How The Pharmaceutical Industry Is Coming Under Attack - Part I

Friday, December 1, 2006 - 01:00
Porzio, Bromberg & Newman, P.C.
Christopher P. DePhillips
Brian P. Sharkey


Methamphetamine abuse is a growing epidemic that is plaguing the United States. Methamphetamine in this country is either imported from Mexico or produced in homemade, local 'laboratories.' One of the key ingredients used to produce methamphetamine is pseudoephedrine, which is also an ingredient in many popular cold and allergy medications. Responding to the growing methamphetamine epidemic, many state legislatures and Congress have passed laws imposing restrictions on the sale of pseudoephedrine-containing products in an attempt to reduce the number of local 'laboratories.' As a result, the pharmaceutical industry is now in the process of reformulating many of its consumer products that previously contained pseudoephedrine. In addition to dealing with the costs associated with reformulation, the pharmaceutical industry is also facing potential civil liability under a variety of legal theories for its production and sale of legal, pseudoephedrine-containing products.

This article focuses on the methamphetamine epidemic and how states and Congress have been responding. A separate article in next month's issue will focus on how effective those state laws have been, as well as the types of pseudoephedrine-related lawsuits that the pharmaceutical industry is facing.

Methamphetamine is a highly addictive central nervous stimulant that has powerful short-term and long-term effects on users. Methamphetamine addiction rates have climbed dramatically. According to the federal government's Substance Abuse and Mental Health Services Administration, from 1993 to 2003, the rate of treatment admissions for primary methamphetamine abuse increased from 13 to 56 per 100,000 population age 12 or older. The White House's deputy drug czar has called methamphetamine 'the singular worst drug we face in America.' The Illinois Attorney General characterized methamphetamine as 'perhaps the most destructive drug ever encountered.' Methamphetamine abuse affects not only the user of the drug, but also his or her family and the community.

Part of the reason for the increase in abuse of methamphetamine is its availability and the ease with which it can be made. The drug is made from fairly simple recipes, readily available on the Internet. It can be produced in six to eight hours. The ingredients include common consumer goods like cookware, ammonia, and anti-freeze. Another key ingredient is pseudoephedrine. Because of the ease with which methamphetamine can be made, and its potential profit, homemade methamphetamine 'laboratories' have sprung up throughout the country.

In response to the growing problem of methamphetamine abuse, states began to restrict the sale of pseudoephedrine-containing products with the hope that depriving methamphetamine 'cooks' of a key ingredient of the drug would slow its production. The state restrictions on the sale of pseudoephedrine-containing products have had, and continue to have, an economic impact on the pharmaceutical industry. For example, in announcing its second-quarter results for 2006, Schering-Plough Corporation noted that sales of many of its consumer products containing pseudoephedrine were lower, as the company blamed the adverse impact of restrictions on the sale of those products. Likewise, Perrigo Company, in reporting its first quarter results for 2006, acknowledged that restrictions on the sale of pseudoephedrine-containing products resulted in lower product sales for its cough and cold products.

Faced with restrictions on the sale of pseudoephedrine-containing products, many manufacturers are presently engaged in the costly process of reformulating those products by replacing pseudoephedrine with alternative ingredients that cannot be used to make methamphetamine. For example, Pfizer is reformulating many of its pseudoephedrine-containing products, like Benadryl, and has already introduced a version of Sudafed that does not contain pseudoephedrine. Johnson & Johnson is reformulating its Tylenol line of products, while Wyeth is reformulating Robitussin.

The federal government has also taken action. On March 9, 2006, President Bush signed into law the Combat Methamphetamine Epidemic Act ('Act') as part of the USA Patriot Act Improvement and Reauthorization Act of 2005 which restricts the sale of pseudoephedrine-containing products, and has other provisions intended to reduce methamphetamine abuse. These provisions include creating a new Drug Enforcement Administration ('DEA') classification for methamphetamine precursors; providing additional resources to local law enforcement, as well as state and local governments; enhancing the international enforcement of methamphetamine trafficking; providing services forchildren affected by the spread of methamphetamine; improving the environmental regulation of methamphetamine by-products; and increasing criminal penalties for methamphetamine production and trafficking.

A related development affecting the pharmaceutical industry is pseudoephedrine-related litigation. A widow in Oklahoma recently filed a wrongful death lawsuit against manufacturers and distributors of pseudoephedrine-containing products. She is seeking to hold the defendants liable for the death of her husband, an Oklahoma patrol trooper murdered by a methamphetamine 'cook.' Moreover, the Attorney General of Minnesota has threatened to file a lawsuit against key members of the pharmaceutical industry like Pfizer and Merck to recover the monies Minnesota has expended in dealing with methamphetamine use. Have legislators and litigants settled on the pharmaceutical industry as a scapegoat for the methamphetamine epidemic?

The Methamphetamine Epidemic

The damaging consequences of methamphetamine abuse are not limited to the physical, psychological, and emotional harm endured by the addict. Methamphetamine 'laboratories' cause a host of problems for the community. It is estimated that smaller 'laboratories,' typically located in residences or mobile units, create six pounds of toxic waste for every pound of methamphetamine produced. Methamphetamine 'cooks' often dump this toxic waste into streams, rivers, fields, backyards, and sewage systems. This pollution not only poses health hazards for the community, it also decreases property values. According to the DEA, the average cost to clean up a 'laboratory' is $2,000-$3,000, but it can easily increase for larger 'laboratories.' Moreover, although it is relatively easy to produce methamphetamine, it is a dangerous process that involves flammable materials resulting in explosions and fires, causing painful and hard-to-treat chemical burns. Local communities are forced to deal with these problems, and doing so strains a community's finances. It is estimated that 20% to 35% of methamphetamine used in the United States is produced in homemade 'laboratories' here, and that 65% to 80% of the methamphetamine is smuggled into the country from 'superlabs' in Mexico that are run by drug cartels. The economic consequences of the methamphetamine epidemic are felt throughout the criminal justice, child welfare, and medical systems. Recent surveys conducted by the National Association of Counties ('NACo') demonstrate the vast, and expensive, consequences of methamphetamine abuse. In a 2005 report, NACo found that: 1) of the responding law enforcement agencies, 87% reported an increase in methamphetamine arrests dating to 2002; 2) methamphetamine is the leading drug-related local law enforcement problem in the country; 3) methamphetamine-related arrests represent a high proportion of crimes requiring incarceration; 4) other crimes are increasing as a result of methamphetamine abuse, as 70% of the responding officials indicated that robberies or burglaries have increased as a result of methamphetamine abuse, 62% reported increases in domestic violence; and simple assaults and identity thefts have increased by 53% and 27%, respectively; 5) 82% of officials reported that their workloads had increased because of the methamphetamine epidemic; and 6) methamphetamine is a major cause of child abuse and neglect, as 40% of child welfare officials attributed out-of-home placements to methamphetamine abuse.

In a 2006 report, NACo found: 1) there are more emergency room visits related to methamphetamine than any other drug; 2) 73% of hospitals have experienced increases in methamphetamine-related visits over the past five years; 3) methamphetamine patients rarely have insurance, and, as a result, hospitals have experienced a cost increase, as 56% report that costs have increased at their facilities because of methamphetamine use; and 4) 69% of responding officials reported an increase in the need for methamphetamine treatment programs, while 63% felt that they did not have enough capacity in their program to treat addicts, with 57% blaming the lack of funding for the shortage.

States Respond To The Meth Epidemic

In response to the growing methamphetamine epidemic, and the costs it imposes on local communities, many states decided to restrict the sale of pseudoephedrine-containing products to curtail the local production of methamphetamine. Oklahoma was the first to pass such a law in 2004. Oklahoma's law added products that contain pseudoephedrine in tablet form to the Schedule V class of drugs regulated by the Oklahoma Bureau of Narcotics and Dangerous Drugs. The law restricts the sale of pseudoephedrine by requiring that only licensed pharmacists can sell it in tablet form and only after the customer provides identification and signs a log book recording the sale. The law also limits the amount of pseudoephedrine that a person can purchase within a thirty day period to nine grams. As a result of the law, Oklahoma experienced an 80% drop in the methamphetamine lab seizures.

Other states took notice of Oklahoma's experience and passed their own laws to restrict the sale of pseudoephedrine-containing products. At this time, over 35 states have enacted some type of restriction on the sale of pseudoephedrine-containing products. Many states have reported a similar reduction in the number of methamphetamine lab seizures. For example, according to reports from the Associated Press, in Iowa the number of lab seizures dropped 76%, which saved local law enforcement an estimated $2 million. In addition, Iowa experienced a 57% decline in the number of methamphetamine-related child abuse cases, and the University of Iowa Hospitals, which have a top-rated burn treatment center, have reported a savings of $2.5 million because of a significant reduction in the number of people hurt in methamphetamine 'laboratory' explosions. Officials in other states report similar reductions and savings. In that regard, according to a July 2006 NACo survey, 46% of responding county law enforcement agencies indicated that their counties experienced a reduction in the number of 'laboratory' seizures due to the new restrictions on the sale of pseudoephedrine-containing products.

There can be no dispute that the passage of state laws has helped reduce the number of homemade 'laboratories,' as well as the societal problems associated with those 'laboratories.' Nonetheless, the passage of these laws did not slow down methamphetamine abuse. One of the problems with the state laws was that not all states passed such laws; as a result, a methamphetamine 'cook' based in Oklahoma could simply drive to a nearby state that did not have any restrictions and purchase as many pseudoephedrine-containing products as he wished. This patchwork system of state laws has many gaps that methamphetamine 'cooks' exploit.

Congress Responds To The Meth Epidemic

Congress, recognizing the inherent problems of a patchwork system of state laws, and the success of certain states that had passed restrictions on the sale of pseudoephedrine-containing products, also turned its attention to this issue. Many different bills, taking different approaches to the methamphetamine epidemic, were introduced in Congress. Ultimately, Congress focused its efforts on the Act, which was sponsored by Senator Talent of Missouri and Senator Feinstein of California and modeled on the Oklahoma legislation. The Act was included in the Patriot Act reauthorization legislation that President Bush signed into law on March 9, 2006. Senators Talent and Feinstein described the Act as the toughest and most comprehensive anti-methamphetamine legislation ever considered by Congress, declaring that the Act's goal is to provide legitimate consumers with the access to medicines that they need, while at the same time preventing methamphetamine 'cooks' from obtaining the ingredients they need to produce methamphetamine.

One of the provisions of the Act restricts the sale of ingredients, i.e., pseudoephedrine, that are necessary to 'cook' methamphetamine. The Act also: 1) restricts the sale of medicines containing methamphetamine precursors like pseudoephedrine, ephedrine, and phenylpropanolamine; 2) moves pseudoephedrine-containing products behind the counter at retail outlets; 3) requires purchasers to show identification and sign a logbook; 4) limits the amount one person can purchase in a day to 3.6 grams and 9 grams in a month; and 5) creates a new DEA classification for methamphetamine precursors to impose strict penalties.

In addition to restricting the sale of pseudoephedrine-containing products, the Act provides law enforcement officials with new tools and funding to reduce methamphetamine use and to deal with the effects of methamphetamine abuse. Specifically, the Act: 1) provides an additional $99 million annually for the next five years to train state and local law enforcement officials to investigate methamphetamine offenders and to expand the funding available for the enforcement, prosecution, and environmental clean-up associated with methamphetamine; 2) enhances international enforcement of methamphetamine trafficking by requiring new reporting and certification procedures for the largest exporting and importing countries of pseudoephedrine, ephedrine, and phenylpropanolamine; 3) provides $20 million in grant funding in 2006 and 2007 for Drug Endangered Children rapid response teams to promote cooperation among federal, state, and local agencies to assist and educate children affected by the production of methamphetamine; 4) enhances environmental regulation of methamphetamine byproducts; and 5) increases criminal penalties for methamphetamine production and trafficking.

In signing the reauthorization legislation for the Patriot Act, President Bush commented on the legislation, declaring that '[t]his bill also will help protect Americans from the growing threat of methamphetamine. Meth is easy to make. It is highly addictive. It is ruining too many lives across our country. The bill introduces common-sense safeguards that would make many of the ingredients used in manufacturing meth harder to obtain in bulk, and easier for law enforcement to track. For example, the bill places limits on large-scale purchases of over-the-counter drugs that are used to manufacture meth. It requires stores to keep these ingredients behind the counter or in locked display cases. The bill also increases penalties for smuggling and selling of meth. Our nation is committed to protecting our citizens and our young people from the scourge of methamphetamine.'

Christopher P. DePhillips is a Principal of Porzio, Bromberg & Newman, P.C., in Morristown, New Jersey, New York, New York, and Brick Township, New Jersey. He is Co-Chair of the firm's Product Liability and Mass Tort Group and is a Member of the firm's Governmental Affairs Practice. Brian P. Sharkey is an Associate of the firm concentrating in products liability and mass torts.

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