Immunity for immunizations: tort liability, biodefense, and bioshield II.

Publication: Stanford Law Review

Publication Date: 01-APR-07

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COPYRIGHT 2007 Stanford Law School

INTRODUCTION: AFTER 9/11



I. THE FAILURE OF "BIOSHIELD I" AND THE NEED FOR TORT IMMUNITY II. BIOSHIELD II: A THICK, STURDY SHIELD A. Preparing for the Worst: The Structure and Significance of the PREP Act 1. Operative structure: expansive liability protection at the discretion of HHS 2. Mechanisms for shielding tortfeasors 3. Virtually no recourse to tort 4. Plaintiffs who reach the tort system face additional hurdles and sharply limited recovery 5. Victim compensation scheme 6. Eligibility for the fund III. THE RISKS OF BIOSHIELD II A. The Risk of Inadequate Victim Compensation B. The Risk of Inadequate Tortfeasor Deterrence and Monitoring C. The Risk of a Slippery Slope IV. SMELTING A NEW BIOSHIELD A. The Mismatch Between Tort and Biodefense B. Tailoring Tort and Nontort Responses to the Challenges of Biodefense CONCLUSION

INTRODUCTION: AFTER 9/11

The September 11, 2001 attacks forced the United States to reassess the possibility of a mass-casualty bioterror event. If terrorists could coordinate the destruction of four large commercial aircraft, two of the tallest skyscrapers in the country, and an entire section of the Pentagon in a single day, killing thousands of people, then they might eventually release a catastrophically lethal biological agent. Indeed, shortly after September 11, an unknown assailant sent anthrax spores to congressional offices and other targets, causing several fatalities and sowing widespread fear of being poisoned through the mail. Barely a year later, the outbreak of Severe Acute Respiratory Syndrome (SARS) and, after that, avian influenza, woke the public to a pandemic threat of a scale not seen since the million-death influenza strains that circulated in 1968-1969 and 1957-1958 (and perhaps even the 1918-1919 Spanish flu, which killed 40 million people worldwide). (2)

The federal government has determined that the country is woefully unprepared for a pandemic or major biological attack, particularly because of the lack of effective medical countermeasures. For example, in 2001, in its Third Annual Report to the President and the Congress, the Advisory Panel to Assess Domestic Response Capabilities for Terrorism Involving Weapons of Mass Destruction concluded that "[l]imited research, development, and production capability for certain vaccines is one of the largest hurdles currently facing military and civilian responders as they prepare for biological threats." (3) Indeed, in 2003, the Commissioner of the Food and Drug Administration (FDA), Mark B. McClellan, called counterterrorism that agency's "biggest new challenge." (4)

Such concerns prompted Congress to enact Project Bioshield (also known as "Bioshield I") in 2004. President Bush, inaugurating the multibillion-dollar program to develop and stockpile vaccines and antidotes to the most likely biological weapons, pledged to "rally the great promise of American science and innovation to confront the greatest danger of our time." (5) The drug industry's lackluster response to Bioshield I, however, disappointed the legislation's supporters.

The following year, Congress responded with competing versions of legislation that became known as "Bioshield II." (6) These proposals offered a sweeping array of reforms to coordinate national biodefense efforts and stimulate private development of medical countermeasures for deadly biowarfare agents. This Note focuses on the development and implications of Bioshield II's broad tort immunity for entities that develop or deploy covered countermeasures, as well as its no-fault compensation scheme to pay for any injuries that these countermeasures cause.

Congress passed part of the Bioshield II program--the liability protections and no-fault compensation scheme--in the form of the Public Readiness and Emergency Preparedness (PREP) Act, which the President signed on December 30, 2005. (7) In conferring nearly impregnable immunity from tort suits on designated products, Bioshield II built on a post-September 11 trend toward liability limitations and terrorism-related no-fault schemes. In 2001, Congress created a no-fault administrative scheme for victims of the al Qaeda attacks that offered generous compensation while constraining victims' recourse to tort. (8) Shortly thereafter, it passed the Homeland Security Act of 2002, giving limited but uncertain liability protection under section 304 to manufacturers, distributors, and administrators of countermeasures, while offering little compensation to injury victims. (9) The Smallpox Emergency Personnel Protection Act of 2003 (SEPPA) soon followed, addressing liability and compensation concerns for one of the most lethal potential biowarfare agents. (10) Bioshield I arrived in 2004, allocating billions of dollars to develop and stockpile drugs for diverse biological threats. (11) The drug industry, however, viewed these measures as insufficient, (12) and, in 2005, Congress passed the PREP Act to facilitate faster development of biowarfare and pandemic countermeasures. (13)

This Note begins at the origin of U.S. biodefense concerns, then explains and assesses Bioshield II as a possible solution. Part I introduces the post-9/11 threats that America faces from bioterrorism and pandemics. After examining the intersection between biodefense and the tort system, this Part concludes that modifying tort was necessary to stimulate more effective private sector involvement in biodefense.

Part II focuses on the text, structure, and purpose of the Bioshield II legislation itself, mapping the PREP Act as well as key parts of Bioshield II bills that Congress passed over but may yet consider again.

Part III analyzes Bioshield II's most significant risks--inadequate compensation for victims, insufficient deterrence of negligent tortfeasors, and concerns that "a slippery slope" will develop that carries the legal innovations of Bioshield II into the broader realm of medical products liability.

Part IV suggests specific reforms to Bioshield II in light of the following three conclusions: First, the government must fully account for the positive externalities associated with developing biodefense and pandemic countermeasures. (14) Second, to internalize these externalities, Congress should create a more robust guaranteed market for biodefense products than that which Bioshield I achieved, as well as circumscribe tort liability for entities that develop, distribute, or administer these products. Third, Bioshield II should retain the core aspirations of the tort system--providing victims with adequate compensation and inducing potential tortfeasors to take socially optimal precautions. To that end, this Note identifies aspects of Bioshield II that are ripe for reconsideration.

I. THE FAILURE OF "BIOSHIELD I" AND THE NEED FOR TORT IMMUNITY

Few major companies have entered the biodefense market, and even fewer are developing novel biodefense therapies. In 2000, the Defense Department determined that of fifty-seven medicines and medical devices the United States would need to be ready for a biological attack, only one existed. (15) By 2005, only two existed. (16)

The drug industry offered an unequivocal explanation: tort liability and limited commercial prospects. In April 2005, the vice president for public policy at pharmaceutical giant Merck stated, "we think the two critical issues are a strong, guaranteed purchase commitment and liability protection." (17) James Greenwood, who heads Biotechnology Industry Organization (BIO)--the industry's trade association--similarly asserted that "you aren't going to have companies risk their entire corporate existence without sufficient liability protection." (18) Drug companies, however, do risk substantial sums, and sometimes their entire existence, to bring new products to market without any tort immunity or government purchase guarantee, often striking it rich or failing spectacularly. (19) Companies' reticence to shoulder the risk for biodefense medicines implies that they perceive far greater downside in the political risks and legal liabilities than upside in the field's potential profit margins. (20)

Insurers echo the drugmakers' reading of the inherent risks in the biodefense market. (21) First, it is difficult to predict the frequency and severity of bioterror attacks and pandemics. Second, it will be impossible to gauge the safety and efficacy of key biodefense therapies, because human clinical trials would be unethical for deadly diseases that seldom naturally occur, such as Ebola and anthrax. Third, terrorist attacks are not random occurrences. Over the long term, at least from an insurance perspective, Nature is more predictable than humankind. Fourth, potentially "catastrophic" risks are difficult or impossible to insure. (22) The September 11 attacks killed 3000 people and produced tens of billions of dollars in insured losses; in the aftermath, terrorism-related insurance dried up. (23) Yet, September 11 was a conventional attack. Terrorists did not use nuclear, chemical, biological, or radiological weapons. An unconventional attack (let alone pandemic flu) could be much worse. Civil immunity, then, is essential because the tort system presents manufacturers of biodefense products with an unquantifiable, uninsurable, and therefore unmanageable risk. (24)

A series of unfavorable court decisions that began in 1974 with Reyes v. Wyeth Laboratories (25) prompted insurers to dramatically reassess vaccine makers' liability exposure, and provoked an exodus of companies from the vaccine market. The added risks of biodefense did not entice them to return. Major vaccine manufacturer Aventis, in a statement to Congress on Bioshield I, asserted that "[t]he issue of potential liability ... absolutely must be addressed in order to stimulate private sector interest in entering into agreements for such countermeasures." (26) An Aventis executive further testified, "We would try to obtain commercial insurance, but the practical reality today is that it is unlikely to be available for projects of this nature." (27)

Aventis's reluctance to take on biodefense projects is significant because it is the world's largest company "devoted entirely to vaccine[s]," producing "approximately 1.4 billion doses of vaccines annually ... to protect 500 million people across the globe ... against 20 bacterial and viral diseases." (28) The company epitomizes the commercial experience and expertise that Congress had hoped to enlist with Bioshield I but failed to attract.

To address the market's understandable perception of a lopsided risk-reward ratio for biodefense medicines, the government needed to both reduce the risk and raise the reward. Granting companies immunity from suit, however, is highly contentious, and Congress sought to sidestep the issue. While Bioshield I passed with great fanfare, 99-to-0 in the Senate (29) and 414-to-2 in the House, (30) these resounding votes of approval reflect that the bill achieved consensus at the cost of efficacy.

Bioshield I did not allocate enough money to procurement and ignored the problem of tort liability. These inadequacies became apparent as soon as the Department of Health and Human Services (HHS) asked for bids on its first major contract: a nearly $1 billion award to develop and stockpile a new anthrax vaccine. No bids came in from major pharmaceutical companies because of concerns about profit potential and tort liability. (31) HHS had little recourse but to award the $877 million contract to VaxGen, a small, struggling biotech company with no track record of bringing products to market. (32) Problems plagued the program and, (33) eventually, prompted the government to cancel its order. (34) The rewards Bioshield I held out were inadequate because, in a world of multibillion-dollar blockbuster drugs (35) and costs of hundreds of millions of dollars to bring a new drug to market, (36) Congress's $5.6 billion over ten years seemed paltry. Furthermore, that modest cash pool came fraught with the political risks of dealing with the government, (37) and the market risks of the government being the sole or primary purchaser. (38) Major pharmaceutical companies bring a depth of experience and resources that small biotech firms cannot match, which was why the government had hoped to attract "Big Pharma" in the first place. Without added incentives, however, these companies made the obvious financial choice to stay on the sidelines.

Professor Michael Greenberger, who directs the Center for Health and Homeland Security at the University of Maryland, contends that "inept implementation of [Bioshield I] ... led the best brains and the best scientists to give up, to look elsewhere or devote their resources to medical initiatives ... not focused on biodefense." (39) Bioshield I came to appear ill-fated so soon after its passage that legislators introduced Bioshield II the following year to address companies' concerns with legal liability and bureaucratic confusion. (40)

II. BIOSHIELD II: A THICK, STURDY SHIELD

In late 2004, with Bioshield I already showing signs of failure, the FDA found that a British factory's entire production run of flu vaccine had become irretrievably contaminated. (41) The vaccines had been destined for the U.S. market, and their loss halved the number of doses available to Americans for the 2004-2005 flu season. (42) Widespread shortages ensued, prompting the federal Centers for Disease Control to establish the first-ever permanent panel to set ethical guidelines for distributing vaccines. (43) That crisis, amplified by the presidential election that took place in its midst, drew into sharp relief the decline of the U.S. vaccine industry over the past generation. The industry had become so uncompetitive that no vaccine manufacturer could make up for a serious production shortfall at any other. (44) Citizens and policymakers quickly extrapolated that the United States was unprepared for a major epidemiological event. According to medical experts, "[t]he manufacturing failure that has thrown the nation's flu vaccination program into chaos this season ... is a wake-up call for a health system that is dangerously vulnerable to other epidemics, both natural and man-made...." (45) Among other factors, commentators pointed to tort liability as a major cause of the industry's decline. Congress answered with Bioshield II.

A. Preparing for the Worst: The Structure and Significance of the PREP Act

The PREP Act dramatically expanded the scope of the Smallpox Emergency Personnel Protection Act of 2003 (SEPPA), which had pertained to smallpox alone but now covers any biodefense or pandemic countermeasure. (46) Its liability protections form the core of Bioshield II's broader vision.

1. Operative structure: expansive liability protection at the discretion of HHS

The Secretary of Health and Human Services has broad discretion over whether and when to issue a declaration extending Bioshield II's generous liability protections to specific products or entities; (47) to the extent that the legislation constrains the Secretary at all, those constraints favor potential tort defendants. The core statutory language is both broad and vague, (48) and exempts the Secretary's decisions from judicial review. (49)

The liability coverage of a declaration is furthermore thorough and durable. Indeed, the only constraint on the Secretary's power to amend existing declarations is that he or she "shall not retroactively limit the applicability" of those declarations. (50) The declaration completely preempts state and local law, rendering moot any legislation or case law that conflicts with it. (51) If the Secretary issues a declaration to purchase a countermeasure for the Strategic National Stockpile, the declaration is suspended when the medicine is deposited into the stockpile and automatically reenters into effect if and when the government withdraws and distributes the countermeasure. (52)

Despite conferring the power to grant such potent liability protection, Bioshield II imposes minimal oversight, accountability, and process on the Secretary. For example, Congress requires only that the Secretary provide an explanatory report within thirty days of issuing a declaration. (53) There also is no opportunity for notice and comment because the Secretary's declarations and amendments take effect immediately upon publication in the Federal Register. (54) The statute declares that "[n]o court of the United States, or of any State, shall have subject matter jurisdiction to review, whether by mandamus or otherwise, any action by the Secretary under this subsection." (55) In short, the executive branch has decisive control of the process, which should produce greater efficiency and direction but also calls for some form of independent oversight.

Furthermore, the Secretary can shroud in secrecy the basis for any declaration, pursuant to a Freedom of Information Act (FOIA) exemption. (56) When sensitive intelligence is involved, a FOIA exemption is necessary to protect national security, but this exemption has no such stipulation. The Secretary can invoke it for any purpose, which risks hampering informed debate as well as making it close to, if not completely, impossible for would-be tort plaintiffs to obtain information that may be crucial to their cases.

2. Mechanisms for shielding tortfeasors

The PREP Act incorporates SEPPA's airtight exclusivity provision, (57) which precludes a tort remedy for most plaintiffs.

The first striking aspect of Bioshield II's liability coverage is the breadth of the statutory language itself. The Secretary can designate a "covered countermeasure" for biodefense or a pandemic, and can cover a drug, device, or almost any other product "manufactured, used, designed, developed, modified, licensed, or procured to diagnose, mitigate, prevent, treat, or cure a...

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