Cato Policy Analysis No. 412 August 28, 2001

Policy Analysis

How FDA Regulation and Injury Litigation
Cripple the Medical Device Industry

by Charles A. Homsy

Charles A. Homsy holds an Sc.D. in chemical engineering from the Massachusetts Institute of Technology. After five years with the Du Pont Company, in 1966 he established at the Texas Medical Center the first U.S. hospital-based bioengineering laboratory, which he directed until 1990. He was founder and CEO of Vitek Inc. (197190) and Novamed Inc. (198892), which made surgical implants. From 1992 to 1999 he was scientific director of Swiss companies founded to carry on that work.


Executive Summary

Manufacturers of medical devices face a triple threat in their efforts to develop products to alle-viate pain and suffering. The U.S. Food and Drug Administration can drive manufacturers out of business, even when the FDA itself certifies their devices. The personal injury liability system makes it easy for predatory lawyers to force manufactur-ers of safe products into bankruptcy. And sensa-tionalist media accounts of allegedly dangerous devices add to manufacturers' problems.

Three examples illustrate those problems. In 1974, on the basis of unsubstantiated media reports and lawsuits, and without legislative authority, the FDA forced A.H. Robins to remove the contraceptive Dalkon Shield from the mar-ket. Though later reports showed the shields to be safe, A.H. Robins was driven into bankruptcy. Beginning in 1988, Dow Corning's silicone breast implants became the subject of FDA accu-sations, liability suits, and media hysteria. Although no sound science has ever shown the devices to be dangerous, the manufacturer was driven out of business.

My company, Vitek, manufactured out of the patented material Proplast implants that were used successfully in some 100,000 patients with distorted, damaged, or destroyed facial structure; joints of the jaw, thumb, and hip; and other body parts. In 1986 reports surfaced about particular jaw implants wear-ing out. In fact, the problems occurred when underly-ing conditions were not treated or when patients refused to follow the prescribed treatment. But the FDA and liability lawyers waged a campaign against those implants, driving Vitek out of business. Worse, the FDA also targeted Novamed, a company estab-lished to produce other FDA-approved Proplast implants that were not under suspicion, and used questionable court tactics to drive it out of business. Finally, the FDA used its own regulatory leverage and the World Health Organization to drive into bank-ruptcy a Swiss company established to produce Proplast products that had obtained or were obtain-ing certification in the Europe Union, Switzerland, and Canada.

European governments allow private compa-nies that meet certain objective criteria to certify medical devices. That approach is less subject to abuse, better ensures patients' access to devices, and could be an alternative to the malfunctioning American approach.

Full Text of Policy Analysis No. 412 (PDF, 20 pgs, 126 Kb)

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