For Drugs, Higher Purchased Price Includes More Warranties And More Rights To Sue

My comment to John Goodman's Health Policy Blog, "Bad Law Leads To a Bizarre SCOTUS Outcome" by John Goodman about the New York Times editorial, "A Bizarre Outcome on Generic Drugs" published March 23, 2012, on how users of brand name drugs can sue drug manufacturers for inadequate labeling and warnings, while generic drug users cannot sue the manufacturers.

The different outcomes are only strange because we have a heavily regulated third party payer system for drugs and health care and patients are not part of the contractual purchase negotiations. The individual harmed did not get to choose generic versus branded. Generics are cheaper and the usual assumption is that is due only to R&D, patent and manufacturing costs, but legal rights are also part of the price. Additionally, normal commercial transaction legal rules about warranties, etc., do not apply to most of health care.

For example, using a non-medical situation of construction, a homeowner can hire an insured or uninsured contractor; demand that the contractor increase the amount of his liability insurance; demand the contractor purchase a performance and completion bond; demand that everyone on the job be experienced and licensed and so forth. The above-mentioned items will increase the cost of the job, but will allow a homeowner to sue successfully for damages. It is the homeowner’s choice whether to pay more and get a contractor that can pay damages in a lawsuit or not. Many homeowners choose to pay less and forego the additional insurance benefit. Large companies and governments tend to pay more to have the additional insurance benefits.

Our regulated third party health care system removes the price versus benefit discussion from the patient and focuses only on cost without consideration of the lost social benefits to the consumer, such as the right to sue and many other intangible benefits.