In some product liability cases, in addition to alleged damages, plaintiffs might argue that sales of a product or service should be limited. While there may be cases where such an outcome could be considered “first best” or “socially optimal” from an economics perspective, there are many cases for which limiting sales may not result in improved or desirable social outcomes. This is especially true in cases where the level of attributable harm of the product or service is either unclear based on the scientific evidence, highly variable in its impact, or resulting in minimal impact on users. Limiting access can be especially harmful if removal from the market disproportionately affects “at risk” subgroups of the population, such as those who may already face persistent barriers to access.
This issue is especially important in healthcare products and services. For example, in its drug approval capacity, the U.S. Food and Drug Administration (“FDA”) is tasked with balancing access to novel treatments and the risks of those treatments. Many of the drugs approved by the FDA have rates of “adverse events” of 1%-5%, and these rates are generally considered “acceptable” given the clinical value of the drug. Conversely, if the probability of adverse events “outweighs” the drug’s potential clinical benefits, the FDA will generally not approve the drug. But if clinical benefits exceed the likely any harms associated with adverse events, the FDA will generally approve the drug. In this assessment of tradeoffs, the FDA will also consider access issues, especially in the case of serious rare diseases for which there are few if any treatments available. The FDA example is not unique—there are many areas of product liability where the same “risk tradeoff” assessment may be relevant, again especially in cases where attributable harm of the product or service is associated with relatively high levels of uncertainty, highly variable in its impact, or resulting in minimal impact on users. In these cases, economic simulation models can be developed to analyze these tradeoffs and determine the net effects of limiting sales.
(By John E. Schneider, PhD & Maggie Do Valle, MPH) (2023)