Richard Ausness is the associate dean for faculty research and the Stites & Harbison professor of law at the University of Kentucky College of Law
Last Wednesday, an Ontario court approved a $20-million settlement to around 2,000 Canadians who had brought a class-action suit against Purdue Pharma, the manufacturer of OxyContin, a powerful opioid drug.
Not only does the settlement provide compensation to the Canadian victims of opioid addiction, but it may become a precursor to lawsuits by provincial and local governments. This has now started to occur in the United States and will potentially affect not only Purdue Pharma, but other opioid manufacturers, distributors and pharmacy chains as well.
This is not necessarily good news. While governmental entities and individuals who have suffered harm deserve compensation, lawsuits that snowball out of control threaten the continued availability not only of painkillers, but of other beneficial drugs as well.
Purdue Pharma began marketing OxyContin in 1996. Its principal feature was a patented time-release mechanism that allowed its analgesic ingredient, oxycodone, to be released over a 12-hour period. Although oxycodone prescriptions at the time were generally limited to cancer patients, Purdue and other manufacturers aggressively promoted opioid drugs for the treatment of arthritis and chronic back pain. They also assured doctors and the Food and Drug Administration that these products were not addictive if used properly. Nevertheless, widespread abuse of the drug occurred in the United States and Canada.
The problem of opioid addiction in the United States first came to the attention of the general public with the publication of a New York Times article in 2001.
This resulted in a stream of individual lawsuits and class actions against Purdue Pharma shortly thereafter. Various liability theories were invoked, including negligence, defective design, failure to warn, breach of implied warranty, violation of consumer protection laws, negligent marketing, fraud, conspiracy and "malicious conduct."
For the most part, these lawsuits were not successful because Purdue Pharma was able to raise a number of defences based on expiration of the statute of limitations, misuse and lack of causation. These defences were effective primarily because courts were not sympathetic to plaintiffs whom they considered to be drug abusers.
However, the situation began to change when the federal government became involved. In the fall of 2001, the United States Attorney for the Western District of Virginia began a criminal investigation of Purdue Pharma. In 2007, the company and three of its executives plead guilty to "misbranding a drug" and agreed to pay criminal fines and civil penalties of more than $600-million (U.S.). Lawsuits were also filed by West Virginia and Kentucky and eventually settled.
However, in recent years, other states and cities in the United States have brought suits against drug manufacturers, such as Purdue Pharma, Johnson & Johnson and Teva Pharmaceuticals, Endo Pharmaceuticals, Allergan PLC and Actavis Pharma. These lawsuits have also targeted distributors, such as McKesson Corporation, AmerisourceBergen and Cardinal Health, as well as retail outlets such as Walgreens, Rite Aid and CVS. To date, approximately 25 states, counties and cities have begun legal actions against one or more of these corporations and more of them are likely to join in.
So how will it all end? One possibility is that all of the parties will get together and reach some sort of global settlement as occurred in the tobacco litigation of the 1990s. To be sure, there are parallels between today's lawsuits and the tobacco litigation of yesteryear.
In both cases, the product in question was dangerous and it imposed substantial economic costs on health insurers and governmental entities, the manufacturers engaged in advertising and publicity campaigns designed to mislead consumers and others about the risks of consuming these products, and the defendants pursued a hard-nosed "no settlement" policy that resulted in some early victories. Finally, at least in the United States, state and local officials hired outside lawyers to handle the litigation on a contingent fee basis.
However, there are also important differences. First of all, tobacco products had relatively low utility while pharmaceutical products, including opioids, are essential to the treatment of disease. Second, tobacco products were subject to minimal regulation by the government while drugs are closely regulated by the FDA. Third, and perhaps most importantly, there were only 50 or so plaintiffs in the U.S. tobacco litigation while there could be hundreds, or even thousands, of cities and states (or provinces) involved in today's drug litigation, making a global settlement much less likely.
Is litigation a viable tool for curbing bad corporate behaviour? Probably not. In the past, some companies have exercised extremely bad judgment or even committed criminal acts. While it is comforting to punish them, we should realize that companies like banks, oil companies and pharmaceutical companies provide the public with useful, and even essential, products.