Strengthening the Power of Healthcare Insurers to Regulate Medical Device Risk

Forthcoming in I. Glenn Cohen, Timo Minssen, W. Nicholson Price II, Christopher Robertson, and Carmel Shachar. The Future of Medical Device Regulation: Innovation and Protection. Cambridge University Press, 2021

Harvard Public Law Working Paper No. 20-27

20 Pages Posted: 21 Oct 2020 Last revised: 3 Dec 2020

Date Written: August 10, 2020

Abstract

This paper considers harnessing the market forces uniquely exerted by private healthcare insurers (insurers) to reduce medical device risks. Insurers regulatory power derives from their market-gatekeeping coverage and purchase decisions that determine the economic fate of all FDA approved devices, payment of injured insured-patient medical and other expenses, and, based on inflow of insured-patient payment requests, comprehensive market monitoring for product-related accidents, including early signs of new and increasing risks. Insurers thus can generate social regulatory benefits by providing FDA with current, reliable postmarket data on product risk and efficacy, including “first alert” warnings of emerging risks. More generally, by accounting for the implicit price of accidents, insurers coverage and purchase decisions can deter marketing of unreasonably dangerous devices and promote more medically productive use of products. However, insurers lack sufficient financial incentive to exercise their regulatory power for maximum social benefit. To correct the market defects that cause this problem, we propose two simple and virtually costless reforms: (1) require insurers to report medical device accidents to the FDA; and (2) replace state tort law with a federal rule of strict manufacturer liability that bases recoveries on proof of causation alone, pays damages directly and fully to the US Treasury, and is litigated on referral from the FDA by the Civil Division of the Department of Justice directly or by auctioning claims to private attorneys.

JEL Classification: K00, K13, K32, K41

Suggested Citation

Rosenberg, Michael and Adediran, Adeyemi, Strengthening the Power of Healthcare Insurers to Regulate Medical Device Risk (August 10, 2020). Forthcoming in I. Glenn Cohen, Timo Minssen, W. Nicholson Price II, Christopher Robertson, and Carmel Shachar. The Future of Medical Device Regulation: Innovation and Protection. Cambridge University Press, 2021, Harvard Public Law Working Paper No. 20-27, Available at SSRN: https://ssrn.com/abstract=3677318

Michael Rosenberg (Contact Author)

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States
617-496-4558 (Phone)
617-495-1110 (Fax)

Adeyemi Adediran

Harvard Law School ( email )

1563 Massachusetts Avenue
Cambridge, MA 02138
United States

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