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Business Law Case 1

Facts:
A well-known pharmaceutical company, Robins & Robins, is working through a public scandal. Three popular medications which they sell over-the-counter have been determined to be tainted with small particles of plastic explosive. It has not yet been determined where the plastic explosives came from, but over $8 million in inventory is impacted. The inventory is located throughout the Western United States, and it is possible that it has also made its way into parts of Canada. A recall occurs but it is mostly unsuccessful.
Last fall, the FDA had promulgated an administrative rule which stated that all pharmaceutical companies which sold over-the-counter medications must incorporate a special tracking bar code (i.e. UPC bars) on all packaging, to ensure that recalls could be done with very little trouble. This bar code would have cost about $.35 (cents) per package, which would have cost the company nearly $3 million on this batch of inventory.
Robins & Robins lobbied hard against this rule, and managed to get it stopped in the public comments period. They utilized multiple arguments, including the cost (which would be passed on to consumers). They also raised "privacy" concerns, which they discussed simply to get public interest groups upset. (One of the drugs impacted is used for assisting with alcoholism treatment - specifically for withdrawal symptoms and many alcoholics were afraid their use of the drug could be tracked back to them.) Robins & Robins argued that people would be concerned about purchasing the medication with a tracking mechanism included with the packaging and managed to get enough public interest groups against the rule. The FDA decided not to impose the rule.

Using the above fact pattern, answer the following three questions:

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1. TCO C. Robins & Robins immediately issued a massive recall for the tainted medication, upon learning of the situation. Despite the recall, 1400 children and 350 adults have been hospitalized after becoming very ill after taking the tainted medication. Each of them had failed to note the recall after having already purchased the medication. It is quickly determined that they will need liver transplants and many of them are on a waiting list. During the wait, to date, 12 children have died. Their families are considering suing for 402A and negligence, both. The attorneys stated that but for the lobbying efforts, the recall process would have been automated and the people would not have gotten sick or died.

You are an employee with the FDA. You are drafting a memo to your boss analyzing the FDA's liability and explaining why the FDA did the right thing in deciding not to pass the original tracking bar (UPC) rule. You are specifically being told to respond to the issue of the deaths, and illnesses. What would you write? Include (and explain fully) any defenses you feel that the FDA could use against any negligence or public relation cases. Explain what liability (if any) could the FDA have to the victims and their families

Solution Preview

TO; Mr. Woods, Chief FDA
FROM: Hansen, Employee FDA
DATE: October 24, 2010
SUBJECT: Robins and Robins Case.

The Robins and Robins case has led to several activist groups calling for FDA's liability for the death of 12 children. They point to FDA's fault and negligence in not passing the original tracking bar rule. It is contended that FDA does not have any liability to the victims of Robins and Robins medicine poisoning.

Three over the counter medicines being sold by Robins and Robins have been tainted with plastic explosives. This contamination has led to 1400 ...

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