Renovations Needed: The FDA’s Floor/Ceiling Framework, Preemption, and the Opioid Epidemic

Michael R. Abrams* October, 2018

The FDA’s regulatory framework for pharmaceuticals uses a “floor/ceiling” model: administrative rules set a “floor” of minimum safety, while state tort liability sets a “ceiling” of maximum protection. This model emphasizes premarket scrutiny but largely relies on the state common law “ceiling” to police the postapproval drug market. As the Supreme Court increasingly holds state tort law preempted by federal administrative standards, the FDA’s framework becomes increasingly imbalanced. In the face of a historic prescription-medication overdose crisis, the Opioid Epidemic, this imbalance allows the pharmaceutical industry to avoid internalizing the public health costs of their opioid products. This Note argues that the FDA’s administrative design misallocates the costs of the Opioid Epidemic and fails to adequately compensate those injured by it. Part I summarizes the FDA’s regulatory framework with respect to opioid medications. Part II explains how that framework creates a compensatory problem that prevents the internalization of negative externalities by pharmaceutical manufacturers. Part III proposes a victims’ compensation fund as the best substitute for the functions long performed by state tort liability.

Introduction

In January of 1980, the New England Journal of Medicine published a letter to the editor penned by Boston University medical researcher Dr. Hershel Jick and his assistant Jane Porter.¹ The five-sentence letter was titled “Addiction Rare in Patients Treated with Narcotics.”² It reported that of 11,882 hospitalized patients who received at least one dose of narcotic pain killers in the researchers’ files, “there were only four cases of reasonably well documented addiction in patients who had no history of addiction.”³ Thus, the researchers concluded, “despite widespread use of narcotic drugs in hospitals, the development of addiction is rare in medical patients with no history of addiction.”⁴

The letter, referred to simply as “Porter and Jick,” rose to notoriety.⁵ Previously, “doctors had long been taught to avoid prescribing highly addictive opioids to patients.”⁶ But by the 1990s, the letter’s conclusory observation about opioid addictiveness “was invoked by doctors, academics, pharmaceutical companies and others as evidence that few users would develop addictions” to prescription narcotic pain killers.⁷ An article in Scientific American cited Porter and Jick’s one-paragraph letter as an “extensive study.”⁸ Time magazine referred to their “landmark” research as showing the “exaggerated fear that patients would become addicted” to prescription opioids was “basically unwarranted.”⁹ Almost forty years later, the Journal published a retrospective “bibliometric analysis” of the letter; this analysis found that the letter was cited at least 608 times and that some of these citations “grossly misrepresented the conclusions of the letter.”¹⁰

Those citations fueled a shift in the healthcare industry’s perspective on the treatment of pain.¹¹ Pharmaceutical and healthcare industry figures “aggressively pushed the concept of pain as the fifth vital sign.”¹² With the introduction of subjective measures like the “pain scale” and the linking of pain treatment to patient satisfaction, new incentives pushed doctors to prescribe narcotic pain killers.¹³ Concurrently, the pharmaceutical industry ramped up promotion of pain medications.¹⁴ Purdue Pharma introduced OxyContin to the market as a long-term solution to chronic pain.¹⁵ A 1998 OxyContin promotional video featured a doctor referencing the letter’s data: “There’s no question that our best, strongest pain medicines are the opioids . . . in fact, the rate of addiction amongst pain patients who are treated by doctors is much less than one percent.”¹⁶ In 2017, Dr. Jick lamented, “I’m essentially mortified that that letter to the editor was used as an excuse to do what these drug companies did.”¹⁷

Exactly what these drug companies did is now the subject of litigation.¹⁸ And unlike previous public health courtroom battles, such as the tobacco litigation of the 1990s, the prescription drugs at the heart of this deadly outbreak are heavily regulated for safety by the federal government.¹⁹ As a result, a diverse array of federal agencies have prioritized responding to the emergency.²⁰ To understand why, consider the extent of the damage: the Substance Abuse and Mental Health Services Administration’s annual survey found that “over 11 million Americans misused prescription opioids” and “2.1 million had an opioid use disorder due to prescription opioids or heroin” in 2016.²¹ Drug overdose deaths in 2016 totaled 63,000, which (after adjusting for age) represents a 21 percent increase over the prior year.²² This is “the largest annual jump ever recorded in the United States,” reaching a total greater than any peak number of annual deaths caused by car crashes, HIV, or guns throughout history.²³ Opioids are responsible for 66 percent of those overdose deaths, killing more Americans annually than breast cancer.²⁴ And 2017 estimates show those numbers rising across all races and nearly all age groups.²⁵ In 2017, Stanford Professor of Psychiatry Keith Humphreys compared “the amount of standard daily doses of opioids consumed in Japan”—a nation with an “older population than us, you would think more aches and pains”—to that of the United States by saying, “double it. And then double it again. And then double it again. And then double it again. And then double it a fifth time. That would make Japan number two in the world behind the United States.”²⁶ According to one forecast, opioids could kill 500,000 Americans over the next ten years.²⁷

Dire as they are, the nationwide numbers mask the extent of the damage in the most heavily impacted localities. The highest-prescribed state sees three times as many opioid prescriptions per person as the lowest-prescribed state, despite “[h]ealth issues that cause people pain . . . not vary[ing] much from place to place.”²⁸ Between 2007 and 2012, drug wholesalers shipped 780 million pills of just hydrocodone and oxycodone to West Virginia.²⁹ In Kermit, West Virginia, a town of 392, drug companies shipped nearly nine million pills of hydrocodone to a single pharmacy.³⁰ In 2016, Montgomery County, Ohio saw a record 349 opioid deaths, but local officials estimate that 2017 deaths could surpass 800.³¹ County coroners are overwhelmed by the influx and struggling to find the physical space necessary to store bodies and conduct autopsies; some coroners have resorted to the use of refrigerated trailers.³² In New Hampshire, the backlog of autopsies is putting the state medical examiner’s office “at risk of losing accreditation.”³³ That state has seen a nearly tenfold increase in overdose deaths since 2000.³⁴

This human cost, in lost life and welfare, translates to a gargantuan toll on the economy. A 2017 study estimated the societal cost (including lost productivity, healthcare expenses, criminal justice costs, etc.) of the Opioid Epidemic at over $95 billion for 2016 alone.³⁵ The White House Council of Economic Advisers, additionally placing a value on the loss of human life, estimated the 2015 cost of the crisis at over $500 billion, or 2.8 percent of GDP.³⁶ These calculations do not incorporate the further costs of patients “initiated” into opioid addiction by prescription medications who then transition to cheaper, more widely available black-market heroin.³⁷ The damage is sizable enough to cause macroeconomic impact: economists from Princeton University, Goldman Sachs, and the Federal Reserve postulate that the perplexing decline in the labor participation rate is linked to opioids.³⁸

This unprecedented rate of addiction and death amounts to the largest drug-related public health emergency in American history.³⁹ Six states and the White House have declared official emergencies.⁴⁰ And, because these drugs are FDA-approved medicines with legitimate applications, the challenge is distinct from past epidemics like the rise of heroin or crack cocaine. According to Scott Gottlieb, the commissioner of the FDA, “Most people who become addicted to opioids become medically addicted. Their first exposure is going to be a clinical prescription that they receive in a clinical setting, and then they’ll go on to develop an addiction.”⁴¹ Indeed, “many public health experts have traced the roots of the current surge in opioid addiction . . . to . . . prescription drugs”⁴² because “[t]he misuse of prescription opioids is intertwined with that of illicit opioids.”⁴³ Four out of five new heroin users began by misusing a prescription opioid.⁴⁴ Between 1996 and 1997, retail sales of hydrocodone increased by 244%, oxycodone by 732%, and methadone by 1,177%, coinciding with the trend of “increased rates of abuse and mortality associated with prescription opioid[s].”⁴⁵ Thus, understanding the FDA scheme that regulates the prescription drugs in question is crucial.

This Note argues that the FDA’s administrative design misallocates the costs of the Opioid Epidemic and fails to adequately compensate those injured by it. The FDA’s regulatory framework emphasizes premarket scrutiny but largely relies on state common law liability to police the postapproval drug market. As the Supreme Court increasingly holds state tort law preempted by federal administrative standards, the FDA’s framework becomes increasingly imbalanced. In the face of a historic prescription-medication overdose crisis, the FDA’s scheme allows the pharmaceutical industry to avoid internalizing the dramatic public health costs of their opioid products. Part I summarizes the FDA’s regulatory framework with respect to opioid medications. Part II explains how that framework creates a compensatory problem that prevents the internalization of negative externalities by pharmaceutical manufacturers. Part III proposes a victims’ compensation fund as the best substitute for the function long performed by state tort liability.

I. The FDA’s “Floor/Ceiling” Scheme and the Preemption Lever

A. The FDA’s Administrative Design

Prescription drugs are regulated under the Food, Drug, and Cosmetics Act (FDCA), passed by Congress in 1938.⁴⁶ The FDCA “imposes an elaborate system” requiring premarket approval of new drugs following “extensive testing and stringent risk/benefit analysis.”⁴⁷ The approval process is notoriously onerous.⁴⁸ The process requires every manufacturer to submit a “New Drug Application” showing data from multiple phases of animal and human preclinical and clinical testing as well as results from a variety of other forms of research and investigation.⁴⁹ The burden is on the manufacturer to show by substantial evidence that its drug meets the standard of “safe and effective” under the conditions recommended for its use.⁵⁰ Because all drugs have “potential risks, contraindications, . . . and adverse reactions,” the approval process also involves a rigorous labeling-approval process to ensure a drug’s label “provides doctors information needed to make informed prescribing decisions.”⁵¹ The FDCA implements a “risk-benefit assessment framework” to determine when a drug poses an acceptable degree of risk in light of its benefits.⁵²

That risk–benefit analysis is central to the FDA’s regulatory scheme. Quantifying costs is especially challenging when an agency must analyze the risk of injury or death of human beings.⁵³ But that is the FDA’s task every time it evaluates whether a new drug meets the “safe and effective” standard.⁵⁴ A drug is never entirely risk free, so warning labels are crucial.⁵⁵ An approved warning label informs doctors and patients about the risks they assume in prescribing and taking a drug respectively.⁵⁶ When a label is inaccurate or incomplete, or when a drug is marketed for nonapproved uses, the manufacturer can face liability under the FDCA for “misbranding.”⁵⁷ That potential penalty incentivizes manufacturers to update a drug’s warning label for risks that arise following approval using the “Changes Being Effected” (CBE) process.⁵⁸ The FDA primarily relies on manufacturers supplying information through the CBE process to detect postmarket risks.⁵⁹ By the FDA’s own account, “[s]ignificant, but substantially fewer, resources are devoted to postmarketing surveillance and risk assessment activities” compared to premarket approval.⁶⁰

This raises the question of who bears the “costs” of a system built on cost-benefit analysis. The FDCA does not include any private right of action or other remedy for consumers injured by unforeseen risks.⁶¹ The Supreme Court interpreted this omission as Congress’s determination “that widely available state rights of action provide[] appropriate relief for injured consumers” in part because “state-law remedies further consumer protection by motivating manufacturers to produce safe and effective drugs and to give adequate warnings.”⁶²

The FDCA framework was therefore designed as a “floor” of oversight and regulation, where state common law liability provided the complementary “ceiling.” This model of regulation takes advantage of the layers of redundant governance: “[T]he federal government sets a minimum required level of stringent protection, and states, local governments, and common law regimes can lead to even more protective results.”⁶³ The preservation of state common law liability “creates ongoing private incentives to challenge the status quo,” a “particularly valuable antidote[] to complacency and ineffective regulation.”⁶⁴ But when common law liability lurks in the background of an industry’s compliance with a complex federal scheme, regulated entities face increased uncertainty and expenditure.⁶⁵ These competing interests of consumer protection and regulatory efficiency are balanced between the FDCA’s floor and ceiling.

B. The Role of Preemption and the Shifting Balance

The constitutional doctrine of preemption is a lever for optimizing this balance between consumer protection and regulatory efficiency. Preemption arises out of the Supremacy Clause.⁶⁶ Because “federal law reigns supreme,” it “preempts any conflicting law or law that federal legislation deems preempted.”⁶⁷ Preemption can be “based on an express or implied legislative or regulatory determination.”⁶⁸ Express preemption clauses speak for themselves, while implied preemption is broken into three main categories.⁶⁹ The three categories of implied preemption are as follows: “Field” preemption, where the federal government intentionally or effectively has exclusive authority to “occupy the field” alone (such as issues of foreign affairs);⁷⁰ and two kinds of “conflict” preemption: where complying with both state and federal law at once is “physically impossible” (such as a federal regulation imposing one standard that is directly at odds with a state standard);⁷¹ and where state law poses a sufficient “obstacle” to fulfilling Congress’s intent (such as a state imposing additional regulation in an interfering manner on top of existing federal requirements).⁷²

In a floor/ceiling model, the degree to which federal standards preempt common law liability sets the height of the regulatory ceiling. As the contemporary administrative state expands, “it is not surprising that federal preemption has become an increasingly popular defense.”⁷³ A regulated entity, such as a pharmaceutical manufacturer, might argue that its compliance with the FDCA regulatory framework preempts concurrent state common law liability.⁷⁴ The FDCA’s regulation of drugs, however, includes no express preemption clause (unlike its section on medical devices).⁷⁵ And for nearly all of the FDCA’s history, courts and the FDA did not take the position that multilayered pharmaceutical regulation amounted to an implied preemption.⁷⁶

In recent years though, the FDA’s stance on preemption has shifted. In 2006, without prior warning, the FDA “slipped a preemptive statement into the preamble of its rulemaking on the format of prescription drug labels.”⁷⁷ The preamble stated a new interpretation of the FDA’s regulatory scheme as establishing both floor and ceiling, a dramatic departure from the FDCA’s historical interpretation.⁷⁸

Initially, the Supreme Court rebuffed this logic. In the 2009 landmark case Wyeth v. Levine, the Court was not swayed by the FDA’s changed stance.⁷⁹ In a decision hailed as “one of the most important Supreme Court victories for consumers in many years,”⁸⁰ the Court rejected a pharmaceutical manufacturer’s impossibility preemption defense that argued the “FDCA establishes both a floor and a ceiling for drug regulation.”⁸¹ The Court held that a state law failure-to-warn claim against a brand-name pharmaceutical manufacturer, whose drug caused the plaintiff to lose an arm to gangrene, was not preempted by the FDA’s approval of the drug’s warning label.⁸² The Court reasoned that it was not “impossible” to comply with both federal and state standards because the manufacturer could update its warning label using the CBE process.⁸³

The Supreme Court’s subsequent decisions, however, undermined Wyeth and embraced preemption of state law in most pharmaceutical litigation. In 2011 and 2013, the Court expanded impossibility preemption in PLIVA, Inc. v. Mensing⁸⁴ and in Mutual Pharmaceutical Co. v. Bartlett.⁸⁵ Those cases involved generic drugs, as opposed to the brand-name drug at issue in Wyeth.⁸⁶ In 2016, generic drugs accounted for nearly 90 percent of prescriptions dispensed.⁸⁷ Under the FDCA, a generic drug manufacturer cannot unilaterally modify its drug’s composition or its warning label using the CBE process, because of the “duty of ‘sameness,’ ” which requires the generic warning label to be identical to the brand-name label.⁸⁸ Therefore, the Court held that subjecting a generic manufacturer to both the federal duty of sameness and state tort law liability for a design defect or inadequate warning label amounted to an “impossibility” conflict.⁸⁹ The Court reached this conclusion despite the FDA’s objections.⁹⁰ The agency argued that a generics manufacturer in this position could seek permission “to work toward strengthening the label that applies to both the generic and brand-name” drugs, rather than taking no action at all.⁹¹ Moreover, state law did not require the manufacturer to change the drug’s composition or modify its label if the manufacturer simply compensated the injured consumers.⁹² Prior to these cases, the “impossibility” category of preemption was reserved for physical impossibilities.⁹³ But here, the Court found impossibility in situations where only the avoidance of liability is impossible, a result that Justice Sotomayor characterized as “frankly astonishing.”⁹⁴

The Supreme Court’s post-Wyeth pharmaceutical preemption decisions amount to a novel application of the doctrine with seismic social policy implications.⁹⁵ This line of cases immunizes most drug manufacturers from state common law liability.⁹⁶ Under this regime, when two plaintiffs suffer the same injury from a defective brand-name drug and its generic equivalent, only the former has a claim against the manufacturer.⁹⁷ Even the Court acknowledged this outcome “makes little sense” for pharmaceutical consumers,⁹⁸ and commentators found the decisions “bizarre.”⁹⁹ To the pharmaceutical industry, the decisions signaled an increasing preference by the Court for immunizing manufacturers from state common law liability.¹⁰⁰ In the face of the Opioid Epidemic, the Supreme Court has severely obstructed a major pathway to remedying consumer injuries and penalizing manufacturers.

II. The Supreme Court’s New Step in Preemption’s Doctrinal Thicket Creates a Compensation Problem

By expanding the concept of impossibility preemption, the Supreme Court reduced the essential role of state common law in the FDA’s administrative design. This prevents internalization of prescription opioids’ externalities and compensation for the injured. The Court’s increasing preference for centralized, standard-setting regulation over localized, market-based compensatory torts shelters industry at the expense of consumers. Section II.A contends that the Court’s novel preemption analysis marginalizes the tort system’s essential role in the FDA’s administrative design. Section II.B argues that the remaining federal regulatory scheme is inadequate on its own. Section II.C acknowledges that, even at the proper floor/ceiling balance, torts alone cannot compensate all victims of the Opioid Epidemic.

A. The Court’s Embrace of Preemption Minimizes the Crucial Role of Torts

The Supreme Court’s preemption cases displace the economic functions traditionally performed by the state tort system. After Mensing and Bartlett, manufacturers of generic drugs are “effectively immunized” from products liability schemes.¹⁰¹ Given that nearly 90 percent of prescriptions are for generic drugs,¹⁰² this leaves the vast majority of injured patients without a path to economic recovery. Tort liability incentivizes manufacturers to avoid liability by policing their drugs for adverse effects postapproval¹⁰³ and then compensates the victims effectively.¹⁰⁴ By embracing preemption, the Court has replaced the internalization and compensation that torts provide with the model codes of conduct of the federal administrative state.¹⁰⁵

The federal regulatory scheme alone cannot perform the same economic functions as parallel tort regulation. Federal regulation “replace[s] the ex post, decentralized form of private regulation” that torts provide “with ex ante, centralized public administrative rules.”¹⁰⁶ Because that ex ante determination is premised on a risk–benefit analysis,¹⁰⁷ the injuries that do still occur need to be compensated. The FDA, though, does not compensate the victims of its cost-benefit analyses.¹⁰⁸ Pharmaceutical companies should fill that role, as the FDCA imagined, given they are likely the cheapest cost avoider.¹⁰⁹ Drug manufacturers “are better able to control product safety” and “possess superior capacity for risk distribution.”¹¹⁰ Drug consumers, by contrast, are patients following the instructions of a doctor, and pharmaceutical companies “cultivate and profit from consumer reliance on the safety” of their drugs.¹¹¹ That is why the strict-liability common law tort scheme preempted in Bartlett was an essential element in the federal regulatory design.¹¹² Without that compensatory safety net, the manufacturer does not internalize the costs of a drug’s harms, and consumers bear the burden. As Judge Calabresi put it, “the pharmaceutical industry’s drive for federal preemption would have the effect of imposing direct, centralized, and high-level decisions as to the value of life and limb” on the FDA approval process.¹¹³ Under the FDCA’s intended design, “the costs of tort law are . . . borne by the drug companies,” but when preemption is applied “costs . . . would be borne, pretty much entirely, by people other than those companies.”¹¹⁴ Thus, “[w]ho can doubt that the pharmaceutical companies have, to this extent, an important distributional reason to push for preemption and regulation[?]”¹¹⁵

The pharmaceutical industry may argue that the FDA’s standards are sufficient, but the role of the torts “ceiling” in the FDCA framework is crucial. Despite the FDA’s valuable expertise regarding drug safety and approval,¹¹⁶ “safety issues plague FDA-approved drugs that remain on the market, as more than 100,000 consumers are killed every year as a consequence of medical devices and pharmaceutical use.”¹¹⁷ The FDA’s inadequacy in this domain is well established.¹¹⁸ It is itself evidence of Congress’s “understanding of the limitations of ex ante federal regulatory review” and “preservation of a role for state law generally, and common-law remedies specifically.”¹¹⁹ The FDA does not independently conduct safety testing when considering approval applications but rather relies upon the manufacturers.¹²⁰ Nor does the FDA independently monitor for serious risks which arise postapproval¹²¹ (though it is aware that such problems will arise).¹²² The FDA instead relies on manufacturers’ self-reporting.¹²³ While the FDA has a variety of enforcement tools for policing its postapproval jurisdiction,¹²⁴ those mechanisms cannot effectively monitor the entire market.¹²⁵ Without the specter of common law liability, manufacturers have little incentive to perform these information-generating functions.

B. An Inadequate Regulatory Scheme Remains Post-Preemption

The Opioid Epidemic presents a prime example of the compensatory problem that results from a lack of incentive to monitor the safety of approved drugs. Though the degree to which the manufacturers of opioids are responsible for the addiction crisis remains uncertain,¹²⁶ existing evidence indicates a significant contribution.¹²⁷ That evidence has led to an onslaught of litigation against the major opioids manufacturers and distributors.¹²⁸ So far, several state attorneys general, over sixty counties and municipalities, the Cherokee Nation, multiple labor unions, and private classes of plaintiffs have brought actions.¹²⁹ The dozens of lawsuits bring varied theories of liability, but they “generally allege the drug companies downplayed the addictive risks of the drugs in order to turn a profit.”¹³⁰ The defendants raise preemption in response.¹³¹

The lawsuits allege the risk–benefit approval process underestimated the risk of addiction due to industry’s obfuscation. Tort liability could allocate the externalities that result from such a miscalculation to the cheapest cost avoider. But market forces in the American healthcare system drive consumers to generic opioids,¹³² where common law tort claims are preempted under Mensing and Bartlett.¹³³ Indeed, the defendants in the opioid litigations have already raised blanket preemption defenses.¹³⁴ Consumers often play no role in the decision between a generic or brand-name drug that ends up impeding their path to recovery.¹³⁵ Moreover, the preempted plaintiffs tend to be disproportionately low income and more likely to lack access to alternative remedies.¹³⁶

C. Torts Alone Cannot Adequately Compensate the
Victims of the Opioid Epidemic

Restoring the balance between federal regulation and state common law liability in the FDCA’s design would provide a remedy for at least some victims of this epidemic. That said, merely overruling Mensing and Bartlett would not provide a comprehensive solution. The vastness of the Opioid Epidemic makes assigning responsibility for the fallout challenging, in both a moral and legal sense. The crisis has been shaped by the actions (and inactions) of virtually every stakeholder involved in supplying prescription painkillers: manufacturers,¹³⁷ distributors,¹³⁸ physicians and pharmacists,¹³⁹ insurers,¹⁴⁰ policymakers,¹⁴¹ and law-enforcement agencies.¹⁴²

Beyond sheer magnitude, the nature of the harms at issue poses a challenge for tort plaintiffs. Where addiction is the actionable injury, tort doctrine limits feasible arguments. Only “legitimate” use of a prescription opioid fits a legal theory that alleges manufacturers misrepresented the addictive nature of their drugs and failed to warn consumers.¹⁴³ Manufacturers have succeeded in challenging causality by arguing “that misuse of OxyContin by drug abusers was a superseding cause sufficient to break the chain of causation.”¹⁴⁴ For plaintiffs deemed “illegal users” who “intentionally defeated the time-release mechanism” of the pill’s design (i.e., crushing the pill, or taking multiple doses), “the extent of their deliberate misuse tended to render any sort of claim impracticable.”¹⁴⁵ In the class action context, the same issue is an obstacle to meeting the standards of Rule 23.¹⁴⁶ Some courts have found addiction injuries complicate the rule’s commonality and typicality requirements because they necessitate “individualized inquiries with respect to those class members who crushed or otherwise misused the drug.”¹⁴⁷

Causation will be central to any tort action but is likely to exclude addiction injuries. A court’s inquiry into causation and drug abuse is inevitably moralistic. Many states’ common law standards will not apply comparative negligence frameworks to “intentional abuse of a potentially intoxicating substance such as alcohol or OxyContin” but will instead consider this an issue of proximate cause.¹⁴⁸ The comparison is questionable—not many physicians prescribe a daily dosage of alcohol in a manner that naturally induces physiological addiction and high tolerance.¹⁴⁹ By contrast, OxyContin rose to prominence on a marketing campaign boasting of twelve-hour pain relief, but the drug “wears off hours early in many people,” resulting in “excruciating symptoms of withdrawal, including an intense craving for the drug.”¹⁵⁰ Though addiction science is often hotly contested, it is well-established that physiological addiction to opioids, among the most addictive substances known to man, impacts decisionmaking processes in the prefrontal cortex.¹⁵¹ Despite this layer of complexity, courts in some of the states most acutely impacted by prescription-opioid abuse follow the proximate cause framework and hold illegal drug abuse to be a bar to recovery.¹⁵²

Therefore, renovating the floor/ceiling model would only partially address the problem. The magnitude of the Opioid Epidemic goes beyond the personal responsibility of the Americans who have fallen prey to addiction. The solution to the problem must do so as well.

III. Calling for an Opioid Epidemic Victim’s Compensation Fund

In an era where the Supreme Court’s “hostility toward the common law of torts trumps even their caustic criticism of the ever-inflating administrative state,” what are the alternative legal mechanisms for internalizing the costs of mass injustices like the Opioid Epidemic?¹⁵³ Section III.A explains why alternative solutions, like nontraditional tort schemes or enhanced criminal enforcement, would not solve the compensation problem. Section III.B proposes an opioid victims’ compensation fund to replicate the original vision of the FDCA.

A. Nontraditional Torts and Criminal Punishment
Cannot Solve This Problem

Beyond optimizing the preemption balance, some possible solutions exist within nontraditional tort frameworks. For example, in the case of mass-exposure accidents, injured parties “may in theory sue in tort for redress for their injuries,” but in practice “they are unlikely to receive tort compensation” because “the indeterminacy of causation of the injury[]create[s] a basic incongruity with the tort system.”¹⁵⁴ Courts can develop novel standards, such as the “substantial factor” test, in response to such problems.¹⁵⁵ Similarly, the late twentieth century saw a rise in the use of public nuisance doctrine to target mass damage resulting from dangerous products, such as tobacco, guns, or lead paint.¹⁵⁶

Compensating victims of the Opioid Epidemic is likely a challenge that even these alternative standards are ill-suited to resolve. While mass-exposure theory addresses the causation obstacle, ultimately, an FDA-regulated and doctor-prescribed pharmaceutical drug is neither an environmental nor accidental harm and is ill-suited to the doctrine. Though analogizing between an addictive drug flooding the markets and a toxic substance flooding the environment is intriguing, it is probably more useful as a thought exercise than a practical litigation strategy.

Public nuisance theory is a closer call. Many legal commentators have already begun comparing the tidal wave of opioid litigation to that of the 1990s tobacco litigation, where public nuisance was utilized.¹⁵⁷ The Ohio attorney general’s complaint against the opioids manufacturers is testing the theory: its first cause of action is a public nuisance claim.¹⁵⁸ Some localities have indicated they are taking the same approach.¹⁵⁹ But this theory requires the extension of a common law doctrine that was virtually never the basis for a manufacturer’s liability to an injured consumer until the twenty-first century.¹⁶⁰ It is unlikely that a majority of courts would welcome such an approach. Even if public nuisance were a more promising scheme, “the scope of liability for damages is more restricted than it is for other torts such as strict products liability . . . where compensation is a principal goal.”¹⁶¹ Forcing the common law to serve as a substitute for products liability would fail to achieve comprehensive compensation for victims.

Outside of torts, some policymakers argue that an increased criminal justice response is needed.¹⁶² Indeed, prosecuting corporate executives guilty of intentionally or recklessly exacerbating the Opioid Epidemic is likely warranted.¹⁶³ Law enforcement agencies argue that criminal enforcement improves norms of corporate ethics in the industry, thereby affirmatively reducing the harm done by the epidemic.¹⁶⁴

But even when considering that possible shift in corporate culture, increased criminal enforcement could do more harm than good for victims of the epidemic. History reflects a tendency for the criminal response to substance abuse emergencies to take the form of a “war” waged on the same communities burdened by crisis.¹⁶⁵ This aggravates the underlying public health problems. The costs of criminal enforcement “disproportionately impact low-income individuals and communities,”¹⁶⁶ and “[t]he harms normally associated with drug addiction . . . are exacerbated in prison.”¹⁶⁷ When those struggling with addiction are incarcerated, their communities foot the bill: a Medical Care study estimates that opioid criminal justice–related costs in 2013 totaled $7.7 billion “borne directly by state and local governments.”¹⁶⁸ For opioid addicts not seeking treatment, studies using a “cost-of-illness methodology” estimate an “average annual law enforcement and victimization societal burden” above $50,000 per individual.¹⁶⁹ By contrast, “dollar for dollar, treatment” of the underlying addiction “reduces the societal costs of substance abuse more effectively than incarceration does.”¹⁷⁰ Legislators should look to solutions grounded in harm reduction rather than criminality when addressing the compensation problem.

B. The Victim’s Compensation Fund Model

A compensation fund has the potential to address the costs problem where tort litigation is inadequate and criminal enforcement is counterproductive. In circumstances where litigation is not feasible or desirable, courts and legislatures have turned to the use of compensation funds.¹⁷¹ A compensation fund can mimic the functions of the tort system, achieving goals like internalization and deterrence, as well as compensation.¹⁷² The fund model is a comprehensive approach to public health crises because it “enable[s] courts to overcome the problems posed by systematic causal indeterminacy.”¹⁷³

Compensation funds are uncommon but not unprecedented.¹⁷⁴ The best-known compensatory fund is likely the controversial September 11th Victim Compensation Fund, “the country’s largest experiment in paying mass victims and their families without placing blame.”¹⁷⁵ Less well-known examples exist, including funds addressing childhood vaccine injuries, nuclear exposure, black lung disease, and Agent Orange victims.¹⁷⁶

The situations above are comparable to the current Opioid Epidemic compensation problem. For example, at the apex of the tobacco litigation, scholars suggested a variety of compensatory fund approaches as comprehensive solutions.¹⁷⁷ Similarly, the Childhood Vaccination Compensation Program (CVCP) arose when “administratively costly tort liability did not provide injured consumers reliable compensation.”¹⁷⁸ The CVCP is a close analogue to the solution the Opioid Epidemic requires: it “creates something of a hybrid system between a fault-based system and a causation-based compensation system” and is “meant to be expeditious . . . accessible, and informal.”¹⁷⁹ CVCP damage awards are funded through an excise tax on the sale of the vaccines and, occasionally, additional penalties against manufacturers.¹⁸⁰ Like prescription opioids, childhood vaccines provide a clear public benefit while also causing injuries that tort liability cannot reliably compensate.¹⁸¹ The opioids compensation fund could also be financed through an excise tax, furthering the internalization goal. The CVCP is not primarily concerned with deterrence,¹⁸² but the opioids fund could additionally achieve deterrence goals (against irresponsible marketing, distributing, and prescribing) through a partially fault-based component in addition to the tax funding.

While funds like the CVCP simply provide cash payouts,¹⁸³ the opioids fund should compensate in a manner that addresses the unique public health dimensions of the crisis. For applicants with ongoing addiction injuries at the time of application, the fund’s payout schedules could provide sorely needed¹⁸⁴ drug abuse resources¹⁸⁵ rather than cash awards. Harm-reduction policies such as overdose-reversal medications, supervised-injection facilities, and addiction-treatment programs should be prioritized to slow the unprecedented rate of overdose deaths.¹⁸⁶ This form of compensation remedies the injury at issue and achieves efficiency by relieving over-burdened local healthcare systems.¹⁸⁷

The fund would be an administrative scheme mimicking products liability.¹⁸⁸ Industry stakeholders would provide financing, and affected consumers (patients with addiction injuries, families with wrongful death claims, etc.) would receive compensation.¹⁸⁹ Congress would generate eligibility criteria sufficient to establish an applicant’s injury from a prescription opioid.¹⁹⁰ The standard for establishing causation would be cursory by design, allowing for compensation beyond what the tort system could achieve and deterring manufacturers and distributors from facilitating overprescription.¹⁹¹ An administrative tribunal would preside over the fund to evaluate applications and calculate remedies based on predetermined schedules.¹⁹² The damages would then be allocated among the opioids manufacturers and distributors currently in litigation with state attorneys general.¹⁹³ Allocations would be based on negotiated proportions (depending on the circumstances of the negotiations, this could include a fault-based component or simply follow market-share). For complying companies, participation in the fund would function like a settlement of the pending litigation through its offer of prospective tort immunity.¹⁹⁴

Thus, an opioids compensation fund could achieve the very functions that the post-Mensing-and-Bartlett FDCA floor/ceiling balance cannot. By requiring industry participants to finance a portion of the awards, the fund imposes the negative-externality costs of opioids on their manufacturers and distributors. This internalization reduces inefficiency and alleviates some of the macroeconomic burden of the crisis. The more simplistic evaluation of causation means the fund would reach a wider population of injured parties. The sizable pool of potential applicants also acts as a deterrent against the irresponsible prescribing practices that led to the current crisis.

Feasibility is the primary obstacle to this solution. Manufacturers and distributors are unlikely to volunteer for new taxes and penalties in exchange for tort immunity unless the liability they face is potentially bankrupting. For example, during the tobacco litigation policymakers considered compensation funds while manufacturers were facing potential regulation by the FDA and a settlement with state attorneys general estimated at $368.5 billion.¹⁹⁵ While comparisons have been made by attorneys familiar with the tobacco litigation,¹⁹⁶ the current stance of the opioids litigation is not as threatening to the pharmaceutical industry.¹⁹⁷ Until industry players feel sufficient pressure to come to the table, this solution remains aspirational. But an unprecedented crisis demands unprecedented solutions, and it is not too early to see that a compensation fund is an optimal option.

General critics of the compensation fund mechanism may raise concerns about manufacturing liability outside of courts. A program like the one suggested here requires “a single, powerful administrator . . . completely dominat[ing] the creation and implementation” of liability imposed upon private parties—a system that might “lack[] legitimacy in a democratic society.”¹⁹⁸ A fund simulates the administration of justice in a vacuum removed from “the values of participation, accountability, transparency, rationality, personal autonomy, equality, due process, and other social capital values necessary to promote civil society.”¹⁹⁹

These concerns are justified. But, this kind of remedy is reserved for situations where existing legal mechanisms are inadequate. Prior examples, such as the CVCP or black lung fund, indicate that Congress’s discretion is a sufficient barrier to wholesale abandonment of the civil process. Ultimately, these criticisms do not outweigh the social value of the fund. A legal system that provides no remedy to victims of the Opioid Epidemic is similarly removed from democratic values.

Conclusion

Reasonable minds can disagree on the optimal balance between federal regulation and state common law liability in the contemporary administrative state. The FDA’s pharmaceutical regulatory framework, however, indisputably relies on some role for the states in compensating consumer injuries. Dramatically cutting back that role, just as an unprecedented prescription drug crisis grips the nation, protects the pharmaceutical industry’s interests at the expense of working Americans.

Allocating costs and compensating injured consumers will alleviate this imbalance. The mechanisms of tort liability will force internalization by manufacturers and provide needed incentives for safety. But, in a nationwide addiction crisis, torts are ill-equipped to achieve this task alone. An Opioid Epidemic victims’ compensation fund will achieve this outcome comprehensively.

* J.D. Candidate, May 2019, University of Michigan Law School. My thanks go to the Maryland Office of the Attorney General’s Consumer Protection Division and Professor Gabriel Rauterberg. Also, thank you to Mel Cassel, the Notes office, and the rest of the Michigan Law Review for their feedback and friendship.