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Aug 23, 2011

Language in Bill and Capitol Hill Politics Create Cloudy Outlook for Sunshine in Litigation Act

Where product liability suits are concerned, the status quo is most likely to prevail.

Language in Bill and Capitol Hill Politics Create Cloudy Outlook for Sunshine in Litigation Act

Of 17 “Examples of Court Secrecy” highlighted by the Senate Judiciary Committee, eight involved drugs or medical devices that were the subject of litigation. [© iQoncept - Fotolia.com]

  • While the U.S. Senate prepares next month to approve word-for-word the closely watched patent reform bill passed June 23 by the House of Representatives, both chambers of Congress also have pending before them an intellectual property measure with no less significance to biotech, pharmaceutical, and medical device companies.

    The Sunshine in Litigation Act of 2011 (S 623 and HR 592) would bar courts from entering “by stipulation or otherwise” an order “restricting the disclosure of information obtained through discovery, an order approving a settlement agreement that would restrict the disclosure of such information, or an order restricting access to court records.” While setting forth significant exceptions, the act would apply “in any civil action in which the pleadings state facts that are relevant to the protection of public health or safety,” according to the bill.

    “Biopharma may be more vulnerable to the effects of the Sunshine in Litigation Act due to the nature of the industry, i.e., healthcare and medicinal products would almost always fall within the ‘public health or safety’ language of S. 623,” Michael J. Laszlo, an associate at the law firm Laszlo & Associates told GEN. “Further, a single exposure of proprietary information could irreparably harm a biopharma business. Opposing parties, be they competing corporations or personal injury plaintiffs, will leverage this fear of exposure to force settlement.”

    Laszlo cited the use of the word “pleadings” in S. 623. “A complaint is a pleading, and even a poorly pled complaint, facing a motion to dismiss, could lead to discovery of the type that would harm a business to the point where it is not worth the risk of exposure and the firm would settle where it otherwise would have enforced its rights,” he added.

  • Support in Congress

    With Congress divided between a Democratic-controlled Senate and a Republican-controlled House that professes to be business-friendlier, and with a presidential election just over a year away, it’s hard to see the legislation succeeding where earlier versions in 2008 and 2009 failed.

    The 2009 bill died in the Senate Judiciary Committee only a year after it approved a similar measure. Then as now, the Sunshine in Litigation Act was introduced in the Senate by Sen. Herb Kohl (D-WI), who will retire after 2012. Co-sponsors this year include Judiciary Committee Chair Sen. Patrick Leahy (D-VT), Sen. Lindsey Graham (R-SC), and Sen. Dianne Feinstein (D-CA). Rep. Jerrold Nadler (D-NY) has introduced a companion version of the bill in the House, with no co-sponsors recorded.

    “Senator Kohl is now looking for ways to move it through the full Senate,” the senator’s press secretary, Dawn Schueller, told GEN.

    One point in his favor: This year’s version of the bill has cleared the Senate Judiciary Committee, which on May 19 moved the legislation along by reporting it favorably to the full Senate. The panel voted 12–6, with Graham and Chuck Grassley (R-IA) siding with all 10 Democrats; the remaining Republicans voted against.

  • Biopharma Targets

    While Sunshine in Litigation would affect a broad range of businesses, biopharma and medical device concerns can be forgiven if they feel targeted by the measure. Of 17 “Examples of Court Secrecy” highlighted by the Senate Judiciary Committee in a report intended to justify support for the bill, eight involve drugs or medical devices that were the subject of litigation, the most of any specific industry. Among them:

    • The painkiller Zomax, made by McNeil Pharmaceuticals (now Janssen Pharmaceuticals, a unit of Johnson & Johnson) and withdrawn from the market after McNeil settled dozens of lawsuits with sealed settlements.
    • The schizophrenia and bipolar disorder drug Zyprexa made by Eli Lilly, which used sealed settlements to settle 8,000 cases linked to effects of the drug in 2005 for $690 million without admitting wrongdoing. The settlements were made public the following year by The New York Times.
    • The ear infection medicine phenylpropanolamine (PPA), linked to the 1996 death of a seven-year-old boy whose mother agreed to keep secret the information she learned and the terms of her settlement with the drug’s manufacturer.
    • The Bjork-Shiley heart valve made by Shiley Inc., later acquired by Pfizer and connected with at least 619 fractures, two-third of which have been reported to have resulted in death. Pfizer pursued lawsuit settlements that would have forced plaintiffs to stay silent on details of their cases before the FDA removed the product from the market.
    • The Dalkon Shield intrauterine birth control device, whose manufacturer A.H. Robins settled numerous cases with confidentiality agreements. The shield was linked to 11 deaths and 209 cases of spontaneous abortion.
    • Silicone breast implants, whose dangers were discovered during litigation in 1984 but remained undisclosed for years afterward.
    • Dietary supplements containing Ephedra, banned by the FDA in 2004. The ban survived a court challenge in 2006, the year that one maker, Metabolife, agreed to settle 21 claims totaling $130 million for $4.7 million, then another $56 million to settle more than 250 claims. The claims helped drive the company into bankruptcy.
    • The antipsychotic drug Seroquel. In March, AstraZeneca agreed to pay $68.5 million, without admitting wrongdoing, to settle claims by 37 states and the District of Columbia that the company promoted the drug for unapproved uses such as treating insomnia and Alzheimer disease. AstraZeneca agreed last year to a $520 million settlement with the U.S. government over claims of off-label uses.
  • Decrying Secrecy

    “In the many examples cited above, it is clear that judges do not always consider public health and safety,” the Judiciary Committee concluded in its report. “As a result of the differing interests of judges, plaintiffs, defendants, and the public, current litigation practices do not adequately protect the public from court-endorsed secrecy that conceals public health and safety hazards.”

    Kohl, in a statement, argued beyond legalities: “Had information about these harmful products not been sealed by court orders, injuries could have been prevented and lives could have been saved.”

    A coalition of consumer groups expressed their thoughts in an April 14 letter. The coalition included the Alliance for Justice, The Center for Justice and Democracy, Consumers Union, Consumer Federation of America, National Consumers League, US PIRG, and Public Citizen.

    But a coalition of business groups—whose members include the Pharmaceutical Research and Manufacturers Association of America (PhRMA), the National Association of Manufacturers, and the U.S. Chamber of Commerce—asserts that the bill would severely restrict existing judicial discretion to protect the privacy, property, and confidentiality of litigants by requiring federal judges to make what it deems premature decisions about information produced in civil trials.

    “Ultimately, S. 623 would increase the costs and burdens associated with civil litigation while stifling the federal court system,” the Coalition to Protect Privacy, Property, Confidentiality, and Efficiency in the Courts wrote in a May 3 letter to the Judiciary Committee. “Finally, the bill would confer unfair tactical advantages on certain litigants at the expense of others.”

    More worrisome for drug and device developers, Sunshine in Litigation will make it harder to protect trade secrets and other intellectual property for products that are the subject of a trial, Matt Webb, director of legal reform policy for the U.S. Chamber Institute for Legal Reform, told GEN.

    “If you get sucked into any sort of litigation—which those in the biopharma world always do because of the nature of the products they produce and the research they are doing—your ability to get a protective order to protect your trade secrets and what-have-you is going to be greatly diminished,” Webb said. “The evidentiary burden that’s going to have to be met in order to obtain a protective order is going to be challenging. And the result is that you may basically have your processes and other types of confidential internal information, which any sort of competitor would be very happy to get their hands on, put out for the world to see and your competitors to see.”

    With the ability to secure protective orders diminished, Webb said, litigation would become more burdensome and challenging. “The likelihood of both companies as well as individuals being willing to settle litigation if a protective order can’t be put in place is going to be greatly diminished.”

    “Basically you’re ‘in for a penny, in for a pound’ as far as litigation is concerned. It may make more sense just to roll the dice and to litigate the case to its fullest extent,” Webb added.

    As he correctly notes, that may have the unintended effect of hurting consumers, since many have prevailed in litigation against businesses in and outside of biopharma by compelling defendants to settle cases for significant sums of money. Neither the coalition nor other business groups have come out, however, with any attempt at quantifying the bill’s costs in time and money.

    PhRMA referred questions to the U.S. Chamber of Commerce. PhRMA’s biotech counterpart, the Biotechnology Industry Organization (BIO), opposes Sunshine in Litigation, communications director Stephanie Fischer told GEN.

  • Exemptions in the Act

    Yet the bill as amended to clear the Judiciary Committee also includes language that should give opponents some comfort and should give supporters pause, namely exemptions from the measure that would allow judges to continue granting orders limiting information disclosure following “independent findings of fact” that:

    • such orders would not restrict the disclosure of information relevant to the protection of public health or safety.
    • public interest in the disclosure of past, present, or potential health or safety hazards is outweighed by a specific and substantial interest in maintaining the confidentiality of the information or records in question and the order is no broader than necessary to protect the confidentiality interest asserted.

    Such language is broad enough for judges of different ideological stripes to apply so differently as to leave the new law no better than current law in leaving discretion to judges about how to apply it. As with current law, judicial discretion could be tempered, however, by appellate court reviews.

    “Proponents of S. 623 will argue that (B)(i) gives discretion to the judge, but the judge already has discretion under existing rules, and S. 623 would only pressure judges, by statute, to over expose information in the name of S. 623. Ultimately, the reach of S. 623 will all come down to various interpretations and could eventually snowball to the point where a suit between, for example, Apple and Microsoft could yield damaging disclosure of proprietary info all in the name of public safety,” Laszlo said.

    The language of the bill and the politics of Capitol Hill help ensure that where product liability suits are concerned, the status quo is most likely to prevail, whether the bill stalls in the House, stalls in the full Senate, or instead, makes the unlikely leap to becoming law.


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