Responses to Liability Immunization: Evidence from Medical Devices

• Published date: 01 December 2020
• DOI: http://doi.org/10.1111/jels.12268
• Date: 01 December 2020

Journal of Empirical Legal Studies

Volume 17, Issue 4, 789–819, December 2020

Responses to Liability Immunization:

Evidence from Medical Devices

Elissa P. Gentry and Benjamin J. McMichael*

The Supreme Court’s decision in Riegel v. Medtronic immunized medical device manufac-

turers from certain types of state product liability claims. However, this immunization

applies only when the devices underlying those claims have been approved through the

Food and Drug Administration’s most rigorous—and costly—review process, premarket

approval (PMA). Exploiting this decision, we examine whether manufacturers strategically

respond to this new immunity. We f‌ind evidence that, following Riegel, approvals for high-

risk product categories increase relative to the comparable change for low-risk categories,

suggesting that f‌irms are sensitive to the newly immunized risk. We additionally f‌ind evi-

dence that physician treatment patterns with respect to medical devices also change, con-

sistent with Riegel shifting liability away from device manufacturers and toward physicians.

The analysis provides evidence that sophisticated actors respond to changes in their

expected legal liability and that technical legal decisions have important ramif‌ications for

the provision of healthcare.

I. Introduction

Medical devices are ubiquitous in U.S. medical care. From the use of intrauterine devices

for contraception to stents for blocked arteries, medical devices pervade many everyday

healthcare decisions. Until a few decades ago, however, the federal government did not

regulate these devices. Instead, states regulated the safety of medical devices indirectly by

allowing individuals harmed by these devices to assert tort claims against device manufac-

turers. Manufacturers would, in theory, create safer products to avoid this liability, fearing

the large damages awards that could be imposed under tort law. Federal regulation

began only in 1976, with the enactment of the Medical Device Amendments of

1976 (MDA).

*Address correspondence to Benjamin McMichael, Assistant Professor, University of Alabama School of Law,

101 Paul W. Bryant Dr., E., Tuscaloosa, AL 35487; email: bmcmichael@law.ua.edu. Elissa P. Gentry is Assistant Pro-

fessor, Florida State University College of Law.

We are grateful to the editor and two anonymous referees for their helpful comments, by which our paper is

substantially improved. We are also grateful to David Hyman, as well as the participants at the Conference of

Empirical Legal Studies 2019, for thoughtful feedback and discussion. Finally, we thank the seminar participants at

the Institute for Advanced Study in Toulouse, Vanderbilt University, and Queen’s University for helpful feedback.

All errors remain our own.

789

Rather than establish remedies for injured consumers, as tort law does, the MDA

established ex ante standards for devices. The rigor of each standard varies by the risk each

device class is likely to pose to consumers. Class I devices pose little risk to consumers and

are subject to the lowest level of regulatory control by the Fo od and Drug Administration

(FDA). Class II devices pose higher risks, and the FDA subjects these devices to more

stringent regulation. Class III devices present the highest risk to patients and must

undergo premarket approval (PMA), which includes the submission of valid clinical and

scientif‌ic evidence demonstrating safety and eff‌icacy, prior to being marketed to con-

sumers. At the time the MDA was enacted, many devices that met the criteria for inclu-

sion in Class III were already on the market. Rather than remove existing devices from

the market until the FDA could review them under the PMA process, however, the MDA

allowed existing Class III devices to remain on the market. New devices found to be “sub-

stantially equivalent” to those grandfathered devices can remain under a Section 510

(k) license until the FDA requires their product category to go through PMA review.

1

In addition to creatinga new federal regulatory scheme, the MDA curtailedstate regu-

lation of medical devices. Specif‌ically, the MDA contained language that could be inter-

preted to preempt certain state laws, potentially including state tort law. The extent of this

preemption was somewhat unclear until the Supreme Court clarif‌ied the MDA’s effect on

state tort law in its 2008 decisionRiegel v. Medtronic. In that case, theCourt held that medical

devices approved under the PMA process were immune from liability for certain state tort

claims. In contrast, devices approved via the Section 510(k) process were not immunefrom

state tort liability. With this decision, for a subset of complaints, the Supreme Court created

a bifurcated liability scheme for the riskiest devices: PMA-approved devices are subject to

only federal regulation, whereasSection 510(k)-approved devicesare subject to federal regu-

lation (albeitless rigorous) as well as indirect regulation under statetort law.

While the Supreme Court’s decision in Riegel was based on the interpretation of the

language in the MDA—andnot on furthering any theory of optimal liabilityor regulation—

it nonetheless drastically changed the liability landscape for a number of medical actors.

This article focuses on Riegel’s effect on two important entities—device manufacturers and

physicians—and examines how these entities respond to a sudden and meaningful shift in

their potential tort liability. This examination demonstrates that these sophisticated parties

respond to the incentives createdby tort liability and contributesto the ongoing—and often

heated—debateover the salience of tort liabilitywithin the healthcare system.

Section II discusses the history and provisions of the MDA. It also details the

Supreme Court’s evolving doctrine of preemption and how it led to Riegel. Based on the

changes in expected liability effected by Riegel, Section III outlines our empirical strategy

and data for analyzing the impact of Riegel on two related medical actors: device manufac-

turers and physicians.

Section IV focuses on quantifying the effect of Riegel on device manufacturer behav-

ior. Prior work has found that f‌irms respond strategically to shifting legal incentives. For

example, Yin (2009) explores how drug manufacturers responded to the Orphan Drug

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The FDA does not set deadlines for individual devices but for entire product categories.

790 Gentry and McMichael