Responses to Liability Immunization: Evidence from Medical Devices

Abstract

The Supreme Court's decision in Riegel v. Medtronic immunized medical device manufacturers from certain types of state product liability claims. However, this immunization applies only when the devices underlying those claims have been approved through the Food and Drug Administration's most rigorous—and costly—review process, premarket approval (PMA). Exploiting this decision, we examine whether manufacturers strategically respond to this new immunity. We find evidence that, following Riegel, approvals for high‐risk product categories increase relative to the comparable change for low‐risk categories, suggesting that firms are sensitive to the newly immunized risk. We additionally find evidence that physician treatment patterns with respect to medical devices also change, consistent with Riegel shifting liability away from device manufacturers and toward physicians. The analysis provides evidence that sophisticated actors respond to changes in their expected legal liability and that technical legal decisions have important ramifications for the provision of healthcare.