Two recent examples illustrate the varying paths to settlement in drug and device cases.
The undeniable sweep of scientific advances and technological innovation notwithstanding, new drugs and medical devices frequently fail and are removed from the market. For example, two recent hip-implant recalls—the Stryker Rejuvenate and Johnson and Johnson’s DePuy ASR—have affected more than 100,000 devices.
Competition and the Sleepy Watchdog
There are two primary reasons why defective drugs and medical devices so often reach the marketplace. The first is fastened to the incredible competition in the multi-billion-dollar drug and device arena. Many new drugs and medical devices are not totally new to their field, but improvements to other drugs or devices already in the marketplace. An innovation or improvement translates to increased market share and profits, but only until a competitor leapfrogs it with an improvement of its own.
The Food and Drug Administration was created to protect consumers against the premature introduction of unproven drugs and medical devices. Yet time after time, it has demonstrated that it is not up to the task. Facing criticism when its approval process delays the arrival of an eagerly-awaited miracle drug, the FDA faces a Goldilocks dilemma. It is chastised when new drugs are delayed for more testing, but blasted when bad drugs make it to market.
New, innovative medical devices can be cleared for implantation in the human body without the rigorous clinical testing the public assumes is a prerequisite for FDA approval. That’s because the FDA has adopted a “510(k) process” which allows some devices to be approved for sale without undergoing the rigorous testing.
Dominating recent headlines have been the spectacular failures of the “improved” hip replacement implants. Notwithstanding the existence of well-tested and proven implants, nearly all device manufacturers have introduced a “new, improved” model, usually without adequate premarket testing. Johnson and Johnson’s DePuy ASR XL Acetabular System total hip replacement and ASR Hip Resurfacing System were used in more than 93,000 hip replacement surgeries beginning in 2005. A recall was issued in 2010. Stryker released the Rejuvenate and ABG II hip systems in 2009—and recalled them in 2012.
When defective medical devices and flawed drugs are introduced into the streams of commerce, the results can be horrific. The specific solution for the flaw in Stryker’s Rejuvenate hip implant was removal and replacement. Removal required extraction of the femoral stem, which had become fixated within the femoral cavity by bony ingrowth—a difficult surgical procedure with a high complication rate.
Mass Torts and Coordinated Litigation
Drug and device cases are often called mass torts, meaning that a large number of individuals have been injured by a single, wrongful act. In the case of Stryker Rejuvenate/ABG II, more than 4,000 cases were filed all over the country. For each of these 4,000 plaintiffs to take separate depositions of the key design engineers would be unwieldy and counterproductive. The solution to the problem of litigating huge numbers of similar cases filed nationwide is called coordinated litigation. At its core, coordinated litigation is a refined blend of class-action litigation and the more familiar, one-on-one lawsuit.
While class actions are a recognized tool for dealing with injuries to large numbers of individuals, limitations exist that preclude utilization in most drug and device cases.
The innovation of multi-district cases allows for cases filed all over the country to be coordinated. A group of federal judges, the Joint Panel on Multi-District Litigation (MDL), designates one “transferee” court, and all federal cases nationwide are transferred to this court for pre-trial proceedings. These proceedings involve discovery, motion practice and frequently, settlement mediation. If the cases are not settled, they are sent back “home” to the federal district in which they originated for trial.
The early stages of multi-district litigation bear significant similarities to class-action litigation, but a major difference between the two occurs when settlement negotiations approach fruition. Often times, class members are not represented by individual counsel, as the amount at stake does not warrant it. The class leadership negotiates a settlement and presents it to the court. While any class member can object at a “fairness hearing,” the chance of substantially changing or scuttling the settlement is remote. If the court approves the settlement, all class members are bound.
In multi-district litigation, however, the individual plaintiffs are represented by their own counsel, and neither the leadership committees nor the courts have the ability to impose a settlement. The leadership committees often do come to global settlement agreements, but all plaintiffs are free to decline, take the fruits of discovery and proceed to their own trials.
Coordinated State Litigation
It is usually impossible to force all drug and device cases into federal court. Since federal courts are perceived as “friendly” to manufacturers, a substantial number of plaintiffs will opt to litigate in state courts, as most offer a procedure similar to federal multi-district litigation. The result is that most drug and device cases are initially litigated in one federal MDL court and or more state court coordinated litigations. The Stryker Rejuvenate litigation is a good example. The federal MDL court was in St. Paul, Minnesota, while there was a coordinated state court action in Bergen County, New Jersey. There were approximately 2,000 cases filed in the St. Paul court, and slightly more in New Jersey.
Case Studies: Rejuvenate and ASR
Two hip implant cases, the DePuy ASR and the Stryker Rejuvenate, provide interesting insights and contrasts. Neither device went through the FDA’s extensive premarket approval process; both were fast-tracked to market via a 510(k) certification. Both devices had been recalled, lending a great deal of strength to the plaintiffs’ cases. The ASR was a multi-focal case, with a federal MDL proceeding in Cleveland and multiple state court coordinated proceedings. The Rejuvenate case was bi-focal, in that there were essentially only two coordinated proceedings, the federal MDL in St. Paul and the coordinated state proceeding in Hackensack. Both cases were settled via “global settlements,” but the routes to settlement were radically different.
The ASR settlement process was fairly conventional. The two sides engaged in full-blown discovery, hired experts and made the cases trial-worthy. When settlement was not forthcoming, the presiding judges ordered bellwether trials, which are essentially test cases that can act as a guidepost for the parties in renewed settlement negotiations.
The first ASR test case was in state court in California, where DePuy was rocked with an $8.3 million verdict for a single plaintiff. Shortly thereafter, the plaintiffs were stunned by a defense verdict in state court in Chicago. With additional bellwether trials fast approaching in both federal and state courts, both sides used the early results to gauge their prospects and entered into a $4 billion settlement, providing relief for more than 8,000 victims of the defective implant. The settlement was not binding, and in reality, was an offer of settlement to each of the individuals affected by the bad device. DePuy retained “walk-away” rights if the acceptance rate did not reach 95 percent, but that number was reached and the settlement was consummated.
The Rejuvenate settlement process was somewhat unusual. Exhaustive discovery was not completed, and there were no trials or test cases. New Jersey Judge Martinotti took a bold, proactive approach to attempt early resolution. Realizing that a recalled device is difficult to defend, he approached both sides to determine if they would be amenable to early settlement efforts.
The capstone of the New Jersey effort was a bellwether mediation program. Instead of test trials after protracted discovery and motion practice, the parties agreed to mediate representative cases to see if a pattern of settlements would emerge that could guide negotiations. These mediations resulted in an unprecedented success, and on November 3, 2014, a global settlement was announced amounting to approximately $1.4 billion for over 4,000 victims. The settlement is historic in that it was agreed to without extensive discovery and without trials in test cases. The prompt resolution allows the victims, many of whom are elderly, to receive the proceeds at a time when it can be a positive force in their lives. iBi
Michael Waters is a partner at Vonachen, Lawless, Trager and Slevin, focusing on complex litigation. He is currently representing more than 30 plaintiffs in the Stryker Rejuvenate hip implant litigation.