CREATES Act is a giant gift to trial lawyers

In the ongoing battle between Patent-Holding Drug Companies and Generics Manufacturers, the government is poised to step in.  The problem is that the only group of people looking to benefit from our benevolent government's intrusion are the trial lawyers of America.

A proposal intended to address an intra-industry regulatory battle could instead usher in a new "golden age" of lawsuits, enriching trial lawyers and driving up health care costs for everyone else.

The bill, titled the "CREATES Act," would create unprecedented new legal rights to file suit against drug companies.  Experts warn that this will result in lawsuits becoming the first and primary means, rather than negotiation, of resolving disputes that arise between firms.

Under the proposal, private companies would gain the right to enforce federal drug laws by lawsuit, rather than the Federal Drug Administration deciding to bring action against violators, for the first time.

This bill will result in a huge influx of suits, as it incentivizes legal combat rather than good-faith negotiations.  The act allows only 31 days after a firm first initiates contact with a competitor to reach an agreement outside the court system.  The short timetable guarantees that a legal battle must ensue, creating a win for lawyers.

At issue are disputes between drug patent-holders and generics-manufacturers over extensive safety protocols surrounding the manufacturer and distribution of medicines.

The protocols, called Risk Evaluation and Mitigation Strategies (REMS), are a special part of the FDA's approval process for drugs that require extra caution in their use or distribution. 

One example is Thalidomide, a drug with numerous therapeutic uses.  It also comes with some serious side effects if taken by a pregnant woman, causing severe malformation of fetuses.  To prevent Thalidomide from ever being used by pregnant women, manufacturer Celgene developed a REMS with the FDA that restricts distribution to a special network of certified pharmacies.

Generics manufacturers allege that the REMS protocols are being abused to stymie their ability to produce a generic version of the name-brand drug.  Name-brand manufacturers say they are trying to uphold REMS standards.  The patent-holding manufacturer not only is legally liable for its drug, but would be liable for putting patients' lives at risk.

The CREATES Act is the legislative proposal put forward by allies of the generics companies.  If it becomes law, it will create a dramatic expansion of the right to sue, with far-reaching consequences beyond REMS and even the drug industry. 

For example, U.S. law has long protected property owners from needing to justify ownership or protect it through use.  "It is the privilege of any owner of property to use or not use it, without question of motive," the Supreme Court wrote in 1908. 

By contrast, the CREATES Act creates obligations on manufacturers to sell "sufficient quantities" to their competitors, even if a product is protected by a patent for many years into the future. 

This obligation is more onerous because the law gives firms only 31 days following their first contact from a generic manufacturer.  The penalties are steep: lawyers' fees plus all revenues from the "reference product" during the period after the deadline until an agreement is reached.

This may seem like a one-sided solution to an intra-industry dispute favoring the generic companies.  However, it's not the generics companies that are its primary beneficiary; it's the trial lawyers.

Under the law, lawyers will gain a brand-new venue to go after deep-pocketed drug companies.  It makes no sense for generics manufacturers to negotiate, because the outcomes are much better if they pursue legal remedies.  The goal appears to be creating a landscape where lawsuits are the ordinary means of resolving disputes over these matters. 

This is an outrageous gift to one of the most pernicious special interests in America.  Congress should send it, like famous trial lawyer and vice presidential candidate John Edwards, into the dustbin of history.