A diagnosis of non-Hodgkins lymphoma used to be a death sentence. Like many cancers, it was nearly untreatable, and families were forced to wait out the days until a loved one died.
But new methods of chemotherapy in addition to drugs, such as Rituxan, changed all that. One study found that a combination of the two treatments improved survival rates among patients to 70 percent, compared with 57 percent for those on chemo alone.
Similar situations exist for a wide range of diseases and treatments, from drug cocktails for AIDS to statins for high cholesterol.
But such novel treatments often do not make it to the market in the first place. For every 100 people helped by a treatment like Rituxan, there may be one patient who suffers serious side effects or even death. And sometimes the drug manufacturer can be held liable in court for those side effects, even when patients are properly warned ahead of time.
These liability risks ? or torts, in legal speak ? add enormous costs to the development and implementation of new technologies and treatments. Fortunately for lymphoma patients, Rituxan has proven effective enough to outweigh legal risks.
But because of legal threats and the potential for debilitating tort payouts, many life-saving or risk-reducing technologies are never brought to market or even invented. Numerous lives are lost through accidental deaths that could have been prevented.
According to data from a recent study by two professors at Emory University, America?s current tort system was responsible for 2,700 accidental deaths in 2004. By extending calculations back through 1981, we can project that 77,419 lives were lost in accidents that could have been avoided if tort reforms had been adopted.
This loss of life affects not just the families and communities of those who have died. It also impacts the nation?s economy.
Let?s think of this group of 77,000 individuals as a “ghost work force.” Had these folks not died needlessly, they would have been alive and working today.
It?s impossible to predict whether one of these individuals would have discovered the cure for cancer or written the great American novel, but the economic output these individuals would have produced can be measured.
The U.S. Bureau of Economic Analysis has concluded that the value of the average worker?soutput is $90,236. If we apply this ballpark value to each member of our ghost work force, we can calculate that the U.S. economy lost $7.51 billion worth of output.
Most costs of today?s tort system are well-known. We see them in the form of higher insurance premiums, higher prices for goods and services, and even the destruction of entire businesses crippled by excessive punitive judgments.
But the concept of a ghost work force emphasizes another cost to society ? that of what could have been. And with the sacrifice of more than $7 billion in economic output due to tort risks, these costs are far from hypothetical.
A thriving economy depends on an efficient tort system that provides just compensation for those who are injured, which facilitates trade and commerce.
But it?s critical that the tort system not increase the cost of risk-reducing advances that ultimately save lives, like new drugs.
The future costs of an unreformed tort system are difficult to fully calculate. But if the “ghost work force” were alive today, it would provide a boost to our nation?s economy. Today?s tort system takes away billions of dollars ? and thousands of lives ? each year. A tort system should operate to save lives, not cost lives.
That fact that the U.S. tort liability system is needlessly costing lives is stark evidence that tort reform is desperately needed.
Lawsuits consume more resources than national defense, charity and federal education combined ?
» Annual cost of U.S tort liability system: $865 billion
» Annual Defense Department budget: $500 billion
» Total annual charitable giving in U.S.: $260 billion
» Federal expenditures for education: $65 billion
Source: American Justice Partnership
? But victims only get 22 cents on the dollar
“The U.S. tort system returns less than 50 cents of every tort-cost dollar to injured claimants, those it was designed to help.”
? “Jackpot Justice”
How tort dollars are spent:
» 24 cents: Noneconomic payments, including punitive damages
» 22 cents: Economic awards to injured parties
» 21 cents: Administrative costs
» 19 cents: Plaintiffs? attorneys
» 14 cents: Defense attorneys
Source: “Jackpot Justice”
Tort tax weakens U.S. competitiveness abroad
Percentage of GDP spent on direct tort costs:
» United States: 2.2 percent
» Germany: 1.1 percent
» Japan, Switzerland: 0.8 percent
» United Kingdom, France:
0.7 percent
» Denmark, Poland: 0.6 percent
Source: Pacific Research Institute
Lawsuits take a big bite out of corporate, individual bank accounts
» Annual “tort tax” for U.S. stockholders: $684 billion
» Annual “tort tax” for each U.S. family of four: $9,827
Source: American Justice Partnership
Lawrence McQuillan is director of business and economic studies at the Pacific Research Institute, where Hovannes Abramyan is a public policy fellow. They authored the PRI study “Jackpot Justice: The True Cost of America?s Tort System.”
