Legal: E-headache

Document production has always been a tedious and costly part of litigation. Now, with new rules governing electronic information, pharma companies must brace for a whole new set of associated costs.
Dec 01, 2006

Jeffrey Brown
When confronted with complaints about the high costs of prescription drugs, pharmaceutical companies point to the expense of bringing a drug to market and the rising costs of defending lawsuits, many of which are frivolous. Pharmaceutical litigation expenses are rising, yet the percentage of cases brought to trial is shrinking, as parties increasingly settle their cases out of court. Why the paradox? Although the vast majority of cases never make it to court, almost all endure the nettlesome phase of litigation known as "discovery"—and the expenses that come along with it.

Discovery is the legal mechanism by which litigants compel each other to provide information, either by deposition testimony, written responses, or document production. For pharmaceutical companies, producing documents for litigation is enormously expensive because of the large volumes of documents they create and maintain.

Documents from R&D, clinical affairs, regulatory, drug safety, and sales and marketing can be in the millions. These documents must be collected and reviewed by lawyers to protect privileged attorney–client communications, patient-identifying information, and trade secrets, a process that can take months or years—and cost a great deal of money.

Mark Yacano
Because parties to litigation understand that document production is a heavy tax that pharmaceutical litigants must pay, experienced attorneys often use it to leverage settlement. Even when a case has little or no chance of success at trial, a pharmaceutical company may settle simply to avoid costly document production. Still, companies must carefully weigh that decision, as settling cases with little merit can imply undue blame.

To add insult to injury, pharmaceutical companies, especially those engaged in product liability and regulatory litigation, cannot fire back with their own document requests because single-party plaintiffs and the government seldom have any documents. In essence, document requests are a high-caliber weapon that can only be used against pharmaceutical companies.

If You Thought That Was a Pain...

On December 1, 2006, the situation for pharmaceutical companies got worse. New federal law became effective that addresses the production of e-mail, electronic documents, and other electronic data, collectively referred to as "electronically stored information" (ESI).

At issue are certain amendments to the Federal Rules of Civil Procedure. As the name implies, the Federal Rules are the legal rules by which lawyers must play in federal civil cases. Among other things, the Federal Rules govern document requests and document production, which include ESI.

Lawyers have always had the right to require pharma companies to produce ESI, but the Federal Rules never included specific guidance on the topic. Having a clear road map for dealing with ESI-related issues in federal cases is likely to prove expensive for pharmaceutical litigants.

First, the amended rules require lawyers to "meet and confer" on ESI-related matters early in the litigation and then report their agreements and disagreements to the court at a later conference, where the matters are addressed again. Previously, lawyers dealt with ESI on their own timetable, if they dealt with it at all. Low attention to ESI often meant that ESI went unaddressed, which usually benefited the pharmaceutical litigant.

Under the new rules, ESI will not go unnoticed. Requiring lawyers to meet and confer is the equivalent of asking lawyers to debate and argue. More disagreement is likely to result in the production of more ESI. An article in the October 2006 issue of American Lawyer predicts that the volume of electronic documents produced in each year could double or triple. Costs associated with the production could rise at a similar rate.

Second, the amended Federal Rules provide a framework for determining the format in which ESI is produced. In the past, many companies simply printed e-mails and electronic documents to paper and produced them like other hard copy documents, or made them into PDF or TIFF files. Supporters of the amendment say that the old forms of production are insufficient and tantamount to the destruction of evidence—lawyers use the term "spoliation"—because printing and imaging removes parts of an electronic document and renders it less useable.

lorem ipsum