substituting the FDA was (Re: [extropy-chat] Professor Being Sued etc)

[Brent Neal]

 (6/23/05 0:00) Brett Paatsch <bpaatsch at bigpond.net.au> wrote:

>> If he were better informed, he'd realize that class action, as it exists
>> today, provides very little benefit to the plaintiffs. Some have argued
>> that the plaintiffs in class action only serve to benefit the lawyers who
>> are bringing the suits.
>
>"Some"? "Only"?.  But what do you think? If the plaintiffs get some
>payout that they would not have otherwise gotten isn't that still a benefit?

It can be.  However, the 'real' payoff is typically pennies on the dollar of loss and the courts allow companies to avoid cash payouts by reimbursing plaintiffs with vouchers for more (substandard) products.  And it is this way for a reason.  The legal system avoids whatare de facto corporate death penalties.  Lets say you're a pharma company, and you've released a new painkiller.  This painkiller is found to cause irreversible heart damage and heart failure.  A class action suit is brought.  There are 100,000 members of the class - not an unreasonable number. (Understand also that there is very little done to vet the class for eligibility. Typically, you simply have to sign saying that you meet the criteria) 

Now, what is the value of permanent damage or death in the courts. That can vary wildly. But lets call it $10M, because I remember seeing wrongful death judgements both higher and lower than that.  Now. 10^7 * 10^5 = 10^12.  1 trillion dollars. Ain't no company going to pay that out.  

Now we can argue whether that number is meaningful and we can argue if the human loss is worth that amount of money (and how do you compute that? Doctor's bills + funeral costs + lost wages?).  But ultimately, the courts decide what amounts are reasonable and the amounts I'm talking about are in that range. So, by definition, if the loss is $10^12, and the total payout is $10^9, the plaintiffs are getting shortchanged by 3 orders of magnitude. Ouch. And I haven't even talked about the fact that the lawyers keep between 10 and 33% of the payoff...


>
>>  One of the key problems therein is that the lawyers have an incentive
>> to settle, due to the burden on most civil court dockets, for substantial
>> sums, but sums that are not sufficient to adequately recompense their
>> clients.
>
>Wouldn't the lawyers have incentives to maximise the payoff if they are
>getting a percentage?

Its actually another incentive to settle.  If we're talking a multibillion dollar case, a company with smart lawyers will drag it out. Its cheaper to be in court for years than to pay out, right? Plus, your shareholders rightly expect a vigorous defense.  The plaintiff's attorneys can take a settlement for 10% of the expected judgement right now, avoid a 10 year long case, and move on to the next case, which is better for them.


>> The defendant company typically admits no wrongdoing in the
>> settlement, the lawyers receive a sizable fee, and the plaintiffs receive
>> pennies on the dollars of loss.  While certainly, -some!
>> - class action suits are prosecuted effectively, an overwhelming
>> plurality of them end in a settlement that's worthless in the sense
>> that we've been discussing.
>
>ie. With respect to being a substitute for the FDA?

Yes.  Now, the schemes proposed by which UL or the Consumers Union vets the drugs have promise.  There will be ramifications for forcing consumers to pay for this research before being able to read it. (This is what CU does. UL listing is something else, and might be a better model.)  It certainly will have ramifications for the less-wealthy members of the populace.  That's an argument outside the scope of our current discussion.

>
>> Now, lets imagine a system where we've doubled or tripled the
>> number of cases of product liability. The courts would struggle to
>> handle that kind of workload, thus providing even more incentive to
>> settle and quickly.
>
>Yes. Maybe. Certainly workloads transferred to judges and juries
>still amount to work that has to be done. And perhaps less well.

More juries for longer time is a drain on the economy. More judges is an expansion of government payrolls....

>
>> The stated goal of the suit - to punish the wrongdoer
>> in order to provide a disincentive for further wrongdoing - is not met
>> and further, the person who suffered the loss would not receive
>> recompense.
>
>If the system clogs.

Its -already- clogged. :)

>
>> Sometimes, it pays to take a small dose of reality with your idealism.
>
>I'm reading "your" as one's.  I don't think I have a lot of idealism.

That's the right way to read it.  That 'your' was vague and untargetted.


>
>> In a perfect world, I'd absolutely agree with the notion of axing the
>> FDA. I'd certainly agree strongly that it needs systemic reforms right
>> now.
>
>In what respects? I think this line of exploration would take us onto
>more useful ground. ie. Identifying what is specifically wrong with
>the FDA, if anything, now. And therefore what would be real ways
>to fix it.
>

Part of the problem that I see with the FDA comes from my own experiences in the medical devices market.  The FDA has essentially one strategy for vetting devices, aids, drugs, etc. These things are not the same and need different treatments from any regulation. Another key reform I see as necessary is a 'caveat emptor' reform.  People should be able to volunteer for experiment treatments at will with no liability accruing to the company providing the treatment unless malfeasance is proven.  I believe that the latter will be necessary to preserve innovation in the medical field in the years to come. 

I'd also like to see an ombudsman system that would shed enough light on the decision-making process to make it more difficult for political appointees to influence the FDA's decision making process. But I don't know enough nitty-gritty details about that to make reasonable suggestions.


B
-- 
Brent Neal
Geek of all Trades
http://brentn.freeshell.org

"Specialization is for insects" -- Robert A. Heinlein