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June 13, 2014

Product Liability Lawsuit Case Study

Introduction
Baxter Healthcare Corporation is a US based health care company headquartered in Deerfield, Illinois which was found in 1931. The key focus of the company is to produce products for the treatment of acute and chronic medical conditions like kidney disease, haemophilia, immune disorder, etc. The company went through several controversies especially in relevance to the legal issues of health and safety including heparin adulteration, cost inflation and hepatitis C infections by Propofol (Baxter Corp).         
Nevada Jury held Teva Parenteral Medicines Inc and the firms partnering its supply chain Baxter Healthcare Corporation and McKesson Corporation responsible to bear 162 million USD in punitive damages for selling anaesthetic Propofol. Punitive damage is awarded for intentional harm caused by an individual or entity rather than mere negligence. The jury found that the drug had caused 3 patients of colonoscopy to contract hepatitis C. The patients of colonoscopy and their spouses made allegation that the companies (Teva and Baxter) had intentionally sold anaesthetic drug in large size vials to encourage doctors to reuse the drug to save their cost while the reuse of those large vials exposed the patients to high risk of catching blood borne illness like hepatitis C.
 Teva and Baxter claimed that the large vials were not meant for reuse and the doctors and nurses were the sole responsible for reusing the vials that resulted in spreading blood disease i.e. hepatitis C from one patient to another. Both the companies had to pay an additional of 40 million USD as compensatory damages as the companies were found guilty in the lawsuit for taking inadequate measures of safety and compromised health of the patients (Business Week).


Legal Theories
In the case of Baxter Healthcare Corp., the jury had made a decision in favour of the patients who caught blood disease due to re-usage of Propofol large vials. The decision was taken in favour of plaintiffs and they were awarded with punitive damages as the company was found liable for not taking adequate measures of safety and healthcare (Business Week). Punitive / exemplary damages are meant to deter defendants from being engaged in same conduct that formed the basis of lawsuit. Punitive damages are not meant to compensate the plaintiff; however they receive whole or part of the damage award. Punitive damages are also awarded in such cases where compensatory damages are thought of as insufficient solution. These damages are usually awarded by the court systems that recognize it where it seems difficult to enforce the jurisdiction that does not recognize it.  Punitive damages are paid more than the proved injuries or damages and they are awarded only in special cases under law of ‘tort’ where the conduct of defendants is found harmful (Douglas, 2002).  
In the US, punitive damages work under common law and they are mostly the matter of law of each state, therefore the application varies from one state to another. However, the federal maritime law can also award punitive damages under certain circumstances.  Generally the rule of awarding punitive damages is that it cannot be awarded for breaching contract, however they can be awarded for independent tort if committed in contractual setting. As in the case of Baxter Healthcare Corp., the company was penalized to pay damages for committing tort in contractual setting after being unable to provide safety standards to the patients. It was also found that the intention of the company was not fair and the case could not be dealt with under mere negligence (Zipursky, 2011).  
Punitive damages are a hot legal debate in the US that are considered as pivotal point of the ‘tort reform’ since the perception exists that million dollar verdicts against the companies seem excessive and unfair. But statistically, only 2% of the civil cases attain punitive damages which imply that the damages paid range between 35,000 USD to 50,000 USD.
There is no limit provided in the law for awarding punitive damages that defendants can be asked to compensate. However, the Supreme Court of United States has initiated steps to limit the damage awards through legal process which include 5th clause of 14th amendment of US constitution. The court has also indicated that a ratio of punitive to compensatory damages is usually 4:1 which is a constitutional impropriety. As in case of Baxter Corporation, the company was ordered to pay 162 million USD in punitive damages and additional 40 million USD as compensatory damages which make 4:1 (John and Christine, 2012).   
The above mentioned legal aspects about punitive damages were used by the plaintiff in the lawsuit against Baxter and Teva. The companies were found guilty and under special circumstances the case was dealt in light of committed tort as the companies were found intentionally involved in the product liability suit. The decision made is though taken as impropriety by the US Supreme Court but still the decision is fair enough as it is matter of millions of lives of people who were exposed at risk due to improper safety measurements.   
Changes for Safety Assurance
After the lawsuit filed against the Baxter Corporation in case of selling Propofol, the company took certain measures to avoid any future lawsuit by assuring provision of quality and safety to the customers. The company has developed a comprehensive set of code of ethics for the employees, board and management to follow to remain within the legal boundaries and to deliver quality and safety oriented products and services. The detail of implemented changes by the company is described as follows:
The company began to communicate the US Sales Ethics Standard document throughout the organisation so that every employee and internal stakeholder of the company becomes aware of the legal and safety standards pertaining to the sales of healthcare products and services. This step is intended to provide adequate knowledge to the operators of the business to avoid any potential conflict with the law or safety monitoring agencies like FDA (Baxter Corp).    
Employees of Baxter Corporation are now made responsible of their own tasks and responsibilities and all employees are provided with specific procedures, policies and guidance to carry out their work with integrity.  It has been made obligatory for the employees to acknowledge the receipt of code of conduct of Baxter and to confirm by practice that they follow the provided codes.
The annual process of ‘Certificate of Integrity and Compliance’ is also initiated to confirm that the employees understand and comply by the code of conduct. The certificate is also intended to measure and assure the implementation of code of conduct and its integrity with the culture of the organisation. It is also assured that the ethical standards set by the organisation are uniformly applied by providing a channel for the employees to point out issues. As the Baxter Corporation applies a significant change to the code of conduct and policies as per circumstances, therefore the employees are taken as responsible to know and comply by the updated laws, policies and regulations.
The employees are also required to promptly report any wrongdoing so that the entire operations remain within the provided standards of safety and quality as per law. The company also keeps the policy of ‘No Retaliation’ under which the employees are not penalised or punished for questioning any breach of law or safety standards.
The company has also developed the process of ‘Monitoring and Auditing’ so that each operation remains compliant by law and safety standards. Monitoring and Auditing committee is responsible to check the practices of employees and production and packaging of the products to avoid any breach of safety standards provided by the Department of Food and Drug Administration (Ethical Compliance).

Role of Monitoring Agency
Food and Drug Administration (FDA) is the agency responsible for monitoring the healthcare and drugs industry that works under the Department of Health and Human Services of United States. FDA monitors and provides the safety standards to the companies of healthcare and drugs industry which helps to safeguard the health of public by assuring the compliance of safety standards. For example, Buretrol Solution of Baxter Corporation was not found compliant to the safety standards of FDA and the recall was announced and the company was taken onboard to instruct the customers for return of the product (Baxter Corp).
The US Congress had passed FDAAA in September 2007 that included new resources and new regulatory tools for the safety of medical products to assure appropriate and safe usage of drugs. FDAAA also includes the labelling pertaining to safety, post-market drugs safety and clinical trials of the product rather than depending upon voluntary actions. FDA, under FDAAA evaluates the risk and strategy of mitigation through REMS to necessarily assure the benefits of drugs are far more than the risk. FDA also demands the companies to provide REMS when the drugs are brought to the market.  Once the drug is approved by the FDA, then the stage of monitoring of post-market begins (FDA Testimony).
Every manufacturer is obliged to submit post-market reports regularly to FDA on its products. The reports contain information about the adverse effects linked with the usage of one or more products. Reports are quickly submitted to mention serious and unexpected risks associated with the products and the reports are also periodically submitted for less serious safety issues. In the mean period, FDA seeks direct reports about adverse effects of the drugs from the patients, healthcare professionals with the help of MedWatch program.
The reports are continuously saved in the database for analysis and evaluation performed by the safety evaluators and FDA epidemiologists to measure the frequency of adverse effects of the drugs along with the causes. There are numerous factors that are taken into account when making decisions pertaining to regulatory action while responding to the evidences of risk of drug safety. Often the labelling approved by FDA is revised as the benefits and risks of a drug are more known with passage of time for the sake of providing appropriate information.
Like, FDA may add new warnings to describe the conditions under which the drug may harm the patients or new precautions are added which are advised by the doctors to minimize the risk (FDA Testimony).    
Baxter Healthcare Corporation suffered lawsuit as it did not comply by the safety measure including the inadequacy in labelling as the company had not mention any precautionary measure and prevention from re-usage that caused the patients hepatitis C. 
Conclusion & Recommendations
Baxter Corporation had to pay 162 million USD as a result of lawsuit filed by 3 patients who suffered through Propofol drug of the company. The lawsuit came under breach of independent tort, thus the company was ordered to pay multi million dollars as punitive damage. The company was held responsible for having intent to cause harm to the end users. The company has learned from the incident and improved its processes and safety standards to avoid any future lawsuit. FDA is the agency responsible to monitor and communicate the safety standards and issue to the entire industry of healthcare and drugs. The company must conform by the principles provided by the FDA to be able to retain the reputation and avoid losses in terms of lawsuits.
Recommendation
Baxter Corporation and many other healthcare corporations have borne multimillion lawsuits that resulted in financial suffering of the companies. Baxter Corporation suffered the lawsuit due to lack of safety measures. Following recommendations may help Baxter Corporation to avoid any future lawsuit:
·         The company should keep regular communication with Food and Drug Administration to be able to grab current safety issues and updated policies, procedures and standards set by the agency so that the company remains abide by the law.
·         The company has suffered multiple lawsuits, thus it should keep a dedicated legal team of experts who help to manage legal issues promptly.
·         The company should develop safety standard committee to monitor and retain the safety and quality throughout the organisation including policy making, product design and marketing.
·         The company should avoid partnering with any firm that does not abide by the law like Teva.



References
Baxter Corp.
http://www.baxter.com/about_baxter Accessed on May 24, 2013
Douglas L. (2002), Modern American Remedies. Aspen. p. 732-736.
Ethical Compliance

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