<DOC>
[110 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:44331.wais]
S. Hrg. 110-497
SHORT-CHANGE FOR CONSUMERS AND SHORT-SHRIFT FOR CONGRESS? THE SUPREME
COURT'S TREATMENT OF LAWS THAT PROTECT AMERICANS' HEALTH, SAFETY, JOBS
AND RETIREMENT
=======================================================================
HEARING
before the
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
JUNE 11, 2008
__________
Serial No. J-110-99
__________
Printed for the use of the Committee on the Judiciary
U.S. GOVERNMENT PRINTING OFFICE
44-331 PDF WASHINGTON DC: 2008
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COMMITTEE ON THE JUDICIARY
PATRICK J. LEAHY, Vermont, Chairman
EDWARD M. KENNEDY, Massachusetts ARLEN SPECTER, Pennsylvania
JOSEPH R. BIDEN, Jr., Delaware ORRIN G. HATCH, Utah
HERB KOHL, Wisconsin CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California JON KYL, Arizona
RUSSELL D. FEINGOLD, Wisconsin JEFF SESSIONS, Alabama
CHARLES E. SCHUMER, New York LINDSEY O. GRAHAM, South Carolina
RICHARD J. DURBIN, Illinois JOHN CORNYN, Texas
BENJAMIN L. CARDIN, Maryland SAM BROWNBACK, Kansas
SHELDON WHITEHOUSE, Rhode Island TOM COBURN, Oklahoma
Bruce A. Cohen, Chief Counsel and Staff Director
Stephanie A. Middleton, Republican Staff Director
Nicholas A. Rossi, Republican Chief Counsel
C O N T E N T S
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STATEMENTS OF COMMITTEE MEMBERS
Page
Coburn, Hon. Tom, a U.S. Senator from the State of Oklahoma,
prepared statement............................................. 57
Feingold, Hon. Russell D., a U.S. Senator from the State of
Wisconsin, prepared statement.................................. 71
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont. 1
prepared statement........................................... 96
Specter, Hon. Arlen, a U.S. Senator from the State of
Pennsylvania................................................... 3
WITNESSES
Anderson, Andy R., Of Counsel, Morgan, Lewis & Bockius LLP,
Chicago, Illinois.............................................. 10
Cooper, Richard M., Partner, Williams & Connolly LLP, Washington,
D.C............................................................ 14
Kurtek, Maureen, Pottsville, Pennsylvania........................ 8
Lawless, Robert M., Professor of Law and Galowich-Huizenga
Faculty Scholar, University of Illinois College of Law,
Champaign, Illinois............................................ 15
McGarity, Thomas O., Professor of Law, University of Texas School
of Law, Austin, Texas.......................................... 12
Robb, Bridget, Gwynedd, Pennsylvania............................. 6
QUESTIONS AND ANSWERS
Responses of Richard M. Cooper to questions submitted by Senators
Grassley and Specter........................................... 27
Responses of Robert M. Lawless to questions submitted by Senator
Feinstein...................................................... 35
Responses of Thomas O. McGarity to questions submitted by
Senators Specter and Grassley.................................. 40
SUBMISSIONS FOR THE RECORD
Anderson, Andy R., Of Counsel, Morgan, Lewis & Bockius LLP,
Chicago, Illinois, statement................................... 48
Bartlett, Steve, President and CEO, Financial Services
Roundtable, Washington, D.C., statement........................ 53
Cooper, Richard M., Partner, Williams & Connolly LLP, Washington,
D.C., statement................................................ 59
Johnson & Johnson, New Brunswick, New Jersey, statement.......... 73
Kurtek, Maureen, Pottsville, Pennsylvania, statement............. 77
Lawless, Robert M., Professor of Law and Galowich-Huizenga
Faculty Scholar, University of Illinois College of Law,
Champaign, Illinois, statement................................. 82
McGarity, Thomas O., Professor of Law, University of Texas School
of Law, Austin, Texas, statement............................... 98
National Business Group on Health, Washington, D.C., articles.... 114
Robb, Bridget, Gwynedd, Pennsylvania, statement and attachment... 117
SHORT-CHANGE FOR CONSUMERS AND SHORT-SHRIFT FOR CONGRESS? THE SUPREME
COURT'S TREATMENT OF LAWS THAT PROTECT AMERICANS' HEALTH, SAFETY, JOBS
AND RETIREMENT
----------
WEDNESDAY, JUNE 11, 2008
U.S. Senate,
Committee on the Judiciary,
Washington, D.C.
The Committee met, Pursuant to notice, at 10:02 a.m., in
room SD-226, Dirksen Senate Office Building, Hon. Patrick J.
Leahy, Chairman of the Committee, presiding.
Present: Senators Leahy, Whitehouse, Specter, and Hatch.
OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM
THE STATE OF VERMONT
Chairman Leahy. Good morning. I am glad to see everybody
here. I called this hearing today to shine a light on how the
Supreme Court's decisions affect Americans' everyday lives. We
sometimes see a headline, the Court rules this way or that way,
and I recall when I was a law student, it was always an
interesting thing to then discuss the pros and cons of a
decision. But it is well beyond that. It goes into how it
affects real people in those decisions.
We know that the Court's rulings will come into focus if
they involve divisive cultural issues. But, lately, many Court
observers have noticed that business interests have been the
big winners over workers and consumers. In a worsening economy,
mothers and fathers are struggling with health care coverage,
the uncertainty of retirement, credit card payments, and
mortgages, and, of course, gasoline prices that are going off
the charts. Congress has passed laws to protect Americans in
many of these areas, but in many cases, the Supreme Court, I
believe, has ignored the intent of Congress in passing these
measures, sometimes turning these laws on their heads and
making them protections for big business rather than for
ordinary citizens.
For almost two decades, to give one example, Lilly
Ledbetter worked as the sole female supervisor in a major
national corporation. Her diligence helped send her children to
college and helped her and her husband plan for the future.
Before her retirement, Ms. Ledbetter received an anonymous note
showing the salaries of her male counterparts, the men in her
business that were doing the same work she was doing. And even
the lowest-paid of the male supervisors was earning 20 percent
more than she was, despite having far less experience and
seniority than she did. She would later learn that the pay
difference was even greater because she was also short-changed
on bonuses, retirement benefits, and overtime pay. Now, she
clearly proved to a jury that she had been illegally
discriminated against. There was no question in the jury's
mind, no question in the lower court she was discriminated
against. But the Supreme Court reversed the verdict and created
a bizarre interpretation of the law. As a result, her employer
is never going to be held accountable for the illegal
discrimination against her. The Court's ruling tells other
corporations very clearly go ahead and discriminate because you
can get away with it, as long as they keep their illegal
activity hidden long enough.
Now, a majority of Senators support overturning the Court's
decision, but we have 43 Senators who are preventing us from
even proceeding to consider this remedy. They have filibustered
having the ability to reverse what the Supreme Court did. And
by filibustering the Lilly Ledbetter bill, those Senators are
standing behind the Supreme Court's terrible interpretation of
our antidiscrimination laws.
At today's hearing, we are going to focus on several laws
designed to protect Americans' health, safety, and retirement.
We will hear testimony today from two brave women who, like Ms.
Ledbetter, have or will be denied relief and justice as a
result of Supreme Court rulings. There are thousands more of
them outside this hearing room who have been adversely affected
by rulings that slam the courthouse door shut and encourage
corporate misconduct.
Years ago, Congress passed a landmark law known as ERISA.
It was done to ensure that workers with employer- sponsored
health insurance or retirement benefits could benefit from them
when they needed them. But the Supreme Court has so distorted
this law, so changed what was intended by Congress, that it
provides no relief for individual beneficiaries when the
companies and insurers entrusted with administering their
benefit plans violate the law or the terms of the employees'
plans. Can you imagine? People are entrusted to handle these
retirement plans, and if they violate the law, the Supreme
Court has given them a get-out-of-jail-free card.
Moreover, the Court has held that it was the intent of
Congress to take away preexisting State law remedies for
workers, even though Congress never intended that. The result:
Congress' bill passed with Republican and Democratic support, a
monumental effort to safeguard workers and their families has
literally left them more vulnerable than they were before the
law was passed. Congress passed the law to protect them, and
the Supreme Court says not only does it not protect them, but
we are taking away any other protections you might have had.
Great jurists from the late Justice White to Justice Ginsburg
have decried how preposterous, unjust, and incompatible with
Congress' true intent this result is. The late Judge Ed Becker,
former Chief Judge of the Third Circuit, a friend to many of us
here in this Committee, best captured the impact of this line
of cases when he observed that the interpretation had devolved
from the protection of ordinary Americans that was intended
into a catch-22 and ``into a shield that insulates HMOs from
liability for even the most egregious acts of
dereliction...directly contrary to the intent of Congress.''
The Supreme Court has narrowly interpreted another law
designed to protect Americans who rely on medical devices to
keep them alive. Unfortunately, here again the Supreme Court's
interpretation has transformed the law into one that takes away
protections from people by extinguishing longstanding State law
remedies which hold corporations accountable when they are
aware of potential dangers but hide them from consumers, and we
are going to hear what happens in real life.
The last set of laws to be examined here today involves
lending institutions used by Americans to finance their homes
and credit cards used for everyday purchases. In this context
as well, the Court has interpreted Federal legislation in such
a way that strips consumers of the right to benefit from more
protective State laws. These decisions also serve to shield
corporations from their misconduct. This is something that
potentially affects the pocketbook of every working American
man and woman in this country.
Now, the Supreme Court rulings have occurred with little
public attention, except for the lives of Americans that it
impacted. There has been plenty of academic discussion about
the radical changes that this Court is making to preemption and
federalism. But the health and retirement guarantees provided
by Congress were not meant to be merely rhetorical commitments.
They are essential to give every American the chance to lead a
rich and full life.
So in light of the troubling Supreme Court rulings we are
going to examine today, Congress may be again required to step
in with remedial action to clarify our intent, as we did in
2006 with the Voting Rights Act reauthorization. Congress is
seeking to do the same with the Lilly Ledbetter bill if we can
get past the filibuster. And to paraphrase my friend and civil
rights hero Congressman John Lewis, in our system of checks and
balances we have to meet every judicial step backward with a
legislative step forward. The problem, however, with any
legislative fix is that the Supreme Court might again strip it
of its purpose.
So I hope today's hearing will be a first step in
contributing to the understanding of the impact the Supreme
Court has on our daily lives.
[The prepared statement of Senator Leahy appears as a
submission for the record.]
Senator Specter?
STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM THE STATE
OF PENNSYLVANIA
Senator Specter. Thank you, Mr. Chairman.
This is a very important hearing as a significant step for
the Congress of the United States to establish the law on this
subject contrary to what the Supreme Court has ruled. This is a
matter of statutory interpretation, not a constitutional
ruling. So it is a matter for congressional decision.
This issue involves very fundamental questions of
federalism on the tradition of leaving it to the States to make
decisions which are particularly applicable for State court
decisions as opposed to control out of Washington, D.C.
When we deal with the subject of the FDA and preemption,
the FDA under the existing law will grant approval only if it
finds there is a reasonable assurance of the device's safety
and effectiveness. The grave problem with that is that the FDA
has become a joke. It does not have the funds to begin to carry
out its responsibilities, and that has been highlighted in the
course of the past several weeks on strenuous efforts by
Members of Congress to find out from the FDA what money it
needs. But the FDA will not tell, and the reason the FDA will
not tell is because it is run by the Office of Management and
Budget, and they have overall targets, and they do not want a
needy agency communicating to Congress where Congress really
needs to know what is going on.
I have gotten to know Commissioner von Eschenbach well.
Perhaps it is the Philadelphia connection. But I finally got
from him, as a result of a letter I wrote on May 1st, a figure
of $275 million. Now, that is a start, candidly, but not a very
good start. Well, we have worked to put the $275 million in an
emergency appropriation bill, supplemental appropriation.
Yesterday I found out that the administration, Secretary
Leavitt, HHS, has come in with a different approach, wants to
have an amendment to next year's budget. And Secretary Leavitt
is quoted in the New York Times yesterday as ``urging Congress
to act promptly.''
Well, the emergency appropriation would put the money in
FDA's hands in the next week or two if we finally get around to
acting on that bill, which involves Iraq funding. What the
administration and Secretary Leavitt are doing is to defer it
until next March or April. Really, it is an effort to sabotage
getting the funds in hand at the present time. So it seems to
me really ludicrous to talk about having preemption by an
agency which is dysfunctional, does not have the capacity to
pass on safety.
We are dealing here with a wide variety of products, and I
think back to my days as district attorney, and I think that
Senator Leahy will agree and Senator Whitehouse may also, and I
think Senator Hatch will as well. Malice is established when
someone acts or fails to act in a context of subjecting an
individual to the unreasonable risk of bodily injury or death.
That is the definition for malice and murder in the second
degree. And I believe if the Federal Government does not fund
the FDA on matters like the tomatoes and others, harsh
language, but I think it really does amount to criminal
negligence.
So it is hard for me to see how Congress can sit back and
let preemption exist with the FDA when the FDA cannot do its
job. And the administration is sabotaging under a cover of
urging Congress to act, when the Secretary and the
administration are submitting legislation which will delay it
for 8 or 9 months.
I was pleased to see the Chairman quote Judge Becker. Judge
Becker was a preeminent jurist, did a lot of work with the
Committee on asbestos, and I would like to quote Judge Becker a
little more on the subject about preemption on ERISA, where he
said, ``A plan participant whose claim is denied by an HMO is
often in the throes of a life-or-death medical crisis, hardly a
feasible time to retain counsel and prosecute an injunctive
lawsuit.'' He concluded, as have many critics, that ERISA and
its preemption provisions ``have become virtually impenetrable
shields that insulate plan sponsors for any meaningful
liability for negligent or malfeasance acts committed against
plan beneficiaries in all too many cases.''
So I do think it is high time that the Congress got into
this field with both feet and undertook some significant
action.
Just one more point in passing, and I do want to agree with
the Chairman on what he had to say about the Ledbetter case.
Ms. Ledbetter was denied an opportunity to go to court on a
claim of discrimination by a Supreme Court ruling that the
statute of limitations of 6 months precluded her going to court
when she did not even know she had a cause of action within the
6 months. But I want to differ with my distinguished colleague
Senator Leahy on what is happening in the Senate on it.
The bill was introduced, and I am for it, but a procedure
was employed known as ``filling the tree,'' which is arcane
within the Beltway, and nobody could offer any amendments. And
I voted against cloture to go forward because I am not about to
move ahead on the bill if I cannot offer amendments. The same
thing happened with global warming. The same thing has happened
repeatedly. And it is a procedure which has been employed by
both Republicans and Democrats. One thing, when you find
partisanship around here, you find an even 50-50 split. Senator
Mitchell used it nine times years ago; Lott and Frist used it
nine times; and Senator Reid is now up to 12. But we are going
to have to revert to the days when a Senator could offer
amendments on any subject, and we will take up Ledbetter, and
we will reverse the Supreme Court decision, giving the woman a
right to a remedy.
We really are facing enormously serious issues here beyond
any question.
Mr. Chairman, I would ask consent that my letter to
Commissioner von Eschenbach be included in the record and my
letter to Secretary Leavitt yesterday be included in the
record.
Chairman Leahy. Without objection.
Senator Specter. Secretary Leavitt and I traded called. He
called me twice, and I called him back twice, so I finally
ended up writing him a letter in the afternoon to move ahead on
the record.
Chairman Leahy. This falls in the category of strong
letter.
Senator Specter. Well, every now and then a strong letter
is in order.
Secretary Leavitt is a great public servant, and he is
following the work of the administration. But there comes a
time when the public interests are so pronounced that people in
Congress ought to be told what is going on so that we can
protect the public, and not hide behind a shield. But to say
``urging Congress to act'' when the administration is delaying
it for 8 or 9 months is unconscionable. It is sabotage.
Mr. Chairman, I regret that I cannot stay, but I have other
commitments, one of which is to move ahead on this FDA funding,
trying to get it into the emergency supplemental. And I am
especially sorry not to stay because we have witnesses from
Pennsylvania who have come a long way, and I would like to be
here to question them. But I am leaving the Republican side in
very goods hands with former Chairman Hatch.
Chairman Leahy. Thank you, Senator Specter, and I am glad
to hear you quote Judge Becker. I know what a close friend he
was of yours, and he became a close friend of so many of the
rest of us. Let us hope we can get over any procedural things
because 57 Senators have voted to overturn Ledbetter. And let
us hope before the year is out we find a way that all 100 can,
because it was an egregious, egregious misstep on the part of
the Supreme Court.
Our first witness is Bridget Robb, who was diagnosed 4
years ago with congestive heart failure. To save her life,
doctors implanted a medical device in her chest. A few months
ago, she experienced a horrific malfunction of that device. I
want to let her tell the Committee the story.
Incidentally, there is a 911 call that she made. We have a
tape of that. The 911 call is very disturbing. It may be
difficult for many to hear, especially the sound of her child
begging her not to die. I cannot think of an easier way of
putting it, but that is basically it. Your child was begging,
``Mommy, don't die.''
We will put an edited version of the transcript in the
record, without objection, and I will make the audio recording
available to all members of the Committee and their staffs.
Ms. Robb, thank you very much for being here. Please go
ahead with your testimony.
STATEMENT OF BRIDGET ROBB, GWYNEDD, PENNSYLVANIA
Ms. Robb. Chairman Leahy and members of the Senate
Judiciary Committee--
Chairman Leahy. Pull the microphone a little bit closer,
please. We want to make sure that that little red light is on.
Ms. Robb. Is that better?
Chairman Leahy. Yes, that is better.
Ms. Robb. Chairman Leahy and members of the Senate
Judiciary Committee, thank you for the invitation to speak on
the topic of laws that protect Americans' health and safety. In
a time when big business and corporate profits seem to take
precedence over individuals' rights, we tend to forget the
reasons why certain laws were, in fact, enacted and why it
remains important for people who have been injured by defective
products to be able to hold companies accountable and to have
their day in court. I am here today not only because of my own
tragedy, but also to protect the rights of those who have or
may suffer similar events such as mine.
My name is Bridget Robb. I am a 34-year-old mother and
resident of Gwynedd, Pennsylvania. On December 31, 2007, I
suffered greatly and thought I was going to die because of a
defective heart device implanted in my body. I am thankful to
be here today and to be able to share my experience with you.
Approximately 4 years ago, I was diagnosed with non-
ischemic viral cardiomyopathy and congestive heart failure. In
May 2005, to prevent me from dying from a fatal arrhythmia, I
had a Medtronic cardiac defibrillator with pacemaker implanted
in my chest. This heart device is a small metal case that
contains electronics and a battery. Its components work much
like a pacemaker, but unlike a pacemaker, an ICD delivers an
electrical shock to the heart when the heart rate becomes
dangerously fast. My particular device combined a pacemaker and
an ICD unit in one.
On December 31, 2007, I was awoken from my sleep by a
series of shocks to my heart which felt as if a cannon was
being repeatedly shot at my chest at close range. Along with
these recurrent shocks was a strong electrical current racing
through my body. After feeling the first shock, I immediately
phoned 911 for help. My 6-year-old daughter, Emma, had snuck
into bed with me that night and was present during this
horrific experience. I remember Emma being confused and scared.
She crouched down in front of me hugging her cat, saying
``Mommy's dying.'' She was present during the entire 7 minutes
that I was on the telephone with the 911 operator until the EMS
arrived. I cannot imagine how terrified she must have been to
see her mother in such pain.
The doctors have told me that I received a total of 31
inappropriate shocks to my heart in a matter of minutes that
morning. Each time I was shocked, I saw my life flash before my
eyes. At one point, I began to pass out, and I thought that I
would never see Emma again.
I later learned that the inappropriate shocking and
electrical feeling throughout my body was caused by a defective
cardiac lead implanted in my heart, the Sprint Fidelis lead
manufactured by Medtronic. A lead is a thin wire which connects
the ICD to the heart and delivers the actual shock to the heart
when it is beating too fast. Medtronic's Sprint Fidelis lead
was recalled on October 15, 2007, because of its potential to
fracture. Unfortunately, Medtronic never notified me that my
lead was recalled, and I did not learn of the recall until
after this ``life-saving'' medical device seriously hurt me.
Since this terrifying experience, my health has declined
significantly. I have been visiting doctors almost weekly for
followup appointments and testing and have suffered from severe
anxiety. I have since undergone surgical replacement of my
defibrillator and the defective lead, and a second surgery to
revise the lead. My second surgery resulted in an extended
hospital stay where I had to undergo a blood transfusion. As
you would expect, I risk serious harm each time another
procedure is performed. Even though Medtronic's defective
device caused my injuries, my health insurance plan has been
paying for the cost of my medical care.
I would like to have the opportunity to hold Medtronic
accountable for the injuries that I suffered that day and the
emotional aftereffects that I continue to experience on a daily
basis. Medtronic knew that its Sprint Fidelis lead was faulty,
yet the company never took responsible steps to notify me that
this lead needed to be replaced. Instead, I suffered
indescribable pain that day and continue to suffer from the
emotional toll of my near-death experience.
However, my attorneys tell me that a jury may never hear my
case due to a legal doctrine known as ``preemption,'' which the
Supreme Court recently discussed in another Medtronic medical
device case, Riegel v. Medtronic. In that case, the Supreme
Court found that any claims brought by people injured by
another Medtronic device were preempted and that the company
would have complete immunity from any claims brought against it
given that the FDA approved the device. My attorneys are
concerned that the Riegel decision also may apply to my case,
and as a result, I would have no recourse for my injuries. I
find this discouraging and demoralizing.
In addition, the considerable costs for my health care have
been shifted from Medtronic, the company that knew about this
problem but failed to take action, to my health insurance
provider. This may result in an increase in the cost of my
insurance. It is wrong to shift the cost of medical care from
the responsible party to private insurers, patients, and in
some cases to taxpayer-sponsored programs like Medicare and
Medicaid.
Therefore, I am asking Congress to pass legislation to
ensure that victims of faulty medical devices, like me, will
continue to have the ability to hold a medical device
manufacturer accountable for their injuries. I find it hard to
believe that Congress ever intended to prohibit me from having
the opportunity to go to court to obtain justice.
Thank you for your attention to this critical issue, and I
am happy to answer any questions that you may have.
[The prepared statement of Ms. Robb appears as a submission
for the record.]
Chairman Leahy. Thank you very much, Ms. Robb. I would urge
the Senators on this Committee and their staffs to listen to
the 911 call. It is chilling, to say the least.
Maureen Kurtek--did I pronounce that correctly, Ms. Kurtek?
She has been battling lupus for almost 20 years. She is here to
tell her compelling story about an HMO that delayed approving
health care treatment under the Supreme Court's ERISA case law,
which I believe is misguided, and I also believe not what was
intended by either the Democrats or Republicans who voted for
the ERISA law. Ms. Kurtek has no avenue of recovery for
significant medical injuries.
Ms. Kurtek, please go ahead, and make sure that is on. Go
ahead, please.
STATEMENT OF MAUREEN KURTEK, POTTSVILLE, PENNSYLVANIA
Ms. Kurtek. Chairman Leahy and members of the Committee: A
health insurance company should never be allowed to jeopardize
a person's health while they look for ways to save money. But
when they do they should be held accountable.
My name is Maureen Kurtek. I have lupus, and I was
diagnosed in 1989. My doctors agreed that a therapy called IVIG
would be beneficial to me.
IVIG helps to fight infection by building up a patient's
resistance. People with autoimmune diseases such as myself do
not have a normal resistance to germs, which is comparable to a
person undergoing chemotherapy.
Periodic IVIG therapy improved my condition. It raised my
platelet count and boosted my immunities. My first series of
treatments in 1998 cost about $14,000 and was paid for by
Pennsylvania Blue Cross and Blue Shield through my husband's
employer. Although I had six treatments in 3 years, in January
of 2003 my doctor recommended another IV treatment. At the
time, my husband had changed jobs, and our health insurance
company was now Capital Blue Cross.
I immediately called them to preauthorize the treatment,
which according to the plan they would pay for as long as it
was medically necessary.
I first called Capital on January 17, 2003. The first
representative wanted to look into whether the treatment would
be provided at home health instead of in the hospital, which I
had got it all the time before in the hospital.
The next person told me she thought the treatment was
experimental. Well, that put up a red flag to me.
I repeatedly asked to speak with a supervisor and was told
that Capital was continuing to look into this and would report
back to me once a decision was made.
Every time I called, I was told that ``someone was working
on it and that the supervisor had a note on her desk with my
name and number on it.
Capital did not call any of my doctors. It took the
insurance company 53 days to authorize my treatment. By then I
had nearly died. Due to not receiving my treatment, I became
septic. I developed an infection my body that I could not
fight,
On March 1, 2003, I was taken by ambulance to the hospital
for an acute flare-up of my lupus. According to my doctor, this
condition could have been prevented or dramatically diminished
if I had received the medically necessary IVIG treatment.
The very first treatment I received after being admitted to
that hospital was emergent IVIG. While at the hospital, I was
in critical condition. The doctors told my husband I had a 5-
percent chance of survival.
After going into septic shock, I went into kidney failure.
My body also started to throw clots at the same time as I was
bleeding bled out. I had blood clots in my hands and feet. I
also suffered uncontrollable hemorrhaging of the sinuses
causing blood to enter my lungs. I was bleeding from every
orifice in my body, including my eyes and mouth.
I was in respiratory failure and required ventilation on a
respirator and within 24 hours had an emergency tracheotomy due
to bleeding from my sinuses into my lungs. I almost died
because of this injustice, and parts of me actually did die: my
fingertips; I lose half of my right foot.
Eleven days after I was admitted to the hospital, the
insurance company approved the treatment. As a result of the
extraordinary delay in the approval of the IVIG therapy, like I
said, I had lost half my right foot, amputated. I had developed
osteomyelitis to that right foot. I had lost five fingertips. I
had difficulty breathing through my nose and had undergone many
surgeries. I am required to take Lovenox, two injections daily,
and have developed peripheral neuropathy, and I am required to
wear special shoes.
I filed a lawsuit against the insurance company, but the
judge decided my case was covered under the ERISA law, which
does not allow people like me to sue for the harm the insurance
company caused me. The ERISA law, as the late Judge Becker
stated, ``has evolved into a shield that insulates HMOs from
liability for even the most egregious acts of dereliction
committed against plan beneficiaries.''
Because of ERISA, there is a monetary incentive for
insurance companies to mistreat people like me who have health
problems.
I am privileged to be here today to tell you about how the
ERISA law has hurt me and my family. I am wearing a tear-shaped
necklace given to me by my family members who had to watch me
cry tears of blood.
At the time I was sick, I had a 13-year-old son who did not
know whether his mom would even make it through the night. I
had a husband who didn't know whether in a few days he would be
a single parent and have to raise a child while trying to
support a family on a modest income. And all of this pain and
suffering was caused by an insurance company that failed to
timely authorize the treatment that I had received six times
before. This treatment was necessary for me.
As I stand before you today, I can tell you that life
ceased as I had known it. I am no longer able to jog or dance.
I cannot wear stylish shoes on special occasions. And I have to
wear an orthopedic shoe, which I can assure you is not any
woman's dream. During my time in the hospital, I missed my
son's spelling bee, piano recital, his confirmation at church,
and many baseball games. These are events I can never get back.
Due to this law, insurance companies can get away with
denying care and delaying treatment without any consequences.
This is wrong. We need to change this law so no families will
have to suffer the way mine did.
Thank you for your time.
[The prepared statement of Ms. Kurtek appears as a
submission for the record.]
Chairman Leahy. Thank you, Ms. Kurtek. I know it is not
easy to tell your story, the same as Ms. Robb.
Ms. Kurtek. I have pictures here if you would like to see
them.
Chairman Leahy. Thank you. We will make sure they are
available to all the Senators.
Ms. Kurtek. Thank you.
Chairman Leahy. What I am going to do is go through the
testimony of each of you, and then we will open it to
questions.
Andy Anderson is of counsel for the international law firm
of Morgan Lewis. He is testifying today on behalf of the U.S.
Chamber of Commerce.
Mr. Anderson, welcome, and go ahead, please.
STATEMENT OF ANDY R. ANDERSON, OF COUNSEL, MORGAN, LEWIS &
BOCKIUS LLP, CHICAGO, ILLINOIS
Mr. Anderson. Chairman Leahy and members of the Committee,
I am pleased and honored to be here today. As you indicated, I
am here to testify on behalf of the United States Chamber of
Commerce regarding Supreme Court decisions under the Employee
Retirement Income Security Act of 1974, commonly known as
``ERISA.''
My name is Andy Anderson, and I am of counsel at Morgan
Lewis. My practice focuses on advising single-employer and
multi-employer benefit plans on employee benefits matters and
specifically on their health benefit programs. I have worked in
the area of employee benefits since 1984. I chair my firm's
Health and Welfare practice, and I participate on the Chamber's
Employee Benefits Committee.
ERISA uniformity and limited recovery is intended and
necessary. All employers--except for certain religious and
government organizations--who voluntarily choose to offer
retirement or health benefits are governed by ERISA.
ERISA was the subject of a long and detailed legislative
process. Included among the myriad provisions of ERISA are two
concepts that cut to the heart of today's hearing. These
concepts work in unison to encourage employers to voluntarily
extend health benefits to their employees with a high degree of
uniformity and without unnecessary exposure to liability.
These provisions are ERISA Section 514, which generally
preempts State jurisdiction over employer-provided health
benefits, and ERISA Section 502 that outlines the rules
associated with the civil enforcement of ERISA.
The ERISA provisions in these sections have a long and
detailed legislative, regulatory, and judicial history that
extends all the way back to the initial legislative proposals
that eventually became ERISA. It was no accident that resulted
in these provisions but, rather, a careful balance of competing
interests and incentives to encourage employers to voluntarily
offer retirement and health benefits.
Our judiciary, including the Supreme Court, has heard many
cases related to ERISA uniformity and remedies. While sometimes
chafing under the statutory provisions of ERISA or bemoaning
yet another ERISA case on their docket, our judiciary has
usually reached the correct decision regarding both the
specific facts of a given case and the broader principles and
tradeoffs embodied in ERISA. These decisions should be
respected and upheld.
Changes to ERISA will decrease employer-provided voluntary
health care
Employers engage in a complicated calculus when they
determine whether or not to offer health benefits. Included in
this calculus is whether they retain control over the
fundamental provisions of their plans, such as eligibility and
which benefits are covered under the plans. Employers are also
concerned about the risk of liability associated with offering
a health plan and the judicial forums and rules applicable to
the plan.
Of the 160 million Americans who have employer-provided
health coverage, 132 million receive health benefits that are
subject to the provisions of ERISA. The large numbers of
Americans covered by ERISA-regulated health plans shows how
successful ERISA has been at encouraging employers to
voluntarily offer benefits.
This success is due in large part to ERISA Sections 514 and
502, since these rules ensure that employers--and particularly
employers who self-insure their health benefits--are able to
provide uniform medical plans in every State in which they
operate, that disputes associated with ERISA-governed health
plans are heard in Federal court, and that successful litigants
generally receive the benefits owed to them under the terms of
their employer's plans.
I firmly believe that interposing the determination of a
State legislature--or a State judge--regarding the eligibility
and benefit rules for an employer's health plan will begin to
make this voluntary program much less appealing and far more
complicated for employers. Further, if employers have to begin
weighing the increased risk of broader participant recoveries,
we will quickly see a number of employers stop providing health
coverage to their employees or merely reimburse employees for
individually purchased coverage. As a result, we will wind up
with fewer Americans who are covered under traditional
employer- provided health plans.
While a few will benefit, many will lose.
We are already witnessing the reduced retirement income
security associated with the legislative, regulatory, and
judicial environment surrounding defined benefit plans. This
lesson is reason enough for Congress to build on the strengths
of employer-provided health care, maintain ERISA uniformity and
recovery rules, and encourage--rather than discourage--our
system of voluntary employer-sponsored health plans.
Mr. Chairman and members of the Committee, thank you for
the opportunity to testify today and for your attention to this
very important issue. I would be happy to answer any questions
that you may have during the balance of this hearing.
[The prepared statement of Mr. Anderson appears as a
submission for the record.]
Chairman Leahy. Our next witness is Thomas O. McGarity.
Professor McGarity teaches at the University of Texas School of
Law, a leading scholar in the fields of torts, administrative
law, and environmental law. He has written a number of
influential books on Federal regulation, including the
forthcoming book ``The Preemption War: When Federal
Bureaucracies Trump Local Juries.''
Mr. McGarity, thank you for being here. Please go ahead,
sir.
STATEMENT OF THOMAS O. MCGARITY, PROFESSOR OF LAW, UNIVERSITY
OF TEXAS SCHOOL OF LAW, AUSTIN, TEXAS
Mr. McGarity. Mr. Chairman and members of the Committee,
thank you for having me here. As mentioned, I hold the Long
Chair in Administrative Law at the University of Texas School
of Law. I am board member and immediate past president of the
Center for Progressive Reform, which is an organization of
legal scholars throughout the country that is working on
preemption, among other issues. My forthcoming book, just
mentioned, will be out in October, and is being published by
Yale University Press.
Although the Supreme Court quite correctly is insulated
from the pulls and tugs of day-to-day politics, its decisions
do have a powerful impact on the lives of ordinary Americans.
Our written testimony highlights the serious injustices that
can result when the Court exercises its power to interpret
Federal statutes narrowly to reach a result that Congress never
intended and then employs the doctrine of Federal preemption to
impose that questionable interpretation on the State common law
courts.
An increasing number of sitting Justices, in my view, seem
more willing to interpret laws that Congress enacted to
implement protective social goals in ways that really advance
their less protective views of public policy. For example, the
longstanding presumption against preemption that the Supreme
Court has honored for years seems more honored in the breach
these days, as at least some sitting Justices, demonstrate
their willingness to accommodate the interest of the business
community in nationally uniform implementation of weak Federal
regulations. Ms. Kurtek's experience is sadly but one of
hundreds of similar instances of medical benefit plan errors
that have resulted in uncompensated mental damage and physical
harm to the erstwhile beneficiaries of such plans.
The injustice that Ms. Kurtek and Ms. Robb have felt here
in the case of ERISA stems from two lines of Supreme Court
precedent that were just moving off in different directions
from each other and the Department of Labor's failure to
exercise its rulemaking power to address the problem of medical
benefit plans.
The first line of cases narrowly interpreted the clause Mr.
Anderson just referred to, providing civil remedies, to exclude
common law damages. So all you get by way of a remedy is the
benefits that you would have otherwise been entitled to, no
matter how negligent the health care provider.
A second line of cases, broadly interprets the express
preemption provisions of ERISA to displace all Federal laws,
including, though not mentioned explicitly in the statute,
State common law.
The Department has consistently failed to fill the gap
which it does have the power to do by promulgating regulations
that would limit negligence on the part of health care
providers. The net effect has been to substitute a virtually
content-free Federal regulatory regime for what would otherwise
be a rich body of State common law. The message to the HMOs and
insurance companies is to ignore their fiduciary obligations
and deny legitimate requests for coverage, and my testimony
mentions where that has actually been instructed to the medical
service folks.
Justice Ginsburg, Judge Becker, Second Circuit Judge Guido
Calabresi have all expressed concern about the state of ERISA
law as interpreted by these two lines of Supreme Court cases.
Now, ERISA is not the only Federal statute. My book goes
into several Federal statutes where Federal agencies promulgate
weak regulations that then preempt State common law actions.
The Medical Device Amendments that resulted in the approval of
the medical device--the full approval of the medical device
that Ms. Robb described to you is another instance of injustice
coming about by a recent Supreme Court case saying that all
claims involving fully approved devices are preempted.
The arcane law of Federal preemption has a profound effect
on the rights of ordinary citizens. First, it deprives innocent
plaintiffs of the corrective justice to which I believe all
Americans are entitled. Second, it replaces the common law
jury, perhaps that most democratic of legal institutions, with
an unelected Federal bureaucracy. And, third, it undercuts the
backstop role that State common law litigation can provide to
back up the Federal law.
Just in passing, the ERISA law preempts even claims based
on violations of ERISA, not just claims that are inconsistent
with ERISA.
So when the Supreme Court concludes that Congress meant for
the questionable judgment of Federal bureaucracies to supersede
the common-sense wisdom of a common law jury, it leaves behind
a hole in the law that has enormous potential for injustice.
Thank you.
[The prepared statement of Mr. McGarity appears as a
submission for the record.]
Chairman Leahy. Thank you, Professor.
Richard Cooper, our next witness, was chief counsel of the
FDA during 1977 to 1979. He is currently a partner at the
Washington law firm of Williams & Connolly, where his principal
area of practice is food and drug law, with an emphasis on
medical products.
Mr. Cooper, welcome. Please go ahead, sir.
STATEMENT OF RICHARD M. COOPER, PARTNER, WILLIAMS & CONNOLLY
LLP, WASHINGTON, D.C.
Mr. Cooper. Thank you, Mr. Chairman. I thank you and the
Committee for inviting me to testify here this morning.
The fundamental question that is put at issue by preemption
in the food and drug field is who gets to decide whether a
medical device or drug is safe and effective and who gets to
decide what information will be put into labeling to guide
doctors in prescribing and administering the medical product.
Under our Federal system, the supremacy of Federal law over
State law is fundamental. The Riegel decision earlier this year
involved express preemption. Congress in 1976, as part of the
Medical Device Amendments, included a section that provides, in
substance, that no State shall establish or continue in effect
with respect to a device any requirement--any requirement--that
is different from or in addition to a requirement with respect
to the device under the Food, Drug, and Cosmetic Act and that
relates to the safety or effectiveness of the device.
As early as 1959, long before the current Supreme Court,
the Supreme Court recognized that State common law damages
remedies have a regulatory effect and, thus, in effect, impose
requirements. That was 17 years before the Medical Device
Amendments of 1976. That understanding was reiterated and
applied to product liability, a part of the common law, in the
Cipollone decision in 1992. And in the Sprietsma case, another
product liability case, in 2002, that recognition was endorsed
by a unanimous Court.
In Riegel, the Supreme Court applied that established body
of jurisprudence to FDA approval decisions with respect to a
medical device. And although FDA has many problems, whether it
is tomatoes or pharmaceutical factories in China, I am not
aware of evidence that FDA is inadequately staffed or has
inadequate resources to perform its review function with
respect to medical devices or reviews of new drug applications.
When FDA reviews a Pre-Market Approval application for a
medical device, it reviews a vast amount of data. It assesses
effectiveness and safety and makes tradeoffs between design
features that affect safety or effectiveness. It decides on the
basis of the medical needs in the best interest of all
potential users of the product and takes into account, as far
as can be foreseen, those who are likely to derive a net
benefit from it, whether it is saving life, whether it is
maintaining health, whether it is enhancing quality of life, as
well as those who are likely to suffer adverse experiences with
the device. It takes into account what is known and what is
unknown. And when FDA approves a product, it approves it with
conditions that, together with the applicable statutory and
regulatory requirements, must be obeyed by the manufacturer
with very, very limited exceptions.
FDA could always hold the product off the market until
there is more information to guide use, to make it safer and
more effective, possibly to change design, or even to reveal
new risks that might make one conclude that the product is
unsafe. You could hold the product off the market forever until
you had perfect information. If you waited for perfect
information, if you insisted that no device ever malfunction,
no drug ever cause an adverse reaction, we would have no
devices and we would have no drugs. There are no perfect
medical products.
The PMA products are only a very small proportion of the
medical devices on the market today. All Class I devices and
Class II devices and the vast majority of even Class III
devices do not go through the PMA process, and Riegel and the
other preemption decisions have no effect on the ability of
harmed patients to seek legal redress.
Riegel is also consistent with the scope, the limited
scope, for compensation from manufacturers under products
liability law. Manufacturers are not insurers. In general, they
are liable only if their product is defective or they are
negligent, if they are at fault in some way. Once FDA has
decided that a design is safe and acceptable and what is to be
in the labeling, there is no fault in a manufacturer that
markets that product with that design and with that labeling.
Under the Supremacy Clause, State law requirements that would
change the design or would change the labeling are preempted.
In general, this system benefits consumers as the flow of
life-saving and life-enhancing products used by people, some of
whom may be in this room, this hearing room, most of whom,
millions of whom, are not in this hearing room this morning.
Preemption also gives full respect to Congress by taking fully
seriously the words that Congress enacted in the preemption
provision of the Food, Drug, and Cosmetic Act.
Thank you.
[The prepared statement of Mr. Cooper appears as a
submission for the record.]
Chairman Leahy. Thank you very much.
Our next witness is Robert Lawless. Professor Lawless
teaches at the University of Illinois College of Law. He is an
expert in bankruptcy and corporate law, has published numerous
articles on these topics. Professor Lawless has previously
testified before this Committee on the implementation of the
Bankruptcy Abuse Prevention and Consumer Protection Act, and we
welcome him back here again.
Professor, please go ahead.
STATEMENT OF ROBERT M. LAWLESS, PROFESSOR OF LAW AND GALOWICH-
HUIZENGA FACULTY SCHOLAR, UNIVERSITY OF ILLINOIS COLLEGE OF
LAW, CHAMPAIGN, ILLINOIS
Mr. Lawless. Thank you, Mr. Chairman and members of the
Committee. Thank you very much for inviting me to testify
today.
As Senator Leahy indicated, my name is Robert Lawless. I am
a professor of law at the University of Illinois College of
Law, where I study bankruptcy and financial services law, and
my research focuses especially on how those laws, how those
legal institutions affect the American family. And I really
commend the Committee for having this hearing today and
shedding light on the many ways the U.S. Supreme Court has
decisions that happen outside the blur of the usual media
headlines, but that really can dig into the pocketbooks of
everyday Americans.
I am here today to talk about cases about credit cards,
about bankruptcy, about consumer loans, some areas that we have
not heard about yet this morning. But in the same way, what we
have seen is a series of Supreme Court decisions that have
centralized regulatory authority in the Federal Government and
taken away the power of the States to provide protections for
their citizens.
In my written testimony, I refer to a citizen of Maryland
who has written some comments to the Federal Reserve's recent
regulations on credit cards. And he complains about being
charged an extremely high, exorbitant rate. Penalty default
rates now on credit cards can run into the 30s. This gentleman
was complaining about a rate, as he characterized it, in the
``high 20s.'' The State of Maryland prohibits a creditor from
charging more than 24 percent interest. An interest rate higher
than 24 percent is considered usurious. Why can't a citizen of
Maryland rely on their State law to protect them? Because of a
decision of the U.S. Supreme Court known as Marquette.
Why do we have so much consumer debt in this country? Why
do we have over $50,000 in consumer debt for every man, woman,
and child in the United States? Again, because of that same
decision, because of the Marquette decision, involving an
interpretation of something known as the National Bank Act,
which gives a bank the authority to charge interest at the rate
allowed where the bank is located. This law had been passed 114
years before the case had reached the Supreme Court. At the
time it was passed, this country was in the midst of the Civil
War. The purpose of the National Bank Act was to establish a
strong national banking system. The purpose of that particular
section was to prevent a State like Nebraska, as was involved
in that case, from ganging up on a Federal bank and driving
federally chartered banks out of the State in favor of State-
chartered banks.
What had been a section that was there to protect Federal
banks was used in Marquette as now a sword for a bank in the
State of Nebraska to go into the State of Minnesota and make
consumer loans that were above the legal rate allowed by the
State of Minnesota, but because they were within the rate of
the laws of the State of Nebraska, the Supreme Court upheld the
bank's actions.
Now, reasonable people can differ over whether this was a
good idea or not. The effect of the Marquette decision was
effectively to deregulate interest rates. But the important
point here that we have been hearing over and over is that this
ultimately was a decision for Congress to decide. By ruling in
favor of the banking interest, Congress essentially locked in a
regulatory policy. I do not think anybody realistically
expected that consumer interests were going to be able to
effectively come into Congress after the Marquette decision and
seek to have it overturned.
I talked about some other decisions in my written
testimony. Let me just focus on one more from last term, the
Watters decision. Why can't States right now, especially State
Attorneys General, enforce their own State consumer laws
against national banks, the Watters decision? The Office of the
Comptroller of the Currency issued a regulation defining the
scope of its own authority to displace State law. In that
regulation, the Office of the Comptroller of the Currency
preempted State consumer protections as they applied to
national banks. The Watters decision upheld the authority of
the OCC to do this. Again, reasonable people might differ over
this, but, again, this would be a policy decision for Congress
to consider.
Because of the Watters decision, the New York Attorney
General would not have been able to undertake an investigation
into overbilling practices that was undergoing as that Watters
case began its way through the Federal court system. The New
York Attorney General was not investigating consumers who were
trying to escape responsibility for loans, whether the New York
Attorney General was trying to investigate cases of overbilling
where the lender acknowledged receiving payments over and above
the amount they were contractually entitled to. Such an
investigation today would be preempted because of the U.S.
Supreme Court's decision.
We have heard a lot about problems. Let me try to offer one
solution, and that would be for Congress to start adopting an
interpretive rule, either broadly or in particular statutes,
that any ambiguity be resolved in favor of consumer interests.
That would stop the problem of lock-in. That would stop the
problem of having a decision from the Supreme Court that cannot
effectively be overturned. If the tipping rule were to be
adopted, then the burden of legislative change would rest with
the financial services industry and the business interests were
most able to come to Congress and have their interests
represented.
Thank you for letting me speak this morning, and I will be
happy to answer any questions you have.
[The prepared statement of Mr. Lawless appears as a
submission for the record.]
Chairman Leahy. Thank you, Professor Lawless. Let me ask my
first question of Professor McGarity, and I should note that
each of you will have a copy of the transcript; if you want to
expand on your answers, feel free to. We are also going to
probably have some questions for the record afterward.
Professor, you heard Ms. Robb's testimony, and here she has
this 911 call, a malfunctioning device implanted in her chest,
a malfunctioning device that the company knew could
malfunction. She thought she was dying because of the severe
pain, and probably as traumatically, her 6-year-old daughter
thought her mother was dying. And yet she finds that nobody is
accountable. The company knew the device was improper. They are
not accountable.
Now, I wonder--they know they are not accountable, they are
given this kind of blanket immunity--what is out there that
might give them the incentive to do something right? We have
laws on the books that for your conduct. If you drive down the
road, you have got speed limit laws, and most people will
follow them. Some do not. But if you had a sticker on your
license plate which said Professor McGarity does not have to
follow these laws, there is no real incentive to follow them.
Now, some claim that the Supreme Court's Riegel decision is
going to allow an injured consumer to go to court to enforce
Federal agency regulations. That should be sufficient to
protect consumers, but there is no compensation. So do you
really think that is going to allow consumers to be protected?
Is there anything in there that gives a real incentive for
corporations to even notify consumers when they know there is
not a heck of a lot consumers can do to them?
Mr. McGarity. I think there is very little--I mean, there
is nothing there if there is no common law action available at
all, which is the case now for fully approved devices. Now,
what you have, of course, is the approval process so that the
device is supposed to be shown to be safe and effective when it
is approved.
That could have happened years ago. It could have happened
decades ago. In the case of some agencies, it did happen back
in the 1950s. The agency has never gone back and revisited the
regulation or the approval, even though we have lots more
information that has come in by way of adverse event reports in
the case of FDA and other such sources of information,
including academia, that show that various aspects are unsafe
and that safer technologies are there. Until the agency
withdraws that regulation or takes some action, there is no
incentive for the company to do anything to even come up with
safer technology.
Chairman Leahy. Look at the results of this. I mean,
Congress spent, I believe, a decade studying the problems of
protecting workers' pensions and benefits before passing a
sweeping law intended to increase protection of the vulnerable
American workers. But Justice Scalia has taken the lead and
ignored congressional intent, gutted the law that is supposed
to ensure that workers with employer-sponsored health insurance
and retirement benefits can count on them. But listen to Ms.
Kurtek's testimony, we see what Judge Becker, the late Judge
Becker, described as the ``perverse effects'' of Justice
Scalia's cramped interpretation. Doesn't this, instead of
protecting people within HMOs--as Mr. Anderson and others
testify. Doesn't this really create a strong incentive for HMOs
to deny claims? There does not seem to be anything that can
happen to them if they do.
Mr. McGarity. Well, in fact, it can be a profit maximizer
to deny the claims. The fact is that your employer and you have
paid into the insurance company. The money is in their bank
account drawing interest while they are denying the claim so
that the entire time that that is happening, they are investing
that money at the same time they are denying the claim. If
there is no consequences, no accountability, as Ms. Kurtek
pointed out, for doing that, there is exactly that. And I
mentioned in my testimony a training session that was conducted
in the late 1990s of these basically nurses who make the
decision whether or not something is covered or not, and they
train them that if it is an ERISA-covered claim, draw it out.
If it is not ERISA, we might be held liable, so go ahead and
get that thing taken care of.
Chairman Leahy. Well, you know, I think about last week,
Colorado's Governor, Bill Ritter, signed into law major
crippling penalties for health insurers who delayed or denied
authorizing payments of a covered benefit without a reasonable
basis for it. But doesn't Justice Scalia's line of ERISA
decisions threaten to override such State laws?
Mr. McGarity. That is not so different from the Texas law
that President Bush signed when he was Governor of Texas that
was at issue in the Davila case, which did give a private right
of action when your claim was unreasonably denied. The Supreme
Court held that that was preempted. I expect that the Supreme
Court--one hesitates to predict always, but my prediction would
be that this provision is DOA, dead on arrival.
Chairman Leahy. I am going to yield to Senator Hatch, and I
have other questions. We could spend hours and hours with each
one of you on this. I will submit questions to you. And Senator
Whitehouse is going to chair. I must admit--and this, I agree,
will be somewhat editorial commenting, but you hear this buzz
word of ``activist'' judges. I cannot think of any more
activist judges than many on the Supreme Court who have
overturned congressional actions that were intended to protect
consumers, when basically they end up overturning them to
protect multinational corporations, and that is one Senator's
opinion. But I thank each one of you for being here.
Ms. Robb and Ms. Kurtek, you are not people who are used to
testifying before congressional committees, and I thank you for
being here. I hope your son, Ms. Kurtek, still goes to the
spelling bees and does those things. Ms. Robb, I hope your
daughter still wants to hug her mom.
Senator Hatch?
Senator Hatch. Well, thank you, Mr. Chairman. I appreciate
you holding this hearing. It is an interesting hearing to me.
And as many things in the law, we find a lot of situations that
are very difficult to resolve. I empathize with both of you,
Ms. Robb and Ms. Kurtek. Did either of you sue the doctors or
the hospitals?
Ms. Kurtek. No.
Senator Hatch. Did you, Ms. Robb?
Ms. Robb. No, I did not.
Senator Hatch. OK. Well, it seems to me there was some
potential there, but, still, these issues are important issues.
Now, Mr. Cooper, I want to thank you for your testimony.
Reading your resume, and, of course, knowing a lot about you,
it is obvious that you are not only the expert on FDA law, but
you were chief counsel for the FDA during the Carter
administration. And you have a real sense of how the FDA works,
and it is a practical sense. So I want to commend the Chairman
and the Ranking Member for inviting all of you to testify, but
especially you since you have this broad background at the FDA.
And this seems to be a major, major aspect of at least this one
part of this problem.
Now, Mr. Cooper, is there any way that Ms. Robb, based upon
the statement that she made today, could have sued the
insurance company under the Medical Device Act?
Mr. Cooper. You mean the manufacturer?
Senator Hatch. Yes, the manufacturer. Excuse me. The
manufacturer.
Mr. Cooper. I cannot comment on the details of her case
without knowing a lot more about it--
Senator Hatch.--that she could not.
Mr. Cooper. Yes, I can speculate. The preemption doctrine
under Riegel applies to the FDA approval decision, so I think
it protects against lawsuits challenging the design of the
product or the labeling of the product. But if, for example,
the malfunction she described resulted from a defect in
manufacturing, if the product was not manufactured to its
design specification--
Senator Hatch. The law allows an opening for that,
doesn't--
Mr. Cooper. Pardon?
Senator Hatch. The laws allows an opening to sue for that.
Mr. Cooper. That is a possible opening. I don't know
whether that happened, but that is a possible opening.
Senator Hatch. I just wanted to make that clear, that there
may be a cause of action there if there was negligence on the
part of the manufacturer or a defect in the product that they--
Mr. Cooper. In the manufacturing.
Senator Hatch. Right, in the manufacturing, which bothers
me a lot because she has gone through an awful lot of pain. It
is more difficult to see how the ERISA laws would be overturned
in the case of Ms. Kurtek, but, nevertheless, these are matters
of great concern.
Mr. Cooper, what would happen to a company if it ignored
the requirements for use set by the FDA? The requirements the
FDA set, would it be liable under State tort law? What would be
its exposure under Federal law?
Mr. Cooper. Well, if a company violated one of the
conditions of approval of its product, it could be liable under
both Federal and State law. If it manufactured a product that
differed in a material way from the design that FDA had
approved, the product would be adulterated. If it materially
changed the labeling from what FDA had required in its
approval, the product would be misbranded. It would also be--in
the case of a device, an unapproved product and would be
adulterated. In the case of a drug, if the company changed the
formula for the drug, for example, without FDA approval, the
drug would become an unapproved product, and there is a
separate prohibited act in Section 301 of the Federal Food,
Drug, and Cosmetic Act that would make the shipment of that
drug in interstate commerce unlawful. In addition, the Supreme
Court has been very clear in all of its FDA preemption
decisions that a State law theory of liability that, in effect,
enforces a Federal requirement is not preempted.
Senator Hatch. Now, the distinguished Chairman kind of
indicated that the Riegel case was an activist decision. After
all the sturm and drang over the Riegel decision, I think it is
important to keep in mind that it was an 8-1 decision. This was
not some 5-4 decision. This was an 8-1 decision.
Mr. Cooper. That is correct, and it was clearly
foreshadowed in prior Supreme Court decisions and by the vast
majority of courts of appeals decisions that had considered the
question. It was not a bolt from the blue.
Senator Hatch. Well, could you elaborate on that decision,
what it does and does not say? And also, in your view, did the
decision come as a surprise to the experts in the legal
community?
Mr. Cooper. I think it was not a surprise, and I would
emphasize that it protects only a very small percentage of the
medical devices--the thousands and thousands of medical devices
that are marketed. It protects only those that go through the
PMA route to the market and have been approved by FDA in
accordance with what the Supreme Court correctly described as a
``very rigorous process,'' backed up by lots of data.
Senator Hatch. Could I ask one more question, Mr. Chairman.
Senator Whitehouse. [Presiding.] Of course. Please take
your time.
Senator Hatch. This is important stuff because, you know, I
am one of the authors of some of the subsequent aspects of the
Medical Device Act, and I want to have it right. I certainly do
not want to see people suffer. And I would appreciate any
advice you could give to the Committee as to whether we should
change some aspect of the law to make this more workable and to
make it more fair, if there is, in fact, unfairness.
Now, I agree with you, there are millions and millions of
people who benefit from these devices, and there is no way you
could absolutely be sure that any device is perfectly harmless
or that any pharmaceutical is perfectly harmless. They all have
risks, and they all have adverse events to a degree, and this
is part of this.
But let me ask you this question: Mr. Anderson in his
testimony--and I do not mean to not give you this question, Mr.
Anderson, but I would like to--since I have been asking Mr.
Cooper, I would like to just ask this of him.
In his testimony, he stated that legislative efforts to
undermine ERISA preemption would discourage employers from
providing health benefits to their employees.
Do you agree or disagree with that?
Mr. Cooper. I am really not an expert on ERISA.
Senator Hatch. OK. Well, then, let me ask the question of
Mr. Anderson. I do not think there are very many experts on
ERISA, I tell you. It is a very complicated set of laws.
Mr. Cooper. We should treasure the one we have.
Senator Hatch. Yes, that is right. But let me tell you,
your testimony there is a matter of great concern to me. The
fact of the matter is that we are finding that employer-
provided health care is diminishing gradually in a rapid
fashion, and there are many reasons for that. But I for one
want to do everything we can to give incentives to employers to
provide health care. So if you care to expand on your testimony
there so that we all know exactly what you think will happen.
Mr. Anderson. Thank you, Senator. I would be pleased to.
As you point out, ERISA is a voluntary statute. Employers
choose to offer employer-provided health coverage, and,
unfortunately, in recent years, fewer and fewer employers have
been able to afford to offer health coverage. There are a lot
of costs associated with or bundled into delivering medical
benefits--medical advances, liability concerns, so on and so
forth. And I think anything that exposes employers to
additional risk related to their employer-provided health
coverage will lead to those employers beginning to exit the
system.
I would also like to clarify what I think was a
misrepresentation earlier in today's testimony. It is easy to
demonize health insurers here, that they are looking to line
their pockets or some such thing. But what is often overlooked
is somewhere in the neighborhood of 73 million Americans who
have employer-provided health insurance enjoy self-insured
health insurance. What that means is, while there may be an
insurer who handles some of the paperwork or provides the
doctors or the network, every single dollar associated with the
cost of that employer-provided coverage comes exclusively out
of the employer's pocket. This is not a scheme to enrich
insurance companies for those 73 million Americans.
Senator Hatch. Well, let me interrupt you for a second. Ms.
Kurtek's case is the--I would hate to go through what she went
through. I think anybody sitting and listening to this would
just hate to have to go through the terrible pain, suffering,
amputations, and so forth that she has gone through. Do you see
no way that her case could be brought under ERISA?
Mr. Anderson. Well, I see a couple things--
Senator Hatch. Would it be preempted completely under the
ERISA laws? Or is there some way around the ERISA laws that
would give her a cause of action?
Mr. Anderson. I think the United States in the--or the
Supreme Court in the Davila case, which we heard before,
unanimously concluded that cases like that should be the sole
province of the Federal judiciary, not State law.
Senator Hatch. Could she have brought her case in the
Federal judiciary?
Mr. Anderson. She sure could have, and while I am not aware
of--
Senator Hatch. Could she--OK.
Mr. Anderson.--her case, there has been a lot of regulatory
effort in this area recently by the Department of Labor. The
last 5 or 8 years has seen a huge expansion of the rules
associated with ERISA claims and appeals in the area of health
plans. Had a physician determined that a patient was suffering
from some medical condition which rises to the level of urgent
care, that claim has to be heard in 3 days; that appeal has to
be heard in 3 days. On the seventh day, that individual could
make their way to Federal court to receive an injunction to
receive that benefit.
I don't know the particulars of this case. I just want to
highlight that our Government has been very active in this
area, ensuring that Americans have quick access to medical care
and medical decisions when they are suffering from life-
threatening illnesses or diseases.
Senator Hatch. Could I just ask one more? Then I am going
to have to leave.
Senator Whitehouse. Sure.
Senator Hatch. The Chairman has been very gracious to me. I
really appreciate it. But I would like to ask just one other
question of Mr. Cooper, because I am concerned about these two
women, and others who are like them. I agree the vast majority
of cases probably could not be brought. But, Mr. Cooper, you
were forthright in your testimony acknowledging that no product
goes to the market absent any risk. And you explained, however,
that this risk does not emerge through the fault of the FDA or
the manufacturer. If that is the case, it seems that negligence
claims in State court might not be the best way to compensate
persons injured by properly approved and used products.
Now, have you given any thought and could you give us the
benefit of your thinking here on this Committee to alternative
remedies that Congress might pursue to provide compensation to
these persons?
Mr. Cooper. I have given it some thought, Senator, and have
a couple of possible answers. One is a system of compensation
quite different from most of our compensation system would be a
no-fault system. We have that, I think, for some childhood
vaccines. We may have that in some other circumstances. Under
traditional tort law, the plaintiff has to show that the
manufacturer was somehow at fault. Either the design, the
manufacturing, or the labeling of the product had some defect--
this is any kind of product, not limited to medical products--
or that the manufacturer was negligent. That is a kind of
fault.
If the manufacturer was not at fault, then there is no
recovery, and you could have people who go through these kinds
of experiences, and the manufacturer is not at fault. It just
happened, because no drug or medical device is perfect. There
are always going to be some people who will have adverse
experiences, and it is nobody's fault.
My father died in surgery or as a result of surgery,
shortly after surgery. Something went wrong in the surgery. But
it was not clear that anybody was at fault. So there was no
lawsuit. That happens in life. And if you do not have a no-
fault system, then you need a network or set of networks for
insurance, for health insurance, for disability insurance, for
life insurance, to cover the bad things that can happen to
people. You need a social safety net, because, if you put it
all on the manufacturer, then you are going to drive the prices
of goods way up.
Senator Hatch. Well, I apologize to you other two
professors for--I have a couple questions I would like to ask
both of you, and I appreciate the testimony you have given as
well. This has been an extremely interesting hearing to me and
one that causes me great concern on both sides of the equation.
And I can easily see why this is--having worked on both of
these laws, trying to get them right, we had to balance a lot
of interests. There is no question about it. And we have an
illustration here of where, you know, I wish we could have done
a better job of solving these things. But, on the other hand,
our current tort system does not solve a lot of things either.
Thank you, Mr. Chairman. You were very gracious to allow me
to ask these extra questions.
Senator Whitehouse. It is my pleasure. As the audience well
knows, the distinguished Senator from Utah is a former Chairman
of this Committee who served with great distinction. He is one
of the leading trial lawyers in the history of Utah, and his
thoughts and observations are most welcome. And I was very
pleased to listen and have you take the time that you needed,
Senator, since there was nobody else competing for our
attention here.
Senator Hatch. If you would yield for just one further
comment, I agree with Mr. Cooper that the FDA--I agree with
Senator Specter that the FDA needs more money, that we really
treat it like a wicked stepsister rather than doing what we
should when it handles up to 25 percent of all consumer
products in America. But I also agree with you, Mr. Cooper,
that the FDA is very diligent and has the capacity and the
ability to do the work in this area in an extremely refined and
good manner. And I do not particularly go along with people who
do not believe the FDA can do a high-quality job. I know it
can, and especially if we get that--you know, I passed the FDA
Revitalization Act back in 1992 to build the plaza out there,
to get everything under one roof with the highest ability
computer-wise and every other scientific instrumentation-wise
so that we would attract the top people there. And we are
gradually getting there, but we are still--now, that was in
1992, and we are still only beginning getting that whole White
Oak plaza going. But I really appreciate people like you who
have served so long and hard in these areas.
Mr. Cooper. If I may just say, Senator, your work on FDA
matters has been a very important contributor to such success
as the agency has had.
Senator Hatch. Thank you.
Mr. Cooper. That should be acknowledged.
Senator Hatch. Thank you.
Senator Whitehouse. I would like to start on a historical
note, because the question of the role of the common law in
this country is at issue when Federal administrative regulatory
preemption is the topic, and so is the role of the American
jury system. And I know that there are people who could go on
at considerable and exhaustive length about this, and I am not
inviting that at this late stage in the hearing. But I do think
it is important that the hearing should in some fashion reflect
the importance to the founders of this country of the American
common law and of the American jury system.
If you read from the Revolutionary Era of the various
principles that America was fighting for, if you would ask any
of the Founding Fathers to put together a top-ten list of the
principles that they were willing to put their lives, their
reputations, and their sacred honor--their lives, their
fortunes, and their sacred honor on the line for, I suspect
every single one of them would have had the common law and the
jury system in that top-ten list. And I am not, however, a
professor so, if I may, I will turn to Professor McGarity and
Professor Lawless to see if they have an observation along
those--in that context.
Mr. McGarity. Well, I think you are absolutely right that
the common law jury is written into the Seventh Amendment of
the United States Constitution in civil cases, not just in
criminal cases, and most State Constitutions recognize a right
for a jury. So, yes, absolutely. And we trust juries. And the
fact of the matter is the jury has been over the last 15 or 20
years severely maligned and, in my view, quite inappropriately
so, too, usually through anecdotes, like the McDonald's case
and things like that that just get repeated over and over and
over again--
Senator Whitehouse. Often with critical relevant facts
omitted.
Mr. McGarity. That is right, omitting the fact that she was
not in the car as it was driving down the street, that she was
sitting in a parked car, and lots of other things. And the fact
of the matter is, if you look at the objective evidence, that
is, collected data on juries, one they do not vary that much
from judges in their decisions on the merits. So there are very
few instances of juries off the reservation, so to speak. And
if they do go off the reservation, the judges can correct that
by various procedural devices that are available.
They tend to view plaintiffs quite skeptically these days--
in fact, more skeptically these days than judges do, no doubt
in part due to the advertisements that they have been hearing
about all the abuse of the common law system that they get on
their daily TVs. But the fact of the matter is the jury is a
profoundly democratic institution. I, unfortunately, have never
served on one because I always get excluded. I always go down
and try. But my wife has served on them, and she was most
impressed with the seriousness with which they take their job.
Senator Whitehouse. Well, as somebody who has been a lawyer
through a significant portion of his life, I have developed a
very strong confidence in the American trial jury as a
collective group to sift through facts and legal arguments and
come to, almost every time, a very fair and correct decision.
But in addition to that, I think there is another point that is
worth exploring a little bit, and that is that, again, those
Founding Fathers who set up this country were keenly interested
in the abuse of power. And they were keenly interested in the
passions of politicians and containing them. They were keenly
interested in trying to diffuse political power in such a way
that Americans essentially were safe from their Government.
I see the common law backdrop that they fought for and the
jury system that they fought for as a part of that system of
checks and balances. And a word that has not yet been
mentioned, or at least I did not notice it if it was--I
apologize--is ``regulatory capture.'' And I would like to talk
about that just for a minute and ask for your thoughts. For
people who are listening, to me, anyway, regulatory capture
means when an agency that purports to be a public agency
representing the general public in fact gets taken over
politically by the organizations that it was designed to
regulate. It is a widely known phenomenon through
administrative law particularly because it is a little bit more
under the radar then. And it strikes me that if you are doing
your best to deprecate and to diminish the jury system, and if
you are doing your best to eliminate the common law, and if you
are doing your best to set as much power as you possibly can in
the hands of an administrative agency that is not elected but
is appointed by political actors, you are creating a very grave
risk. And, indeed, it strikes me that special interests would
be particularly encouraged to focus the full force and might of
their political and economic strength on administrative
agencies that enjoy preemptive authority, because they know
that if they can capture that regulatory agency, they have won
the day. The prize is a tantalizing one: no more juries, no
more liability, no more State regulation, no more
accountability to the law, just a regulatory agency that you
now own.
And it is a horrible thing for the general American public,
but from a highly self-interested point of view, there can
almost be no greater prize for a special interest than to own
or control or dictate terms to its regulatory agency. And that
prize is even more valued and the risk of that happened I would
think goes up even more once you have put all the eggs in that
basket.
Mr. Lawless. I completely agree with that, Senator. What we
are talking about, the modern administrative state was unknown
to the Founders, but you are absolutely right about their
genius in that they set up checks and balances that are still
with us today--
Senator Whitehouse. I am afraid--I am sorry. I have to
interrupt this hearing. Certain checks and balances have just
been deployed in the U.S. Senate. This hearing has gone beyond
2 hours. There is a rule that requires hearings to conclude
within 2 hours unless unanimous consent, which is ordinarily
provided as a matter of courtesy and formula, is given. A
Republican Senator has invoked the 2-hour rule, which means
that this Committee hearing cannot take place for more than 2
hours after the Senate was called into session, and the Senate
was called into session at 9:30 this morning. It is now just
after 11:30.
I regret that this tactic has been deployed again. It was
done yesterday when a Committee was exploring questions of
torture and of abusive interrogation techniques. It has now
been employed here. But the hearing must be suspended due to an
objection of an unnamed Republican Senator.
This is an important hearing. I thank the witnesses for
their testimony. I particularly thank Ms. Robb and Ms. Kurtek
for this testimony. And I consider it an embarrassment on the
part of my institution that after the effort that you have
taken to come here today and after the nature of the testimony
that you have given that we should be put in this position and
obliged to interrupt the hearing. So on behalf of the U.S.
Senate, I apologize to you.
The hearing is now recessed.
[Whereupon, at 11:33 a.m., the Committee was adjourned.]
[Questions and answers and submissions for the record
follow.]
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