Minimizing Mass Tort Exposure

In today's legal climate, pharmaceutical companies are prime targets for litigation in both state and federal courts. Because they are engaged in product research and development and related complex business practices spread across many jurisdictions and because the public perceives the industry as having deep pockets, executives must be prepared for-and frankly must expect to face-the challenges of major multijurisdictional litigation.

Given recent cases such as the Fen-Phen (fenfluramine, phentermine) and OxyContin (oxycodone) litigations, pharma executives must realize that multistate or multidistrict federal litigation (MDL) is not solely a legal issue to be addressed when the litigation is initiated, then promptly dumped into the hands of counsel. Because such litigation is complex, onerous in nature, disruptive, and costly, companies should anticipate its occurrence and treat it as a critical management issue that is an integral part of their business plans.

Putting Policies in Place

Recognizing the danger of state or federal MDL, some companies are actively working with professional organizations, public relations agencies, government officials, and others to bring about needed legislative changes that will make the litigation path more level, less wasteful of resources, and more predictable in case of a mass tort. Unfortunately, such agendas require long-term efforts and often result in compromises and, in many instances, total failure.

In the meantime, forward-thinking executives can begin to minimize their companies' risks by tightening up internal communications policies. One thing is certain: In all MDLs, skillful plaintiffs' counsel will secure virtually every piece of recorded information related to the case, ranging from regulatory filings to marketing to research-related reports and e-mails. Therefore, management must institute corporate policies that ensure all communications are properly prepared to reflect only accurate, truthful, and necessary information-no more and no less.

Off-handed, careless remarks that seem harmless in the secure setting of a lesser-level executive office or laboratory can come back to haunt company officials. Pharma companies must ensure that each piece of communication is written and distributed based on the assumption that it will be available to outsiders and held up to serious scrutiny. Interdepartmental communication must follow established practices that are enforced seamlessly and uniformly. That will give companies a single voice in regard to their products and services, as well as to any issues that may warrant disclosure or warnings.

Handing out training manuals, posting information in the workplace, and sending out employee newsletters that include such policies is not enough. Ongoing training is needed to inform new members of the corporate family about the required practices and as a reminder to current employees.

Training programs and policies should not only inform employees about the danger of casual, unnecessary, and ill-chosen communications but also should emphasize the importance of allowing the company to defend itself on solid grounds against later unjustified and defensible claims.

Early Control

If a case has been recently filed against a company's product, executives should view that with considerable care, as it may portend the filing of similar cases in other jurisdictions. Communication with knowledgeable local counsel in the affected jurisdictions is advisable, especially if the cases are tied to events such as negative regulatory or legislative actions and media reports. The company should assume that widespread state and federal litigation could follow.

When cases are filed in several federal district courts throughout the country, aggregation of those cases for pretrial proceedings through the MDL federal statutes is common. In those circumstances, a single federal judge supervises and coordinates all the cases. When the pretrial proceedings are completed, the presiding judge requests that the multidistrict litigation panel return the cases to the districts of origin for ultimate disposition. Companies must understand, however, that MDL consolidation is not always optional. The multidistrict litigation panel can compel the action for defendants or plaintiffs who believe federal consolidation is appropriate. Executives should consult with their corporate counsel to discuss what position to take if the cases appear to be eligible for MDL consolidation.

When cases are first filed, the defending party is not expected to have sufficient knowledge about the claim to admit or deny the plaintiffs' allegations. In most cases, at this stage, companies should simply deny the allegations to allow ample time for investigation and discovery. Organization and collaboration with company counsel, and, when necessary, local outside counsel, should take place at that time. Simultaneously, companies must thoroughly evaluate the litigation and institute procedures to preserve documents associated with research, development, regulatory activity, marketing and sales practices. Executives must make it plain that thoroughness, candor, and honesty are the company's unalterable policy. In other words, "no surprises."

Because at this point, it is too early to predict an outcome, the only realistic option in most instances is to defend the case. As the internal investigation and events unfold, that defensive posture may change in regard to the entire litigation or only in regard to certain jurisdictions where laws or local circumstances require distinct strategies. Not all decisions should be made from a central source. Companies should take seriously the advice and recommendations of experienced local counsel, particularly if those suggestions are based on the attitudes, practices, or experiences of the local courts and juries.

This commentary obviously only scratches the surface of how companies can minimize the risks of mass tort. The most important message is that pharma companies must take all such cases with the utmost seriousness from the outset and give them the prompt and unrestricted attention of the highest levels of executive, professional, and legal leadership.