The Pre-emption Prescription

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In July, a federal judge in the Southern District of Indiana did something unusual on a motion to reconsider a controversial drug-labeling case: He reconsidered it in depth.

In fact, in what some saw as a jaw-dropping decision, U.S. District Judge David F. Hamilton reversed himself.

Ten months earlier Judge Hamilton had summarily dismissed Tucker v. Smith­Kline Beecham Corp., a lawsuit brought by the sister of a Catholic priest who committed suicide 22 days after he began taking the antidepressant drug Paxil. The suit alleged that the drug’s labeling had failed to warn patients and physicians of an increased danger of suicide.

In its defense, Smith­Kline (now GlaxoSmith­Kline) argued that the drug’s labeling was approved by the Food and Drug Ad­minis­tration—and the company could have faced criminal charges had it changed the label­ing to reflect an increased risk of suicide.

The judge said this issue of federal pre-emption had weighed heavily in his earlier decision. The drug company’s need to follow FDA labeling regulations, he had previously believed, outweighed any liability under state laws. Fed­eral rules rule.

Daniel Troy
Photo by Ron Aira

But in shifting direction, Judge Hamilton said he had “failed to appreciate” the gritty details of the actual drug labeling process: That when a drug company has reasonable evidence that its product presents a serious hazard, FDA rules allow it to make changes without prior approval.

From early 2006 through Hamilton’s unexpected reversal, drug and medical device companies had been on an unprecedented courthouse roll—even in the wake of well-documented controversies over prescription drugs like Vioxx and Celebrex. Armed with a little-noticed expression of FDA policy, the deep-pocketed defendants found courts—especially federal courts—receptive to the pre-emption of state liability statutes in virtually every corner of the country, including the U.S. Supreme Court.

“There were a couple of losses in state courts and about a dozen victories in federal courts,” says Mark Herrmann, a partner in Jones Day’s Chicago office and co-author of the authoritative Drug and Device Law blog.

“I had just given a talk on how the industry was on quite a roll, and a week after those words left my lips came the Tucker decision,” he says.

In January 2006, the FDA published a formal statement of its long-awaited labeling policy under the drab title of “Requirements on Content and Format of La­beling for Human Prescription Drug and Biological Products.” But in the policy’s preamble, FDA officials included a far-reaching declaration: “FDA approval of labeling … pre-empts conflicting or contrary state law.” Critics say the declaration was made without public notice or hearing, and seemed to reverse decades-old agency respect for state primacy in the civil enforce­ment of liability law.


Before they were published as final, the new drug-labeling rules had been under consideration for nearly six years. James O’Reilly of the Univer­sity of Cincinnati College of Law says the pre-emp­tion policy came as a surprise, even to those who had followed the process closely.

“In 2000, when the rule on drug labels was being proposed, the FDA said there was no pre-emp­tion effect. There was no issue, so no one spoke up and said there shouldn’t be pre-emption. So it was astonishing when the final rule comes out and there’s the 11-page or so preamble,” says O’Reilly, who has written extensively about the labeling rules and the FDA.

The FDA dropped another bomb in January with a new rule that would limit the ability of drug companies, in most cases, to change drug labels on their own initiative without “data, analyses or other information not previously submitted to the agency.”

Critics say the new rule would, in effect, relieve drug companies of liability for failing to warn patients and physicians of dangers and side effects not reported directly to the FDA. Moreover, the rule would bolster the pre-emption argument as it is being considered by the Supreme Court.

In November, the court is scheduled to hear arguments in a pre-emption case from Vermont that may help determine the future balance between federal regulation and state liability law. It’s the third case on pre-emption the court has taken in the past three terms. Whatever the outcome, the arguments are fundamental and fierce.

The FDA had been signaling its new attitude of tort reform regarding prescription drugs and medical devices since 2001, when a new administration at the FDA began gearing up to file “friend-of-the-court” briefs in state and federal courts claiming that federal regulations pre-empted the power of states to enforce deficiencies—or even deceptions—in prescription drug warnings.

To critics like O’Reilly, FDA pre-emption is part of a series of legal and political maneuvers that all but neu­tered the federal agency in the public eye as a regulator of public health and safety. To supporters, the agency has become far more responsive to the public need for development of new drugs and medical devices.

But from either point of view, the one person most responsible for the agency’s dramatic change was Daniel Troy, who is now vice president and general counsel at GlaxoSmithKline.


Karen Barth Menzies
Photo by Max Dolberg

Troy was chief counsel of the fda from august 2001 to November 2004. He developed and set in motion the agency’s aggressive departure from past policies, particularly the push for pre-emption. It was the most significant effort on a list of his initiatives to lessen liabilities that he believes hinder development of new drugs and keep good ones off the market. Those efforts and his methods quickly made Troy the most controversial chief counsel in the agency’s history.

For years Troy had been a corporate First Amendment lawyer at the communications law firm Wiley, Rein & Fielding. More attuned to suing the FDA than to running it, Troy guided such efforts as the fight to keep the agency from declaring tobacco a drug. Just before he joined the FDA, the job of chief counsel was reconfigured to become a political appointment, and he became its first-ever political appointee.

Troy was the right person at the right time, in the opin­ion of Peter Barton Hutt, a senior counsel with Wash­ington, D.C.’s Covington & Burling who was the FDA’s chief counsel from 1971 to 1975 and has spent nearly 50 years in and around the agency.

The issue of pre-emption became significant in recent years because of an exponential increase in product liability suits, says Hutt, who co-authors a casebook on food and drug law.

“Dan recognized the problem and it fit with some of his legal philosophy and he grabbed hold of it,” Hutt says. “And I admire him for that.”

When Troy arrived at the agency, he entered a power vacuum. The commissioner’s job had been open since before President Bush took office, and the first nominee ran into opposition from Democrats in Congress who considered him too close to the pharmaceutical industry. By the time Mark McClellan—brother of then-White House spokesman Scott McClellan—was named commissioner, Troy had already begun refashioning the agency to be in step with Bush administration policy and his own, long-held legal philosophy.

Soon after he came to the FDA, warning letters to drug companies—including concerns about false advertising and drug labeling—were rerouted through his office. The letters, which notify companies of serious reg­ulatory violations that could warrant enforcement, dropped precipitously. In 2001, the year Troy came to the agency, the FDA sent out 1,032 such letters. Two years later their number had dropped to 417.

In September 2002, the FDA filed an amicus brief in the San Francisco-based 9th U.S. Circuit Court of Ap­peals on behalf of Pfizer, one of Troy’s former clients. Although Motus v. Pfizer, a drug-label-warning case involving the prescription antidepressant Zoloft, was decided on other grounds, the agency supported Pfizer’s claim of pre-emption. Had Pfizer on its own created the kind of warning demanded by the plaintiffs, it “would have been false or misleading and would have misbrand­ed the drug in violation of federal law,” the FDA claimed. The agency went on to file similar briefs in a number of cases. And according to a sworn affidavit, Troy solicited opportunities to do so.

At a December 2003 gathering of in-house counsel and drug and medical device lawyers at the Plaza Hotel in New York City, Troy invited them to request FDA pre-emption briefs in their cases.

“We can’t afford to get involved in every case,” he was reported as saying, “[so] make it sound like a Hollywood pitch.”

In 2004, angry Democrats stripped $500,000 from Troy’s budget, shifting the money to the FDA office that monitors drug advertising—one of Troy’s First Amend­ment specialties.

A few months later, Troy returned to private practice, but the case for pre-emption endured as his legacy. And with the FDA in the lead, the new standard of pre-emp­tion has been argued by the Consumer Product Safety Commission and the National Highway Traffic Safety Administration.

In an e-mail response to questions, Troy minimized his role in soliciting amicus briefs: “The Justice Depart­ment filed amicus briefs on behalf of FDA in a very few cases where we thought that a state court’s decision was undercutting FDA’s decision-making and primacy.”

Likewise, Troy said credit for the reduction in warning letters was the result of a higher-level edict in 2001 requiring Troy’s office to review the letters for “legal sufficiency” before they were sent. He said his office concurred in “well over 90 percent” of letters reviewed.

“Apparently, I suppose,” Troy said, “they didn’t think the letters could sustain legal review.”


Peter Barton Hutt
Photo by Ron Aira

Even before troy and the issue of pre-emption, the FDA’s reputation for independent regulation was being called into question. Historically, the agency has struggled to maintain a balance between its regulatory mission and the practical needs of the industry it strives to monitor.

The modern regulatory structure of the FDA was created in 1906 with the Federal Food and Drugs Act. Over the decades what was once known as the Food, Drug and Insecticide Administration was moved from department to department before finding its current home under the Department of Health and Human Services in 1980. Its regulatory powers have increased in number and complexity.

One recurring target of criticism—from both drug companies and consumers—has been the pace at which the agency approves drugs for patient use. In the mid-to-late 1980s, for instance, the median time from application to approval for a new drug was about 30 months, more than double the current approval time. As a result, the U.S. role as an innovator in pharmaceuticals suffered inroads from European competition. Then came the AIDS crisis.

The scramble for new drugs created a renewed demand for a more efficient approval process. Con­gress was unwilling to boost the agency’s budget significantly, so in 1992 it devised a Faustian financing scheme. The Prescription Drug User Fee Act created a fee-based regulatory system that required drug manufacturers to pay for most of the drug approval process.

It was wildly successful at first. Approval time was cut by half, or more. In 1992, 26 new drugs were moved to market. By 1996, the number peaked at 53. But as some of the blockbuster drugs became mired in lawsuits and scandal, the flow returned to a trickle. By 2001, only 24 new drugs were approved. High-profit drugs were repurposed and relabeled. What endured were the fees.

“The problem is that everybody then got addicted to that money—Congress, the White House Office of Management and Budget—and they let user fees grow while in effect cutting back on appropriations,” says William Hubbard, who played a key role in developing the user fee scheme. He retired from the FDA in 2005 after more than 25 years, 14 as associate commissioner for policy and planning.

Photo by Photodisc/Getty Images

“At first the user fees were a much smaller percentage of the agency’s budget,” says Hubbard. “Congress didn’t want to raise taxes, so they just kept jacking up user fees.”

Of the agency’s $2.1 billion 2008 budget, more than 20 percent was generated from user fees. About $300 million came from new drug approval. The fee-dependent system has led to concern that the FDA is a “captive” agency—that the drug companies have, in effect, become more customers or clients than regulated entities.

In several surveys over the past decade, about 20 percent of the FDA’s researchers and physicians say they have been pressured to approve drugs despite reservations about safety and effectiveness.

In 2006, the Institute of Medicine of the National Academies issued a report that found—among other things—a significant imbalance in FDA funding: far more money, resources and efforts for approving drugs than for post-approval follow-up on their safety and efficacy. Last November, the FDA’s science board complained that Congress has increased demands on the agency without proper funding, at great cost to the agency’s effectiveness.

“The FDA cannot fulfill its mission because its scientific base has eroded and its scientific organizational structure is weak,” the board’s report stated.

Critics allege that drug companies have exploited those weaknesses. In recent years, virtually every major pharmaceutical company has been accused of hiding or manipulating information that questions the safety or effectiveness of its most profitable drugs. And plaintiffs attorneys are beginning to get traction with their contention that federal pre-emption of tort claims against the drug companies will eliminate the last effective method of back-end regulation.

“In discovery we get documents that otherwise never would see the light of day—documents the FDA doesn’t get,” says Karen Barth Menzies, a partner at Robinson, Calcagnie & Robinson, a Newport Beach, Calif., firm pursuing claims against GlaxoSmithKline regarding the antidepressant Paxil.

“They’re usually under seal and it’s like I have an invisible shield around me when I’m speaking with the FDA or members of Congress; I can’t show them what I have in my hand. We find smoking guns,” Menzies says. “They also sometimes show the drug companies believe the FDA is a joke and easy to game.”

But there is also a flip-side to the concern. The cost of getting a new drug approved is about $2 billion and the process takes about nine years, says Hutt, the former FDA chief counsel. So the profitable life of a drug with a 20-year patent is only 11 years.

Problems of underfunding and understaffing at the FDA cut both ways, says Richard Epstein, director of the Law and Economics Program at the University of Chicago Law School. “I’m very alarmist on this,” he says. “Incompetence at the FDA is a two-edged sword and they’re much too cautious in most cases. They’re not approving drugs that could be helping great numbers of people now.”

The anti-inflammatory drug Vioxx, for instance, caused between 88,000 and 139,000 heart attacks during its five years on the U.S. market, according to an FDA study. About 30 percent to 40 percent of those attacks were fatal. But Vioxx also helped millions who suffered from acute and chronic pain. And many of the deaths, Epstein believes, could have been prevented.

“A lot of this you want to control at the downstream level—how you prescribe the drug,” he says. “The last thing you want to do is give a drug company protection against its own bad decisions, but I don’t want them murdered by regulation, either.”

Merck & Co. Inc. voluntarily withdrew Vioxx from the marketplace in September 2004. Controversy over its approval by the FDA, and approval of some other drugs, resulted last year in restrictions on outside experts who sit on FDA advisory panels while having financial ties to the drug industry.


Richard Epstein
Photo by Callie Lipkin

Beyond budgets and scandals, the philosophical shift at the agency, as evidenced by the pre-emption and labeling policies, has also taken its toll. Though no precise numbers are available, the FDA has suffered a significant loss of longtime career scientists, physicians and lawyers who disagreed with new agency policies and directions.

“Then pre-emption language in [the 2006 preamble] was very problematic for the career folks,” says Hub­bard, the former FDA planning official. “They didn’t think the FDA should propound that it pre-empted state laws, but the Bush administration felt it should.”

So, much has been riding on the three recent pre-emp­tion cases—all involving the FDA—taken by the Supreme Court. The first two were narrow and a wash.

In February, an 8-1 majority ruled in Riegel v. Med­tronic that the Medical Device Amendments of 1976, in effect, bar state liability suits for medical devices that are FDA-approved. The majority opinion, as written by Justice Antonin Scalia, was a narrow, text-based decision.

In Warner-Lambert v. Kent the court, in effect, very narrowly upheld the right of 27 Michigan residents to pursue a personal injury lawsuit for injuries caused by the FDA-approved diabetes drug Rezulin. Under a Michigan law enacted to protect drug manufacturers, state liability claims can only be made if FDA approval was based on fraud or information withheld in the pro­cess. The opinion, released in March, was a 4-4 decision upholding a 2nd Circuit ruling for the plaintiffs. Chief Justice John G. Roberts Jr. recused himself because he owns stock in Pfizer, the drug company’s parent.

But the third case, Wyeth v. Levine, which aims squarely at a drug-labeling state tort claim, could be the breakthrough that pre-emption advocates have been waiting for. The case concerns a $6.8 million judgment against the drug manufacturer Wyeth upheld by the Vermont Supreme Court.

The suit was brought by a professional guitarist whose hand and forearm had to be amputated after an inadvertent injection of the drug Phenergan into an artery. The drug’s label had warnings about such a possibility, but the plaintiff argued that warning was not nearly strong enough. Wyeth argued, and the FDA agreed in a friend-of-the-court brief, that the FDA-approved label was adequate and that the company could not, and should not, make changes to the label on its own.

If the Supreme Court takes an expansive view either way in Levine, it could be game-set-match for the winning side in the pre-emption. Or not. Legis­lation to reverse the effect of the court’s ruling in Riegel, the medical devices case, has already been introduced. And some believe a significant court victory would accelerate the backlash in a Demo­cratic-controlled Congress.

“If the Supreme Court gives industry a large victory in Wyeth, the personal injury lawyers will be pushing hard to get Congress to overrule what the court has done and say, ‘You got it wrong; we didn’t intend to pre-empt tort law,’ ” says Victor Schwartz, general counsel for the American Tort Reform Association.

Herrmann, the defense lawyer and blogger agrees: “The question is which system is better: one of reg­ulation by skilled experts or a system of regulation of complex drugs by lay juries?”

But the FDA had long acknowledged the tort liability system as a backstop for formal regulation. As late as 1997, the agency’s chief counsel, Margaret Porter at the time, warned that blanket pre-emption “would result in the loss of a significant layer of consumer protection, leaving consumers without a remedy for injuries.”

And critics like David Vladeck—a professor at the Georgetown University Law School, and before that the longtime director of the Public Citizen Litigation Group­—say the most recent rule changes, including removing the right of drug companies to strengthen warnings on their labels, ignore practical experience.

Drugs are approved on the basis of clinical trials on relatively small numbers of people, typically 5,000, says Vladeck. Once they’re on the market, population groups taking the drugs, such as the elderly or pregnant women, increase and widen along with the numbers. There could be long latency periods for adverse reactions. Allowing flexibility in label changes—a longtime FDA practice—places the burden to do so on the manufacturers who receive the incident reports. It’s “the Achilles heel for the pro-pre-emption argument in litigation,” Vladeck says.

In the middle of all this is the FDA. Where the agency had long relied on state liability laws to back up its regulation, blanket pre-emption leaves the agency—understaffed, underfunded and outgunned by the industries it regulates—as the sole and final voice regarding what is effective and safe. There’s a burden on drug and med­ical device manufacturers to report problem products to the FDA, and a burden on the agency to take action on those reports. The whole process depends on a widespread trust in the system that has been wavering in recent years.

“The hope would be that this encourages the companies to get information to the FDA right away,” says Herrmann, a pre-emption supporter.

In fact, some groups of physicians and scientists are beginning to take the matter into their own hands. Epstein says new Internet communications networks are developing that have begun to report drug and device problems from the ground up.

“A cardiothoracic surgeon told me that if there is an adverse event anywhere in the world on Monday, they all know about it on Tuesday,” Epstein explains. “The efficient networks are run privately now, not by the FDA.” Even the FDA is attempting to tap this ground­swell. In May the agency announced it is developing public-private partnerships largely using electronic data and networking to monitor medical products on the market.

A change in presidential administrations could bring a change in philosophy, yet again. O’Reilly, a critic of pre-emption, had the chance to ask Justice Scalia at a conference Q&A whether he was bothered by the agency’s changing policies and views.

“He replied, ‘That’s the way the election system works,’ ” says O’Reilly. “He said that if you’re president and have different policies you can put them into effect; and a Supreme Court that is willing to defer to an agency in one administration can just as readily defer in a new administration.”

Hubbard, the former FDA official, says he’s not certain that politics can solve such a basic philosophical problem.

“It’s just not good for a regulatory agency to be whip-sawed like that,” Hubbard says. “A judge might say, ‘How can we trust these guys in this administration and then that administration?’ The stock-in-trade is trust and consistency.”

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