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MGMT 520 Final Exam

A comprehensive final exam on advanced management concepts.

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    MGMT 520 FINAL EXAM (TCO D) Short Answer Question and Facts for Page 1 Questions: A well - known pharmaceutical company, Robins & Robins, is working through a public scandal. Three popular medications that they sell over the counter have been determined to be tainted with small particles of plastic explosive. The plastic explosives came from a Robins & Robins supplier named Casings, Inc., that supplies the capsule casings for the medication pills. Casings, Inc. also sells shell casings for ammunition. 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. Last fall, the FDA had promulgated an administrative proposed rule that would have required all pharmaceutical companies that sold over - the - counter medications to incorporate a special tracking bar code (i.e., UPC bars) on their packaging to ensure that recalls could be done with very little trouble. The bar codes cost about 35 cents per package. 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. Robins & Robins' contract with Casings, Inc., states, in section 14 B.2.a., "The remedy for defects in supplies shall be limited to the cost of the parts supplied." Casings, Inc. had negotiated that clause into the contract after a lawsuit from a person who was shot by a gun resulted in a partial judgment against Casings for contributory negligence. Robins & Robins sues Casings, Inc., for indemnification from suits by injured victims from the medication, for the cost of the capsule shells, for attorney's fees, and for punitive damages. List any defenses Casings, Inc., would have under contract theory ONLY. (short answer question) Answer: The contract between Casings, Inc. and Robins & Robins indicated a contractual limitation that Casing Inc.’s obligation to provide remedies for defects would be limited to the costs of the parts supplied. Although warranty still applied, the contractual limitation that is stated in the contract would limit the recoveries and damages that can be filed against or claimed from Casings, Inc. As such, although Robins & Robins might be able to recover some of the damages from Casings by reason of contributory damages, Robins & Robins’ major role in the distribution of the medicines, together with their stand against tracking, would also make them liable for the defective product. 2. ( TCO B) The FDA decides to require all pharmaceutical companies to immediately implement the tracking bars (UPC) as a result of the disaster with Robins & Robins. Robins & Robins decides not to challenge this and begins the process of adding them to all of their products. However, McFadden, Inc., a New York pharmaceutical company, realizes that this new requirement is going to bankrupt them immediately. McFadden did not participate in the original

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    public comment period. However, this rule is different from the rule that went through that public comment period in that it specifically names four companies as being impacted: Robins & Robins, McFadden, Inc., Bayer, and Johnson & Johnson. On what bases can McFadden challenge this requirement imposed by the FDA, and can they be successful? Provide at least two bases under the Administrative Procedures Act and justify your answer. (Points: 30) Answer - Two ways in which McFadden can contest the FDA ruling, and challenge the requirement that is imposed by the FDA are discussed below 1. Substantial Evidence Test - Given that the rule specifically states four companies that have been impacted, there is no evidence that the three other companies apart from Robins & Robins have been impacted. Due to this, the FDA would need to provide more evidence and data points to support its claim that McFadden was one of the companies impacted by not having implemented the tracking. 2. Failure to comply with APA - The FDA should have followed the right process and ensured that there is proper public notice, publication of the rule and period for public comment before the rule is passed. As the FDA had not followed this procedure and wanted to immediately implement the rule, McFadden can contest saying that the rule implementation was not in compliance with the APA, and hence would not be able to put a law practice without it going through the public notice and comment period. Based on the above two points, McFadden would be able to stop the rule from being applied immediately, and it could be decided that the FDA meet the above two points before it can execute the ruling. Answer: The two ways by which McFadden can contest the FDA ruling are through the Substantial Evidence Test and through a claim against the FDA’s failure to comply with the APA guidelines. With the Substantial Evidence Test, it can be noted that the rule specifically indicated that four companies would be affected by the new policy. However, aside from Robins & Robins, no substantial evidence has been provided to justify why the new ruling also has to affect the three companies. In this regard, the FDA has to provide more evidence and data points to support its claims that the three other companies – aside from Robins & Robins – were also negatively affected by the absence of the tracking code in their products. Similarly, McFadden can claim that the FDA failed to comply with the APA guidelines in that the FDA did not follow the correct procedure for ensuring that a proper public notice has been issued or that the publication of the rule and the period for public comment has been made prior to the rule being passed. Because the FDA failed to follow this procedure due to its haste in implementing the rule, McFadden can contest the FDA’s initiative for the new ruling, that is, McFadden can claim that the process that the FDA used for implementing the rule was not in conformance to the APA guidelines. In this regard, the rule cannot be implemented.

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    By using these defenses, McFadden would be able to delay the implementation of the new ruling. The FDA would first be required to address the defenses presented by McFadden before they can go ahead with the new rule’s implementation. 3. (TCO C) Robins & Robins immediately issued a massive recall for the tainted medication upon learning of the situation. Despite the recall, 1,400 children and 350 adults have been hospitalized after becoming very ill upon 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 both 402A and negligence. 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 the attorney for one of the dead children’s family. List the causes of action (if any) you would file against Robins & Robins, the FDA, and the bribed FDA member. List the elements of the causes of action, and set forth the facts that you have that would support a lawsuit against each of the three named defendants. State any defenses any of the three would have. Analyze the success of the defenses. The two major theories that would apply in this case are the Tort Liability (402 A) theory and the Negligence theory. For a case against Robins & Robins, the Strict Tort liability under 402A would apply as Robins & Robins, the seller, has sold a product that has harmed a customer. This liability still stands even if there were contractual limitations that indemnified the seller and even if the seller took the necessary measures and precautions. To support this case, it would be necessary to present the number of people and children who were affected and who died as a result of Robins and Robins’ defective manufacturing and inadequate testing of the drugs. Because the case against Robins & Robins would be very strong, they might not have a defense for the complaint filed against them, although they could make claims of Contributory Negligence against Casings, Inc. For the part of the FDA, a case of negligence can be filed against them as their actions led to the people’s exposure to harm as well as to the subsequent loss of life. In particular, the deaths that occurred would have not happened if the FDA has implemented the ruling on the use of the tracking code. This then establishes that the deaths have occurred because of the FDA. In defense, the FDA can assert sovereign immunity, especially if the complainants or plaintiffs are from outside the county or state. However, they remain accountable to the people within the state where they operate. For the case against the bribed FDA member, a case of negligence can be filed against them as they had breached their duty to care, in turn leading to the deaths of many people. If it is proven that this FDA member has indeed received a bribe in order to hinder the enactment of the FDA ruling in favor of Robins & Robins then he or she would be liable for contributory and comparative negligence. It should be noted that the Robins & Robins case has sparked the interest of a number of activist groups, which called for FDA to become liable for the deaths of twelve children. They claim that

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    the FDA was negligent and at fault for not passing the original tracking bar rule. However, FDA contends that they are not liable for the victims of the Robins & Robins medicine poisoning. More particularly, three of the over - the - counter - medicines that were sold by Robins & Robins were tainted with plastic explosives; thus, leading to the hospitalization of 350 adults and 1400 children. Although Robins & Robins recalled their medicines, the recall was not automatic due to the absence of the special tracking bar code on the medicine, and this led o many people taking in the contaminated medicine. In the previous year, the FDA promulgated an administrative rule that required all pharmaceutical companies that sold over - the - counter medicines to place a special tracking barcode on all the packaging in order to enable the automatic recall of these medicines. However, Robins & Robins lobbied against it, leading to the rule’s discontinuation during the public comments period. The FDA was right, though, in discontinuing the bar code rule because of the public’s sentiments that this would violate people’s privacy and would lead to cost increases among over - the - counter drugs. In addition, many public interest groups lobbied against the rule. As such, the illnesses and deaths caused by the contaminated medicines came about because of Robins and Robins’ negligence and not because of any wrongful act by the FDA. The FDA only discontinued the rule because of the concerns and outcries of public interest groups. Furthermore, the FDA could use the defense that it was responsible for the creation of the rule but it had to discontinue the rule’s imposition because of public protests and protests from interest groups. Moreover, they can assert that Section 402 (a) applies only to food and not to medicines. On the other hand, since Robins ad Robins was the strongest opponent to the said rule, the negligence claim should be against them and not against the FDA. In other words, if Robins & Robins had not lobbied against the rule then the children's lives would have been spared. References: www.fda.gov/ www.fda.gov/Food/default.htm www.accessdata.fda.gov/scripts/cder/drugsatfda/ www.fda.com/ - www.fdanews.com/ Here is a second version of this question You are the public relations advisor for Robins & Robins, and your boss tells you to write him a memo that he will use to draft a public announcement. He needs you to explain to him why Robins & Robins should not be found negligent for these deaths and illnesses. Draft the memo utilizing the elements of 402A and negligence. Include (and fully explain) any defenses you feel that Robins & Robins may have. Recall that your boss needs all pertinent information for him to write an announcement to the public after reading your memo.

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