Manhattan Institute - Tom Donohue on Legal Reform
AS PREPARED FOR DELIVERY
Manhattan Institute
President & CEO,
New York, NY
February 21, 2006
Thank you for that kind introduction. I’m pleased to be here. The Manhattan Institute and the U.S. Chamber have a very strong working relationship – particularly in the area of legal reform.
Jim Copland and his team at the Center for Legal Policy have shaken up the trial bar with their series of Trial Lawyers, Inc. studies, and together with the Chamber’s Institute for Legal Reform, have contributed to many legal reform victories.
For those of you not familiar with the Institute, allow me to give you a brief history. We formed it in 1998, shortly after I took over at the Chamber, to organize and focus business on legal reform. Business was being buried by a conglomerate of well-funded trial lawyers across the country with a focused and coordinated plan to protect their ability to sue whomever they wanted, for whatever reason, in any number of “jackpot jurisdictions.” In just eight years time, the Institute has become not only the largest, but the most successful legal reform advocacy organization in the country.
From spearheading the successful Y2K legislative effort in 1999, to leading the coalition that passed the Class Action Fairness Act last year and advancing medical liability reform, we’re taking the fight to the halls of Congress. We’re also taking the fight to state legislatures around the country…leading the effort to pass comprehensive legal reform legislation in Texas and Mississippi, building the case for reform in West Virginia, and helping put medical liability reform legislation over the goal line in Illinois last year.
Speaking of Illinois, you want to know what’s helped us be successful there? We launched a weekly publication in Madison County, Illinois—the mother of all jackpot jurisdictions— that is dedicated to exposing abuse of the county’s legal system. Since the launch of that newspaper about a year and a half ago, we’ve seen a change in the courts for the better. For the second year in a row, the number of class action lawsuits and asbestos lawsuits filed in Madison County declined. In 2005, class action filings were down by 36 cases, and asbestos filing were down by more than 100 cases from 2004. We’ve seen some of the most reprehensible trial lawyers retire – and we’ve seen a judge step down from his position as head of the asbestos docket.
The Madison County Record project has been so successful that a similar paper was recently launched in West Virginia, another notorious “jackpot jurisdiction” - and we’re confident it will reap the same positive effects as the Illinois newspaper. There’s an old political adage that says you shouldn’t pick a fight with someone who buys printer’s ink by the barrel … well, we’re buying the ink.
Finally, and perhaps most importantly, we’re conducting massive voter education campaigns in states throughout the country to educate voters on the need to choose judges and attorneys general who are more likely to restrain liability than expand it. Our voter education program is sending shock waves throughout the legal community – and it has fundamentally altered the legal landscape in a number of states. Since 2000, when we first launched the program, voters have chosen pro-legal reform candidates in 51 of the 60 Supreme Court and Attorneys General races in which we’ve been involved – an 85% success rate.
When you combine our “sunlight” efforts with our aggressive legislative and voter education campaigns – and the important work of organizations such as The Manhattan Institute – we truly have made significant progress on legal reform over the past few years.
But though we’ve turned the corner and put the trial bar on the defensive, it continues to find ways to suck jobs and opportunity from our economy. According to actuarial firm Tillinghast Towers-Perrin, America’s tort liability drains $246 billion a year from our economy. That’s greater than the economies of 38 states and is even greater than the GDP of many European countries. To further break down the numbers, tort liability is a tax of more than $800 on every American citizen – or $3,300 for the average family of four. Bottom line…America’s legal crisis is raising prices for hard-working Americans, crippling companies, eliminating jobs, and clogging our courts with frivolous lawsuits.
And evidently, the trial lawyers are pretty proud of that. Listen to what a couple of them have said.
Fred Baron – former head of American Trial Lawyers Association and asbestos lawyer extraordinaire – recently declared that the “plaintiffs’ bar is all but running the U.S. Senate.” He later declared “jihad” on supporters of legal reform, vowing to “fight them with everything we’ve got.”
Noted trial lawyer Dickie Scruggs defines a “magic jurisdiction” as that where “the judiciary is elected with verdict money” and “it’s almost impossible to get a fair trial if you’re a defendant.”
And so our fight continues in earnest, and one of the biggest battlefields is occurring in the health care arena. The trial lawyer industry has set its sights on doctors, hospitals, drug manufacturers, insurance companies, and numerous other organizations that directly affect the safe and affordable delivery of health care to our citizens.
Research such as the Manhattan Institute’s most recent study, Trial Lawyers, Inc. Health Care, which was released at the Chamber’s Legal Reform Summit in Washington, shows that increasing legal liability impacts health care costs, quality, and access.
However, although the president and some members of Congress have mentioned medical liability – especially in the areas of medical and vaccine liability – the issue has largely been separated from the general debate on health care costs. Our challenge is to make the connection.
Take the issue of medical liability, for example. On any given day, there are more than 125,000 medical liability lawsuits in progress against America’s 700,000 doctors.
The median award in medical liability cases jumped 140% from 1997 to 2003, topping $1.2 million.
To protect themselves against claims, doctors are increasingly practicing “defensive medicine” – unnecessary tests and treatment. The costs of defensive medicine are estimated to be between $70 billion and $126 billion per year.
Worse than that, some doctors are getting out of the profession or moving somewhere with a more favorable legal climate. The American Medical Association says 20 states have a health care liability crisis that is causing doctors to flee those states, leaving working families without access to affordable health care.
One of the worst states is Illinois.
Whereas an OB-GYN in California, which has had medical liability reforms since the 1970s, can expect to pay around $60,000 per year for liability insurance – that same doctor in Chicago will pay upwards of $200,000 or more because of the liability crisis.
These costs forced Southern Illinois’ only neurosurgeon out of the state a few years ago, and large swaths of northern Illinois have had to make do without a Level 1 Trauma Center for much of the past few years.
Women living in the city of Carbondale, Illinois, have had to drive more than 20 miles to have their babies delivered.
We hope that the recent medical liability reforms passed in Illinois will help reverse some of the “brain drain” in that state’s health care sector.
The trial bar also has set its sights on America’s pharmaceutical industry.
The most high-profile case involves Merck for its drug Vioxx, which it voluntarily withdrew from the market after a study showed an increased risk of heart attack and stroke after 18 months of use or longer.
Trial Lawyers, Inc. Health Care called Merck’s decision “the biggest bonanza for the trial bar” since the diet drug lawsuits of a few years ago.
By last fall, Merck was facing almost 5,000 federal and state lawsuits stemming from the drug’s use. Some analysts are now projecting that Merck could take a hit of up to $50 billion by the time this litigation is said and done.
A jury in Texas awarded a $253 million settlement to the wife of a man who tragically passed away – even though it was far from clear that Vioxx was the cause.
And by the way, the Houston plaintiff’s attorney in that case opened a New York office to expand his business in pharmaceutical litigation.
Pharmaceutical companies are in a no-win situation – they can pay huge settlements and risk the appearance of wrongdoing and caving to the trial bar, or they can fight in court but perhaps end up spending more on legal costs than if they had settled.
The consequences of pharmaceutical lawsuits are about much more than just company coffers – they affect the very heart of health care delivery.
In a 2003 poll conducted for ILR by Harris Interactive, 38% of doctors and 44% of pharmacists said that their own patients had stopped taking prescribed medicine because they found out their medication might be the subject of a lawsuit. That was without talking to their doctor first.
More alarming than that—43% of doctors said they had not prescribed a medication for a patient because of fear of lawsuits. That’s a very disturbing statistic.
What’s even more disturbing is that breakthrough or life-enhancing pharmaceuticals or vaccines for diseases ranging from the flu to smallpox may never make it to market out of fear of litigation.
As it is, for every product that actually makes it to market, there are another 20 – on which millions upon millions of R&D dollars might have been spent – that never make it for one reason or another.
When you factor in the added cost of liability, it just doesn’t make good business sense to develop some drugs.
Congress recently considered common sense liability protections to vaccine producers so that they would have the ability to better mass-produce life-saving drugs in the case of flu or smallpox outbreak – or even a terrorist biological attack.
We’re talking about the lives of tens of millions of Americans.
But the trial bar fought against these proposals tooth and nail.
The list of health care-related industries targeted by the plaintiffs’ bar goes on and on … hospitals, HMOs, insurance companies. As a result of this litigation, the cost of health insurance has, according to the Trial Lawyers, Inc. Health Care study, risen annually between 10.9 percent and 13.9 percent over the past four years – five times faster than inflation and wage growth.
But again, costs are just one part of it. These lawsuits are about jobs, peoples’ lives – about their health and well-being … about being able to afford to take their kids to the doctor when they’re sick, or even being able to find a doctor who can deliver their babies.
And that’s why we will continue to shine a spotlight on problem states and jurisdictions, educate voters on the decisions and judicial philosophies of judges and attorneys general, fight for legislative fixes in statehouses across the country, and get medical liability reform through Congress.
And if there is any doubt in your minds about the importance of winning this fight, I urge you to step back and think the next time you see a news report about another outbreak of the bird flu …
Or the next time you read about a terrorist plot to release biological agents over one of our major cities.
Or, on a more personal level, if you have trouble finding a medical specialist or drug to treat an illness.
This is a fight we can win. It is a fight we must win.
Thank you.