Limiting Liability of Medical Device Materials Suppliers

By Keller and Heckman LLP’s Packaging Practice Group

Prior to 1998, companies supplying the raw materials for medical devices were often involved in significant patient litigation over devices that ultimately proved harmful to consumers. Because these biomaterials suppliers represented the "deepest pockets" among those companies involved in the production chain of the finished device, they were often named as defendants even though the manufacturing and design defects associated with harmful medical devices had no connection to the component materials they supplied.

That state of affairs was altered considerably on Aug. 13, 1998, when President Clinton signed into force the Biomaterials Access Assurance Act of 1998 (the Act),1 which was designed to shield biomaterials suppliers from liability for medical device implants that harm consumers.

The goal of the law was to ensure the continued supply of raw materials for medical devices; in the face of escalating patient litigation, domestic and international biomaterials suppliers were increasingly reluctant to enter or remain in the U.S. market, thereby threatening the depletion of available materials.2 Drawing on this history of patient litigation, the Act codifies the judicial conclusion that biomaterials suppliers do not have a duty to evaluate the safety and efficacy of their materials as they are used in medical devices or to warn consumers of the same.3

Unfortunately, biomaterials suppliers are not covered by the law for all possible device markets, because the protections afforded under the Act are limited to certain medical device implant applications. Accordingly, companies that supply raw materials for devices not covered by the Act should be aware of two additional means of limiting liability for faulty devices: the use of effective disclaimer language in promotional material and in contracts with medical devices customers; and the implementation of sound corporate policy with respect to deciding on which device markets should be supplied with biomaterials.

Scope of the Biomaterials Access Assurance Act

The key to understanding whether the Act will apply to exclude a materials supplier from liability lies with the Act's definitions of what constitutes a "medical device implant" and who qualifies as a "biomaterials supplier" versus a "manufacturer" or a "seller."

With regard to medical device implants, the Act defines the term "implant" as a medical device that is intended by the manufacture of the device:

• (a) to be placed into a surgically or naturally formed or existing cavity of the body for a period of at least 30 days; or

  (b) to remain in contact with bodily fluids or internal human tissue through a surgically produced opening for a period of less than 30 days.4

In addition, the term "implant" includes any suture materials used in implant procedures.5 The Act applies only to suppliers of raw materials that are used in the medical device implant applications defined above.

The Act establishes that a "biomaterials supplier" is liable for harm caused by an implant only if the supplier also meets the definition of "manufacturer" or "seller." Additionally, the Act will not limit the liability of a biomaterials supplier that fails to meet contractual obligations for the product, fails to meet finished specifications for the product as set forth in a contract, device master file, or 510K application, or is so connected by common ownership or control to the manufacturer or seller as to incur joint liability.6

As defined under the Act, a "biomaterials supplier" is "an entity that directly or indirectly supplies a component part or raw material for use in the manufacture of an implant," including one that has submitted a master file to the U.S. Food and Drug Administration (FDA) for purposes of premarket clearance, or one who licenses another to produce component parts or raw materials for a medical device.7 Conversely, a "manufacturer" of an implant is defined by cross-reference to Section 510(a)(1) of the Federal Food, Drug, and Cosmetic Act (FFDCA) as one who manufacturers, prepares, propagates, compounds, or processes an implant and who is required to register with FDA pursuant to Section 510 and to include the implant on a list of devices filed with FDA under Section 510(j).8 An implant "seller," on the other hand, is defined under the Act as one "who, in the course of a business conducted for that purpose, sells, distributes, leases, packages, labels, or otherwise places an implant in the stream of commerce."9 Any person who acts only in a financial capacity with respect to an implant, however, does not constitute a "seller" under the Act.10

Whether the biomaterials supplier constitutes a seller under the Act hinges on whether the supplier has sold or transferred the implant after the initial sale of the implant by the manufacturer. Similar to the provisions relating to biomaterials suppliers as manufacturers, a court reviewing a motion to dismiss may find a biomaterials supplier to be a seller if the supplier is intertwined with the seller through common ownership or control, and the manufacturer is found to have insufficient financial resources to pay a judgment that may be imposed.

Under the Act, a biomaterials supplier named as a defendant in a medical device product liability action may move to dismiss an action against it on the grounds that it is a biomaterials supplier, not a manufacturer or seller of the implant, and that it is not liable for furnishing raw materials or components that violate either contract obligations or product specifications.11 Alternatively, a motion to dismiss on the grounds that the manufacturer of the product is not named in the action is sufficient to remove the biomaterials supplier from the case, unless the manufacturer was not named for procedural reasons, for example, jurisdiction.

Under the Act, the reviewing court may treat a motion to dismiss as a motion for summary judgment, and, if the motion to dismiss or the motion for summary judgment is granted, the case shall be dismissed with prejudice, barring any rejoining of the defendant as a defendant in the matter. The procedures established by the Act do not bar a defendant from asserting other available defenses, procedural or substantive, and the Act expressly states that it may not be construed as creating a cause of action against biomaterials suppliers, manufacturers, or sellers.12

Utilizing Effective Disclaimer Language

In addition to the protections afforded to biomaterials suppliers under the Act, companies often seek to limit liability by using effective disclaimer language both in their product literature and in contracts with medical device customers. Depending on the exact relationship between a biomaterials supplier and its medical device customer, the following sample disclaimer language, or variations thereof, can be used to help limit liability on faulty devices:

• Our raw materials are manufactured solely for industrial, not medical, purposes.
• We make no warranties, express or implied, with respect to the merchantability, fitness, or suitability of our material for use in medical or surgical applications.
• We make no warranties or representations that our material is manufactured in accordance with quality standards that may be necessary for materials intended for use in medical device applications.
• We have not sought or received any rulings from the U.S. Food and Drug Administration as to the safety or effectiveness of our product for medical purposes.
• We do not have expertise in the field of medical devices or other medical products.
• Persons (i.e., medical device customers) proposing to evaluate or use our product for a medical purpose must rely on their own medical and legal judgment, and such persons shall be solely responsible for the suitability of our product for any medically-related applications.
• We do not knowingly sell our product into any medical device application without a specific written acknowledgment from the purchaser that the supplier does not make a medical grade of these resins and that it is the responsibility of the purchaser to independently determine the suitability of the product for its application.

Implementing Internal Biomaterials Supply Policies

In addition to the protections from liability afforded to biomaterials suppliers under the Act and through the use of effective disclaimer language, some suppliers have gone so far as to institute corporate policies to evaluate the risk of liability before supplying biomaterials into medical device applications. Such policies usually entail classification by the biomaterials supplier of all potential medical device applications into three categories: high-, medium-, and low-risk devices.

Companies can measure risk using a few factors, including the type of contact associated with the human body (i.e., implantable device vs. external contact device vs. non-human- contact devices), the length of time the device is intended to be in contact with the human body, and how critical the device is to maintain human health. Once the biomaterials supplier classifies a potential device application according to its risk, corporate policies may be implemented to determine which applications are suitable for supplying biomaterials. For instance, biomaterials suppliers may make the corporate decision never to supply into high-risk device applications, but to supply freely into low-risk device applications. For the medium-risk device applications, which typically present the most difficult assessments of liability, biomaterials suppliers may create an internal review committee that is charged with carefully evaluating the risk associated with supplying biomaterials into these device applications. Evaluations of whether it is advisable to supply biomaterials into certain device applications are conducted on a case-by-case basis, and are extremely fact specific.

Conclusion

Since the enactment of the Biomaterials Access Assurance Act of 1998, biomaterials suppliers have been afforded significant protections from liability associated with faulty implant devices that are harmful to consumers.

In addition to these protections, however, some companies have utilized effective disclaimer language to further limit liability when a potential medical device application is not covered by the scope of the Act. Further, some biomaterials suppliers have implemented sound corporate policies and created internal review committees to assess the risk associated with supplying a raw material into certain device markets.

Taken together, the use of these approaches helps to minimize liability for biomaterials suppliers. Indeed, in the event that a biomaterials supplier is named as a defendant in a medical device product liability action for which the Act offers no protection, disclaimer language and sound corporate policy can be critically important pieces of evidence to help prove that a biomaterials supplier should not be held liable for a harmful device.

FOOTNOTES

1Biomaterial Access Assurance Act of 1998, P.L. 105-230, 112 Stat. 1519 (1998), codified at 21 U.S.C. § 1601 (1998).

 

2See id., § 2(8)-(13).

 

3See id., § 2(13)(A)-(B).

 

4See id., § 3(5)(A).

 

5See id., § 3(5)(B).

 

6See generally id., § 5(a). Pure common ownership or control with a manufacturer or seller is not sufficient to impose joint and several liability on a biomaterials supplier. Joint and several liability will only be imposed in such cases if the court is considering a motion to dismiss under the Act and the court determines that the defendant seller or manufacturer alone has insufficient resources to satisfy the judgment of the court should the claimant prevail. See id., § 5(b)(2)(C) (manufacturers), (c)(2) (sellers).

 

7See id., § 3(1)(A)-(B). The term "raw materials" is defined under the Act as "a substance or product that -- (A) has a generic use; and (B) may be used in an application other than an implant," whereas "component part" simply means "a manufactured piece of an implant." Id., § 3(8), (3).

 

8See id., § 3(6)(A)-(B).

 

9See id., § 3(10)(A).

 

10See id., § 3(10)(B).

 

11See id., § 6(a)(1)-(3); see also id., § 4(a).

 

12In very narrow situations, a claimant or a manufacturer may draw a biomaterials supplier back into a lawsuit as a defendant (an action called "impleader") even if the biomaterials supplier was dismissed from the lawsuit earlier in the case. In order to implead a biomaterials supplier as a defendant, the manufacturer or claimant must have claimed to the court and the court must have independently found that: (1) "the negligence or intentionally tortious conduct of the dismissed supplier was an actual and proximate cause of the harm to the claimant" [i.e., the supplier negligently or knowingly placed a bad material on the market and that bad material is the direct cause of the claimant's harm] and (2) the manufacturer's liability for damages in the case should be reduced in proportion to the supplier's negligence or tortious conduct or the manufacturer has insufficient financial resources to pay the anticipated judgment of the court. Under the Act, the "deep pockets" reasoning of lawsuits filed prior to the Act is expressly barred under the law. A biomaterials supplier can only be held liable if the supplier itself was negligent or engaged in intentionally tortious conduct.