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Georgia Gov.'s Bill Seeks to Shield Drug, Device Makers from Product-Liability Tort Claims

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Five months before the world's life-science leaders gather in his state for this year's Biotechnology Industry Organization international convention, Georgia Gov. Sonny Perdue has introduced legislation that would shield drug and device makers from product liability claims filed under the state's tort laws.

Perdue's proposal would protect those companies with a significant presence in Georgia from liability under the state tort law for claims involving products tested and approved by the US Food and Drug Administration.

The measure would protect companies that either "base [their] corporate headquarters in Georgia" or "either employ over 200 workers in manufacturing or research and development, or have [their] principal place of research and development in Georgia," according to a press release issued by the state.

The measure, which at the time of this publication had yet to be formally filed with the Georgia General Assembly, would also require losing plaintiffs to pay legal fees in cases dismissed soon after being filed. However, plaintiffs' attorneys would be responsible for paying those fees if a judge determines those attorneys did not notify their clients of the law.

"The FDA approval should mean something. It certainly should imply protection from tort lawsuits. The legislation will make Georgia an even more attractive environment for biotechnology companies," Perdue said Jan.13. "With the help of the General Assembly, we'll make plain that the threat of merit-less litigation is not a viable business strategy in Georgia."

For Perdue, a Republican who will be term-limited out of office after 2010, the legislation marks the continuation of a "tort reform" effort by his administration that has sought to ease the state's tort laws on employers. For instance, in 2005 Perdue signed into law a measure that capped at $350,000 the compensatory damage juries can award victims for medical malpractice resulting in physical loss and disability.

Like the 2005 revisions, the current biotech tort proposal faces opposition from two groups whose constituencies have criticized tort-law changes favorable to employers — the Georgia Trial Lawyers Association, and GeorgiaWatch, a statewide consumer advocacy group.

GeorgiaWatch spokeswoman Beth Malone told BRN her group questioned Perdue's argument that the tort bill would create jobs, since a similar bill in Michigan has neither stopped life-sci companies such as Pfizer and MPI Research from laying off workers [BRN, Dec. 15, 2008; Jan. 14, 2008] nor stopped that state from recording the nation's largest unemployment rate.

On Jan. 21, the state Department of Energy, Labor, and Economic Growth, citing the economic upheaval and the problems of the US auto industry, said Michigan's unemployment rate of 10.6 percent had become the highest in the nation.

"They're not looking for this kind of liability freedom," Malone told BRN last week. "What's most frightening about it is that this blanket immunity would give drug makers, in an industry that has a terrible record, more and more freedom."

Perdue and others in his administration reject that argument, noting that the tort-relief bill would not apply to a company found to have defrauded the FDA or to have used a drug or device in an off-label manner.

"We believe we have set a very good balance here on being able to protect the general public," Heidi Green, Georgia's deputy commissioner of economic development, told BioRegion News last week. "Even the threat of litigation can be a real cost to doing business, and we felt we needed the state to say we recognize the role of the FDA in approving new products and shielding companies.

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"Given that, we want to make sure that there's an environment where companies don't have to worry that they're going to be hauled into court for a frivolous lawsuit," Green added.

Green said Georgia is looking to craft a statute along the lines of Michigan's drug-liability "FDA defense" law. Enacted in 1996, that measure was one in a series of tort reform measures signed into law by former Gov. John Engler, a Republican, during the 1990s.

But Michigan's political scene has shifted overt the past 15 years when the GOP held the Governor's Residence and both chambers of the state Legislature in Lansing. Indeed, today the future of that state's tort-reform law is uncertain.

Michigan Gov. Jennifer Granholm, a Democrat who, like Perdue, will be term limited out of office in 2010, said she supports repealing the 1996 law — an effort lawmakers from her party tried to carry out two years ago with support from a citizen group, Drug Industry Immunity Must End.

In 2007 one of her colleagues in the legislature, state Rep. Mike Simpson, introduced House Bill 4044, which passed Michigan's Democratic-controlled House of Representatives early that year but died in the state's Republican-controlled Senate.

It was not immediately clear whether Simpson intends to re-introduce the measure this year. He did not return a telephone call seeking comment in time for this publication.

For his part, MichBio CEO Stephen Rapundalo told BRN last week that he is concerned the repeal effort may resurface this year, five years after Merck faced a tangle of class-action lawsuits following its decision to pull its anti-inflammatory drug Vioxx off the market in the US. Those cases were brought after an ongoing trial showed the drug increases the risk of heart attack and strokes in some individuals.

The recall spawned some 50,000 lawsuits that Merck moved to settle last summer by agreeing to contribute $4.85 billion into a fund; at the time the pharma giant had spent some $6.4 billion litigating Vioxx cases.

"There's not a drug out there that doesn't have some kind of side effect; every product out there carries some risk and liability," Rapundalo said. "It's up to the companies to disclose anything and everything that they might know about a product to the FDA during the review process."

Rapundalo said shielding companies against liability for selling FDA-approved products was more significant for its underlying message.

"The image you create is, 'We understand the challenges that companies, particularly large medical device or pharma companies, have, and we'd like to make things a little easier,'" he said.

Green, Georgia's economic-development official, said nether the Vioxx cases nor tort claims by other states spurred Georgia to see its biotech tort proposal. "It really did not come out of any one specific case," she said. "We're really taking a look at, what are our impediments to our business environment?"

Michigan is one of a handful of states that has eased tort liability for drug makers by directing state courts to defer to the FDA's determination of the adequacy of a device or pharmaceutical's warnings. Arizona enacted similar protections in 1989, while Texas enacted a similar law in 2003 as part of a tort-reform package that included a cap on medical malpractice damage awards and a loser-pays provision similar to Georgia's life-sci tort proposal.

Patrick Kelly, BIO's vice president of government relations, told BRN last week he was not aware of any other states now pursuing FDA-based liability shield laws as Georgia is now doing.

"This is primarily a federal issue; it's not been a state issue," Kelly said. He added that most states have been content to keep liability issues involving drug tests with Washington, DC, since the FDA is a federal agency, and that it has lengthened its review process and had begun to scrutinize new drugs more closely since the Vioxx cases emerged.

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"Post-Vioxx, we have a much more aware FDA, a much more aware industry, and I think a much more aware public and physician community as well," Kelly said.

At a Jan. 13 "Eggs and Issues" breakfast of the Georgia Chamber of Commerce, and followed a day later during his State of the State address, Perdue tied his tort measure to the Peachtree State's long-stated goal of growing its life-sci cluster by attracting new biotech, pharmaceutical, and medical-device companies, and by retaining existing ones.

"As we continue to attract new investment in biotechnology, we can secure our position as a leader in this industry by enacting laws that respect the role of the federal Food and Drug Administration as the regulator of the safety of drugs and medical devices," Purdue said in his State of the State address.

Green said the BIO 2009 convention had prompted officials to explore options for advancing the state's life-sci industry: "[Perdue] wants it to be successful here in Georgia. So when we were looking at, what are things we can do to ensure that we are a place where bio companies can feel good about locating and growing, we felt there was an opportunity here."

Kelly said his organization responded to an inquiry from GeorgiaBio, the state's life-sci industry group, about Michigan's FDA-shield law, but otherwise was not involved in crafting the Georgia bill. "Obviously, anything that reduces litigation, I think, is going to be supportive of industry development. Georgia is putting its money where its mouth is and saying, 'We're going to put in place some laws that are going to be bright-line, industry-friendly.'"

To date, Georgia has not projected how much the current tort laws have cost life-sci companies, or how many life-sci companies or jobs the state can be expected to draw if the tort proposal were enacted.

"We've heard some concerns from our existing [life-sci] industry, and some concerns from prospects, that this is an ongoing problem, not only getting FDA approval, but having litigation, and threats of litigation," Green added.

Supporters of Georgia's 2005 medical-malpractice tort revisions have credited the law with several improvements in the state's healthcare climate, including:

• An increase in the state's proportion of practicing physicians, to 202 per 100,000 population, up from 193 per 100,000 people in 2006, according to the Georgia Hospital Association;

• A 10th place ranking on the 2006 US Tort Liability Index of the Pacific Research Institute of San Francisco, whose donors include pharmaceutical giants. The author of the study told the Atlanta Business Chronicle at the time that Georgia would have ranked 45th absent the 2005 law.

However, Georgia slid to 27th in the 2008 US Tort Liability Index, released last May. The slide appears to reflect an increase in how much money defendants lost in tort cases since PRI's first tort study in 2006. Last year Georgia ranked 10th-highest in the nation at $4.9 billion. California was highest at $19.9 billion and North Dakota lowest at $264.4 million.

By contrast, PRI's 2006 US Tort Liability Index ranked Georgia 21st-highest in the nation in tort losses. That study did not disclose the amount lost by Georgia or any other state.

"That's a strong indication that in order to remain competitive and move up, [Georgia lawmakers] are going to have to implement reforms like what the governor is proposing here," Lawrence McQuillan, PRI's director of business and economic studies, told BRN last week. "I think that would go a long way in terms of trying to help move Georgia's civil-liability system into a much more competitive position relative to the other states."

McQuillan called Perdue's plan "a strong reform that he's proposing" and said "it would have a big effect in terms of trying to turn around and make it a much more competitive environment."

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In its blog, however, the trial lawyers association juxtaposed Georgia's PRI ranking with its better showing in the state-by-state business-climate ranking of CNBC (8th in the nation), and a state-by-state ranking for developing new biofuel and other biomass businesses from Forbes magazine (3rd among states).

"Why would CNBC and Forbes give Georgia such great rankings if we really had an unhealthy business climate like the PRI stated?" the association stated in its unauthored blog entry.

Green, the state's economic-development deputy commissioner, told BRN the biotech tort measure was one of several key actions Georgia will undertake over the next several months to convey a biotech-friendlier image to the life-sci industry, which the state hopes will translate into additional employers and jobs.

According to Shaping Infinity: The Georgia Life Sciences Industry Analysis 2008, released last September by GeorgiaBio, Georgia was home to 669 life-sciences establishments — more than 300 of which are businesses — that employed 15,283 people through 2006. Georgia hopes to build on that in large measure through this year's BIO convention, set to bring some 20,000 life-sci professionals to downtown Atlanta's Georgia World Congress Center May 18-21.

Green said Georgia this year will follow through with plans announced last year to create a "one-stop shop" for life-sciences employers seeking to relocate to the state or expand existing facilities there. The Georgia Biotechnology Center would be a public-private effort akin to the North Carolina Biotechnology Center, state Commissioner of Economic Development Kenneth Stewart told BRN last year [BRN, June 23, 2008].

"We are working on that. Stay tuned for, hopefully, some good news coming in the future," Green said.

Georgia Peanuts

If federal interest is any indication, Georgia faces an uphill fight. Last December, the state's life-sci effort suffered a setback when the US Department of Homeland Security chose Kansas over Georgia and three other states to host a $650 million National Bio- and Agro-Defense Facility the agency plans to start building in fiscal 2010.

In DHS' Preferred Alternative Selection Memorandum for the National Bio and Agro-Defense Facility, Jay Cohen, the agency's undersecretary for science and technology, said among its reasons for rejecting Georgia was the $30 million package of state and local economic incentives it offered, which Kansas dwarfed with its promise of more than $200 million [BRN, Dec 8, 2008]. Another factor was the organized local opposition to the biolab [BRN, Sept. 2, 2008].

"Despite strong support from UGA and our elected officials, a small activist minority of the local community has effectively taken away a great opportunity for the Athens area," Perdue, a veterinarian before entering politics, said in a statement soon after the NBAF decision was announced. "As the Centers for Disease Control has shown, the addition of NBAF would have meant stable, high-paying jobs and significant investment for our state."

Another challenge for Georgia has been the expansion of life-sciences activity within the Southeast. While North Carolina has long been a top-tier biocluster, Alabama has grown its life-sci industry in recent years to some 90 businesses, as well as institutions that include the HudsonAlpha Institute for Biotechnology, founded in 2005 with $50 million in state funding.

Two years later it opened a 270,000-square-foot building in Huntsville, and on Jan. 21 South Carolina officials announced that Bridge to Life, a maker of technologies for preserving and shipping human organs, will spend $45 million to relocate its global headquarters to the state capital of Columbia from Northbrook, Ill., a move expected to create 70 jobs.

Meantime, in Florida two research institutions have put the finishing touches on new facilities: Scripps Research Institute will hold a Feb. 26 ribbon-cutting ceremony to mark the completion of its three-building, 364000-square-foot campus within Florida Atlantic University's campus in Jupiter.

And in Port St. Lucie, the Torrey Pines Institute for Molecular Science held a ribbon-cutting ceremony Jan. 31 for its $40 million, 103,000-square-foot facility at the 150-acre Florida Center for Innovation at Tradition, within the 8,330-acre Tradition mixed-use master-planned community.

Scripps and Torrey Pines are two of six institutions that have enjoyed more than a combined $1 billion in economic incentives from the Florida state and local governments — though budget woes last year forced state lawmakers to eliminate the $250 million Innovation Incentive Fund, which helped persuade six West Coast research institutions to expand into the Sunshine State [BRN, May 5, 2008].

By comparison, Georgia has spent more modestly on the life sciences. Last year, Perdue and state lawmakers agreed to chip in $7.5 million toward the $40 million, public-private Georgia Research Alliance Venture Fund, intended to finance seed-stage university spinouts with an emphasis on vaccine developers and other life-science specialties.

Green said Georgia's life-sci advantages over neighboring states include the presence of the Atlanta-based US Centers for Disease Control and Prevention, the American Arthritis Foundation, the US Department of Agriculture's Agricultural Research Service-Southeast Poultry Research Lab, a key facility in researching avian influenza — an asset cited last year by Perdue and others trying to bring NBAF into the state — as well as a nascent but growing biofuel sector, the ports of Savannah and Brunswick, and the Southeast's busiest airport, Hartsfield-Jackson Atlanta International.

"We believe that whether you look at North Carolina, South Carolina, or Florida, Georgia has some unique assets that they do not. We believe that we have assets in Georgia that are broader than just maybe pharmaceutical or device," Green said. "We believe that Georgia is in a unique position to grow our life science and bioscience industry."

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