OxyContin®, Xarelto®, IVC Filters, Transvaginal Mesh and Zofran® are just some of the top drug and devise cases that have been at the center of the mass tort discussion. Big pharma has paid out millions of dollars to resolve injury claims alleging deceptive marketing, defective products and failure to warn. The majority of cases were litigated as mass torts, where thousands of plaintiffs claim to have suffered harm from a defendant’s product.
What is a mass tort? The traditional way to define it is in contrast to a class action suit. A mass tort is established if the factual situations between the plaintiffs are too different and outweigh the common issues necessary for a class action. In most cases, mass tort claims have been filed when consumers are injured on a large scale by defective drugs or products.
A sea changeBut the opioid crisis has launched a new era of mass claims. Historically, torts around medical devices and drugs involved individual patients or groups of people who suffered injury. Today, the plaintiff bar is made up of larger scale players such as municipalities and third party payers who site “financial injury.” According to Forbes, the claims range from local governments seeking to recoup spending on hospitals, foster care and other social services associated with opioid addiction to payers who want to claw back some of the losses they’ve incurred in this crisis. Currently, there are over 2,000 filed suits throughout the U.S. against manufacturers, distributors and retailers of opioid drugs.
At a recent conference in California, one speaker noted, “Smaller defendants could be facing bankruptcy from the wave of litigation, and even the largest defendants such as McKesson, CVS and Wal-Mart will likely resist any settlement that doesn’t put an end to the threat of further lawsuits.”
How did we get here?Opioid addiction has grown in three stages according to Poison Control. Phase one began in 1991 following a steep rise in deaths as prescriptions for opioid-infused drugs began to be used more and more for pain treatment. Phase two began in 2010 with the rapid increase of deaths from heroin abuse. And Phase three kicked off in 2013 with deaths related to synthetic opioids such as fentanyl.
The onslaught of mass tort litigation
Purdue Pharma, maker of OxyContin, recently settled one of the largest opioid mass tort cases on record. The announcement was stark: “The maker of OxyContin and the company’s controlling family agreed to pay $270 Million in a deal with the state of Oklahoma to settle allegations they helped set off the nation’s deadly opioid crisis with their aggressive marketing of the powerful painkiller.”
This ball was set in motion many years before the very recent settlement. In fact, the litigation goes back more than a decade:
- In 2004, West Virginia sued Purdue for reimbursement of “excessive prescription costs” and Purdue settled by paying the state $10MM for programs to discourage drug abuse.
- In 2007, Kentucky sued Purdue for OxyContin abuse in Appalachia. Eight years later, the state settled with Purdue for $24MM.
- In 2017, Everett, Washington sued Purdue for costs related to policing, housing, healthcare, rehabilitation and loss of life.
- In 2018 six states — FL, NV, NC, ND, TN and TX filed lawsuits charging Purdue with deceptive marketing practices.
- In March 2019, Purdue Pharma reached a $270MM settlement filed by Oklahoma which claimed opioids contributed to the deaths of thousands.
What does this mean for the innovators?
In light of this new era of mass tort litigation for “financial injury”, what happens to the early stage development companies? What happens to the smaller private company players vs. the small to mid-cap public traded life science companies who are marching along through clinical trials fast-tracked to earned FDA approval? What about the ones already commercialized?
According to “Anatomy of a Mas Tort 2.0,” “A mass tort hardly needs a trigger anymore. In the end, all that’s necessary is a drug or a device with a decent sized market and something to attract the other side’s lawyers.”
What do drug developers and even manufactures need to do to mitigate risk in today’s environment of mass torts for financial injury?
Gallagher Life Sciences group has its hand on the pulse of this new trend. We believe developers and manufacturers need a strategy for protecting your business, and this begins with a dialog between the C-Suite and your broker/outsourced risk management firm.
A thorough review and an understanding of how your current insurance programs will transfer risk around financial injury are essential. You can insure for product liability or clinical trial liability; those policies are available today. But if your new product maintains the potential to negatively impact 3rd parties outside of the consumer/patient — and you go to market — you and your risk manager need to understand where coverage starts and where it stops, as well as the options for risk transfer.
So, here are some key questions to start the conversation:
- Has your risk management team done a full assessment of how much risk you are retaining and how much risk you are transferring?
- Have you proactively evaluated how your risk profile shifts for each phase of development; from R&D to the clinic to commercialization?
- Are you fully aware of all the insurable risks associated with each of these critical phases?
For answers to these questions and more, contact Gallagher Insurance Life Sciences for Risk Management and Consulting.