Act of 2009, spearheaded by Sen. Arlen Specter, would have lowered the standards for plaintiffs to bring claims in federal court.  That bill never made it out of committee and is now dead.  The failure of that legislation leaves in place the pleading standard set by Twombly – which means that plaintiffs will have to come up with more than nonspecific cookie-cutter allegations in order to state a claim in federal court.   

While legislative action fizzled in 2010, the regulatory front was just warming up.  Acceding to growing pressure from public interest groups, the U.S. Food and Drug Administration's Center for Devices and Radiologic Health formed a working group to examine potential changes to the 510(k) pre-market clearance process for medical devices.  In August 2010, the group released preliminary assessments and recommendations.  Public comments raised serious concerns about impacts on innovation and small businesses.  Since the comment period expired on October 4, 2010, the FDA has been silent about its plans for modifying the 510(k) process, but most agree that significant changes are on the way. 

Cause for Optimism in Court Decisions     

The significant developments in product liability for 2010 took place in the courtroom, where a number of cases had outcomes favorable to medical technology firms.  In April, the Seventh Circuit Court of Appeals issued an important ruling in American Honda Motor Co., Inc. v. Allen that could reduce the cost and threat of class actions based on product liability claims.  The court held that when an expert opinion is important in determining whether a class should be certified, the analysis of the admissibility of that expert's testimony should occur before class certification.  This ruling could provide an early exit from class actions based on flimsy expert testimony.

Another class action case of interest to medical technology companies is UFCW Local 1776 v. Eli Lilly & Co., 620 F.3d 121 (2d Cir. 2010).  There, the Second Circuit reversed a district court's order that allowed a class action for alleged product liability defects based on the Racketeer Influenced and Corrupt Organizations Act (RICO) theory of class-wide reliance.  The case affirms the inherently patient-specific nature of physician's prescribing decisions and supports the idea that non-injury classes should not be certified in products liability cases.

Burgos v. Satiety, Inc. was noteworthy for extending preemption to IDE devices that have not yet received PMA approval.  In that case, the district court dismissed plaintiff's claims against the manufacturer of the device used in the plaintiff's bariatric surgery as part of a clinical trial.  The court held that because IDE devices are subject to oversight and control by the FDA, the same statute that bars claims against PMA devices preempted plaintiff's claims.  The ruling is an important victory for device manufacturers and supports the proposition that devices used in clinical trials should be protected from products liability claims.

Finally, in the most significant ruling of the year, the Eighth Circuit Court of Appeals upheld the dismissal of the Medtronic Sprint Fidelis litigation on PMA preemption grounds.  A year after holding in Riegel that tort claims against FDA-approved devices were preempted, the Supreme Court held that claims involving FDA-approved drugs were not preempted.  This seemingly incongruous result caused some to wonder whether the trial court's dismissal of the Sprint Fidelis cases would stick on appeal.  A split panel of appellate judges provided the answer – "yes" – but not before Medtronic agreed to settle with the claimants for $268 million. 

Troubling Trend Continued in False Claims Act Cases  

These positive developments were largely overshadowed by enormous amounts that medtech manufacturers paid to resolve whistleblower and False Claims Act (FCA) cases in 2010.  The federal government reported collecting more than $3.1 billion in FCA cases last year, with 80% of the recoveries coming from health care and pharmaceutical companies.  Most of the larger settlements involved claims of off-label marketing, product defects, mislabeling, and criminal misconduct.  FCA prosecutions have proven especially remunerative for individual plaintiffs and the federal government, and are therefore likely to continue unabated in 2011.

While 2010 was a relatively quiet year for product liability law, 2011 could be a blockbuster.  The U.S. Supreme Court will decide cases addressing federal preemption of tort claims against generic drug manufacturers and the viability of the injury compensation program under the Federal Vaccine Act.  One thing we won't see, however, is legislation aimed at rolling back decisions that help reduce the burden of product liability litigation on the medical technology industry.