Blog

How liability lawsuits drive up drug prices, stifle innovation, and harm patients

A single drug can cost up to 2 million dollars per treatment. In the light of COVID-19, patient groups and activists have been using the crisis of the moment to call for capping drug and vaccine prices and cracking down on barriers to access for patients. In developing countries, large parts of drug prices are caused by tariffs, taxes, and other regulatory barriers. The United States, on the other hand, has the highest per-capita drug expenditure and drug prices in the world.

Bringing a drug to the US market is usually critical for a company to recoup the roughly 2 billion dollars of development costs per successfully launched medicine. At the same time, the country’s unique legal liability and injury system (called tort law) leads to higher drug prices without necessarily creating benefits for patients. Once a drug has passed the rigorous approval process demonstrating safety and efficacy to the US Food and Drug Administration (FDA), it is still subject to various liability laws at the state level.

In the last two decades, Pfizer set aside a whopping 21 billion dollars for settlements following tort lawsuits against the diet drug Fen-Phen. Those who were harmed by the drug were able to seek legal recourse. That said, thousands and thousands of people who were not harmed by the drug were also able to seek compensation. So much so that it is assumed that at least 70% of the payouts went to claimants who weren’t harmed at all by the drug.

Johnson & Johnson was ordered to pay 8 billion dollars to one patient for side effects caused by the antipsychotic drug Risperdal. These are just a few examples of a plethora of multi-billion-dollar payments drug companies have been compelled to make after being dragged to court, despite them being deemed safe by the FDA.

Patient advocates who are passionate about lowering drug prices in the USA should take a serious look at liability laws and how their misuse inflates prices. Abolishing liability beyond FDA requirements could reduce drug prices in the United States by 12 to 120 billion dollars a year and therefore give many more patients access to medicines. 

In 2019, US patients spent a total of $360 billion on prescription drugs. Between 3 and 30% of this amount could be freed up for other treatments or price cuts if liability rules for FDA-approved drugs would be reformed. This change might seem radical, but it is what Congress has approved for FDA-approved medical devices. A similar preemption was extended to vaccines in the late 1980s via the Vaccine Injury Compensation Program.

Another impact of lawsuits following product withdrawals of FDA-approved drugs is that they negatively affect new investments in development. Pfizer’s settlement for Fen-Phen alone could have been used to bring 10-15 new innovative and life-saving drugs to patients.

Rather than using these financial resources for more research and development, or to lower drug prices, pharmaceutical manufacturers have to fight law firms who enrich themselves by abusing the US tort system. Tort law on top of FDA regulation is not just stifling innovation, but also an expensive way to compensate for the harm caused to patients. Paul H. Rubin suggests that the costs of settlement for the legal process account for half of the total settlement fees. Reducing this burden could increase the speed of new drugs being developed and reduce their price. Critics of tort reform will say that changing liability rules will endanger patients, but that’s far from the truth. A 2007 study shows that tort law reform in some states led to a total of 24,000 fewer deaths due to price reductions and the arrival of new innovative drugs. That’s something to keep in mind.

As long as we keep existing tort law on top of the FDA approval framework, consumers are being de facto forced to pay a massive markup on drugs in order to get insured against potential side effects. This is a very expensive and inefficient way of insuring patients against harm. 

A smarter way of designing such a compensation scheme is to either expand the vaccine compensation scheme to pharmaceuticals or to allow consumers to personally purchase insurance against such damages. This could, for instance, be supplementary insurance on top of the patient’s existing health insurance plans. Such a system would allow patients who opt-in much lower fees than the existing mandatory tort law system.

Exempting drugs from state tort law would be an easy step to reduce drug prices without putting patients under more risk. American patients would save billions a year and be able to access more treatments than they can currently. This will lead to a net benefit for patients and the health of the nation. Why not give it a try?

Can you sue the ski hut where you contracted coronavirus?

European nations may be opening up their economies throughout the month of May, but that grand opening is likely to be dogged by the wave of COVID-19-related lawsuits.

We learned over the weekend that over 5,000 international tourists to the ski town of Ischgl, Austria are in the process of filing a lawsuit against the town and public officials. There are also being considered against ski resort owners in the area.

The lawsuit is being prepared by the Austrian Consumer Protection Association, which claims health authorities and the bar owners were “negligent” in not shutting down ski huts and restaurants earlier. They launched a website asking potential plaintiffs to share their information in order to join a future class-action lawsuit.

Often described as the “Ibiza of the Alps,” Ischgl made international headlines as an epicenter of the coronavirus crisis. At one particular venue, Kitzloch, a German bartender reportedly tested positive for coronavirus on March 7th. The bar closed its doors two days later. The town went into lockdown on March 13th. Tyrolean Governor Günther Platter then issued a province-wide quarantine on March 18th.

By the end of March, nearly 1,000 cases across Europe could be traced back to the resort town, and as many of 1,500 to the region itself.

The complaint states that the delay from the first known case until the ski town was ordered into lockdown was “negligible” and that authorities should have “known of a threat of mass infection”. Some have even blamed “greed” and “toxic business” as the reason local officials and business owners waited before shuttering doors. But as covered above, ski lodges and restaurants shut before provincial and national lockdowns ordered them to.

The first death in Austria from the coronavirus wasn’t until March 12, after which the town of Ischgl went into complete lockdown. The national lockdown went into effect four days later.

Is this enough to make a case against ski huts and villages where tourists contracted coronavirus?

As my colleague Linda Kavuka has pointed out, the current pandemic is a living and breathing example of Force Majeure, an Act of God that indemnifies certain parties in lawsuits and breaches of contract because it is simply “beyond the control” of any person or organization.

That said, there are legitimate questions to be asked: should ski towns have shuttered their doors and closed down bars and restaurants earlier? Likely. But we simply didn’t have the same information then as we do now.

And considering the very disturbing revelations about obfuscation of information by both the Chinese Communist Party and the World Health Organization at the outset of this crisis, it’s hard to place blame solely at the feet of local mayors and ski hut owners in the Alps.

(That’s why the U.S. states of Mississippi and Missouri have filed lawsuits against China.)

Of course, the fact that any skier or holiday goer would contract the coronavirus at a place where they were supposed to be enjoying themselves is a tragedy. Many people unknowingly spread the virus, were hospitalized themselves and died as a result. No one can excuse that loss of life and the grief that ensues.

But what we must hold uphold, in this situation and many more to come, is the facts and cases we allow to enter our legal system and our courts.

Classifying or assigning claims of negligence in the pandemic could likely mean thousands of unwitting public officials, business owners, and individuals will be held liable for what they didn’t know at the time. That would be a dangerous precedent.

We’ve often covered the incredibly litigious culture in the United States’ tort law system and articulated to reasons to reform it. Now, it seems, we’ll have to spread that same message throughout the European continent.

Battle of the Experts: Judge tosses portions of testimony in J&J talc trial

For the last year, we’ve dedicated a good amount of space in our campaigns advocating for significant reform when it comes to both the U.S. tort law system and the science that is used in courts.

With most courts closed due to COVID-19, that afforded us an opportunity to better dive into one case that’s grabbing headlines: one of the many talc lawsuits against Johnson & Johnson, which we’ve written about before.

Plaintiffs in multiple lawsuits claim their baby powder products contained elements of asbestos in the talc, the main ingredient in hundreds of cosmetic products, food additives, and lubricants, and therefore can cause cancer.

Because these lawsuits have been inundated with scientific testimony from all sides, a judge in a Federal District Court in New Jersey held a Daubert hearing, examining the methodologies and credibility of the science presented in the case.

For those interested in countering junk science in the courts, this is a big one.

The Daubert opinion, written by Chief Judge Freda Wolfson, sheds a lot of light on the process of determining whether certain expert analysis can be entered as evidence for juries to consider.

In this specific case in New Jersey, all experts from the plaintiff-side who had part of their testimonies thrown out because their methodologies were questionable or they made claims they couldn’t back up. All defense witnesses will be heard without reservations.

Overall, there’s a lot of “Battle of the Experts” here, and it makes for fascinating reading.

There was a lot of debate about the strength of weakness of “epidemiological studies” – tell me if you’ve heard about those recently – and about whether expert witnesses were basing their testimonies on “subjective belief or unsupported speculation”.

Specifically, one of the main witnesses says talcum powder causes inflammation in certain cells, and then uses that to claim it’s carcinogenic. Chief Judge Wolfson torches him for his claim without causation.

“For all these reasons, the Court finds that Dr. Saed’s opinion that talc causes ovarian cancer is unsupported by the findings of his study—which can only arguably demonstrate that use of talcum powder causes inflammation in ovarian cells.”

Chief Judge Freda Wolfson, Daubert opinion, pg. 24

Second, because there was no transformation of the cell under experimentation, which is usually how we can prove a link to cancer, the judge called his conclusions “unreliable”.

What is more, Dr. Saed’s findings with respect to CA-125 further demonstrate that his opinion with respect to ovarian cancer causation is unreliable.

Chief Judge Freda Wolfson, Daubert opinion, pg. 56

The second main expert witness gets knocked down for producing scientific experiments that can in no way be replicated. The judge points out that each additional attempt at replication came up with a negative for asbestos, which is claimed to be the carcinogen in focus.

“Without that information, which is internally created by MAS, reproducing Dr. Longo’s test under the PLM would not be possible, and hence, the testing is unreliable…J-3’s PLM analysis was negative for asbestos for each sample.”

Chief Judge Freda Wolfson, Daubert opinion, pg. 23

It’s obviously very difficult for courts to examine and establish good science from bad science.

That’s why Daubert hearings are supposed to weigh methodologies, like disproven bite-mark analysis or tire tracks (as many Netflix series are now exposing).

A lot of junk science is taken as fact because it’s in the courtroom, and that’s wrong. That’s exactly what was explained to us last week on Consumer Choice Radio by Jerry Buting, the famed attorney of Steven Avery from the series Making a Murderer.

What we know is that science is a powerful tool to use in lawsuits that affect millions of consumers or innocent people’s lives, but it can be flawed and have bad consequences.

For that reason, we need good legal reform in each state’s tort system to ensure we can uphold good scientific evidence. Justice depends on it.

A full embed of the Daubert opinion can be found here:

I celebrated World IP Day but many didn’t

Last Sunday (April 26th) marked World Intellectual Property Day. While the existence of IP has allowed innovators to enjoy the rewards of their invention, more and more voices speak up against patents and IP in general. So while I celebrated World IP Day many didn’t even want to show up to the party.

The current COVID-19 crises triggers many voices that ask to ban all patents of COVID-19 related tests, drugs, and vaccines. I stumbled ac ross some very wrong statements and want to highlight these and explain what their authors got wrong.

Happy World IP Day to me…

Michael Barker for instance writes:

Flowing from the relentless drive for super-profits, we can also understand the process by which big pharma makes decisions on the type of drugs they will prioritise for mass production. Medicines that can be sold to wealthy consumers in developed countries, are fast-tracked, while drugs and treatments that might benefit the poorest billions simply fall by the wayside. Human life is secondary to the pursuit of profits.

The author might not know that depending on the country you live in and the insurance you have, drug prices can vary enormously, not because of the decisions of the manufacturer, but because of the local reimbursement models. However, producers also sell at different initial costs in developing countries. The British company GlaxoSmithKline usually caps their drug prices in emerging markets at 25% of the price they ask for in developed countries. In many cases the price is way below the 25% cap. The same company offers their HIV/AIDS treatment at merely variable cost in South Africa. Since 2001 the Swiss company Novartis supplies the fixed-dose artemisinin-based combination therapy (ACT) without profit to public-sector buyers. Over 850 million antimalarial treatments have been delivered to patients in more than 60 malaria-endemic countries. American biotechnology company Gilead has an access partnership campaign that licenses out their drugs to local partners in low- and middle-income countries, selling drugs at cost.   

Another group that sometimes totally misunderstands the pharmaceutical research industry is the well-respected NGO Doctors without Borders (MSF). While I am a personal fan of their work on the front lines of health conflicts, I wholeheartedly disagree with their understanding of patents and profits.

MSF states:

The international medical humanitarian organisation Médecins Sans Frontières/Doctors Without Borders (MSF) today called for no patents or profiteering on drugs, tests, or vaccines used for the COVID-19 pandemic, and for governments to prepare to suspend and override patents and take other measures, such as price controls, to ensure availability, reduce prices and save more lives.

Price controls will actually lead to shortages – We have seen this in the past and see this in the current COVID-19 crisis. Whenever a government limits the price of a good, its supply tends to go down. To controlling prices and at the same time ensuring availability is just and oxymoron. If MSF genuinely wants to save more lives (which I believe), they should encourage flexible prices and patent-protection – At the same time they might want to reconsider their own policy of not accepting in kind donations of the pharmaceutical industry…

MSF campaigners raise a point in favour of eliminating private property protection, saying that the ownership hasn’t even been established through private funds. Since manufacturers receive public grants for their work, their results should also be public ownership. While it is true that one in three Euros spent on pharmaceutical research is public money, it is also true that this public expenditure is offset by the taxes paid. The industry, employees, and customers pay directly a much higher amount of taxes than is received subsidies. Total R&D expenditure in the UK in 2015 was 4.1bn GBP (of which roughly 1.2 GBP are public funds) and direct tax contribution was 300% higher at 3.7. Billion.

MEP Gianna Gancia on the risks of fake drugs

Counterfeit medicines pose a real risk to consumer health. Given the current coronavirus pandemic and the numerous problems posed by restrictions on individual freedom decided by most countries, I am concerned that more and more Europeans may turn to questionable online suppliers: this is because politicians and the media are not responsible for properly reporting. citizens, causing panic.

The OECD and EUIPO have published a report highlighting the problems of counterfeit medicines for consumers in Europe and around the world. A transparent and solid pharmaceutical e-commerce regulatory framework can help fight bad actors and protect the health of Europeans, compensating for the apparent turmoil caused by misleading information.

As a member of the European Parliament, I am deeply convinced that the EU should act quickly in this sense, encouraging some Member States to lift some restrictions on certified online pharmacies and giving the possibility of obtaining a prescription that exploits technological innovation in the sector. public: the microchip incorporated in our electronic ID is a certificate of authenticity that could allow a wide range of online services for European citizens. Leaner access to legal practitioners decreases the risk of consumers accidentally purchasing with a supplier of illicit pharmaceutical products.

This is a public health issue and can offer the EU an additional tool to implement strong and decisive action against COVID-19.


The opinions expressed here are those of the authors and do not necessarily reflect the official policy or position of the Consumer Choice Center. Any content provided by our bloggers or authors is of their opinion.


Consumer Choice Center is the consumer advocacy group that supports lifestyle freedom, innovation, privacy, science and consumer choice. The main policy areas we focus on are digital, mobility, lifestyle and consumer goods, and health and science.

The CCC represents consumers in more than 100 countries around the world. We closely monitor regulatory trends in Ottawa, Washington, Brussels, Geneva and other critical regulatory points, and we inform and empower consumers to fight for #ConsumerChoice. Find out more at consumerchoicecenter.org

Javier Fernández-Lasquetty on Liberty And Innovation In the Age Of Coronavirus

The COVID-19 health crisis has highlighted, on the one hand, the weaknesses in the way we have conceived our institutional systems over the last sixty years. On the other hand, how intervened and directed markets become particularly inefficient in times of crisis. 

Thus, of the many responses that we see every day, it is those that emerge spontaneously and freely that offer faster and more effective responses. Spontaneous order is once again the best response to the complex and petreus structure of the state.

The management of the provision of health material and medicines is currently one of the weakest points in our health systems, not because of its lack of effectiveness, but because of the slowness of response. This slowness is due precisely to the excess of control by the public authorities which, in many countries, has led to an intolerable slowness in the purchase of such basic products as means of protection for health workers. 

If the provision of means of protection is important, it is particularly relevant, due to the urgency, how to manage quickly and safely the new research and subsequent patenting of drugs and/or vaccines to stop the pandemic. 

In my view, attention needs to be paid to both aspects. The urgency of the search for a vaccine can lead to the emergence of black market suppliers due to the validation protocols and the various tests that any drug has to pass on the ordinary market, tests that can be ignored on the black market, or applied with less care. The problem with this is that, if adequate attention is not paid to the second aspect – managing research and patents quickly and safely – not only could serious damage be caused to people’s health, but also patents could be stolen to manufacture the drug in parallel markets outside medical controls, with obvious consequences. 

We believe that safety in the creation of drugs and vaccines must be particularly sought after by institutions, without distinguishing between public and private ones. This circumstance implies not only guaranteeing that they comply with the appropriate controls but also protecting the property in the creation of the same since, otherwise, research would be discouraged, particularly in the private sphere. Proceeding in this way would undoubtedly lead to difficulties in finding solutions to these medical problems by leaving out of the production circuit an important agent who, as has been demonstrated in the management of this health crisis, provides important and necessary assistance to the public sector.

It is not unreasonable to remember that times of crisis are times of opportunity, even in circumstances as serious as the present. It is in them that opportunities are found in the weaknesses of the system so that, with ingenuity and creativity, it can be improved and new opportunities for growth sought. 

It is necessary at this point to appeal to disruptive innovation. The best lesson that this terrible health crisis already leaves us is that only through spontaneous and voluntary cooperation, free creation and the absence of bureaucratic obstacles in the search for solutions we become efficient.

Javier Fernández-Lasquetty
Regional Minister of Finance. Madrid Region (Spain)
Former Regional Minister of Health. Madrid Region (Spain)

The opinions expressed here are those of the authors and do not necessarily reflect the official policy or position of the Consumer Choice Center. Any content provided by our bloggers or authors is of their opinion.

Consumer Choice Center is the consumer advocacy group that supports lifestyle freedom, innovation, privacy, science and consumer choice. The main policy areas we focus on are digital, mobility, lifestyle and consumer goods, and health and science.

The CCC represents consumers in more than 100 countries around the world. We closely monitor regulatory trends in Ottawa, Washington, Brussels, Geneva and other critical regulatory points, and we inform and empower consumers to fight for #ConsumerChoice. Find out more at consumerchoicecenter.org

6 Amazing Medical Breakthroughs we should be thankful for

Thanks to continuous innovation in medical sciences and biotechnology we have seen amazing breakthroughs in medical technology and pharmaceuticals in the past two decades. These breakthroughs would not have been possible without incentives for inventors and investors. We can still only cure or treat 5% of all known diseases. Reducing incentives for innovation and intellectual property rights would risk finding cures for the remaining 95%.

This is a list of just six innovations of the last two decades that dramatically improve the lives of millions of people.

MEP Isabel Benjumea on COVID-19

The terrible COVID-19 pandemic that we are experiencing brings with it not only a health and humanitarian disaster but also an economic, social and political crisis. Faced with this issue, we must not forget that moments of weakness and crisis lay a ground for interventionists and statists of all political affiliations, who will try to take advantage’ of these moments of tremendous uncertainty to push forward their dogmas in societies filled with fear.  

The confinement of citizens as the main measure of prevention against the virus and the extensive powers channelled by governments for that matter can be interpreted as the ideal safeguard to enforce statist dogmas. One of them goes as follows, “only the state is capable of protecting you from this threat [coronavirus] only the  State has a clear understanding of what is happening and acting to that end (thus monopolising information and the truth), it is the State that marks the times and that administers your daily life… Ergo: it is the State that will save you in the end”.

Yet, as is usually the case, reality prevails over utopia and facts take over dogmatic dreams. Let’s look at what’s happening in Spain- my home country – which is also, unfortunately, one of the countries most affected by this terrible pandemic.

In the face of the centralised and interventionist measures of a socialist government that is not very freedom-loving, the private initiative has managed to tackle the exasperating slowness of government management. While the central government was piling up sanitary material to ensure a fair and equal distribution, different companies came together to buy sanitary materials and bring them to our country. While this government got lost in bureaucratic procedures and press conferences without journalists, the public-private collaboration in regions and cities allowed the acquisition of material, the direct management of the public health emergency and even the construction or adaptation of new hospitals. While the socialist government is selling supposed aid to increase public spending, small, medium and large companies, along with individual donors who are giving out thousands of grants and contributions to fight the virus and help the most vulnerable and affected groups.

If we allow the usual statist propaganda to manipulate reality and make up for what is happening, the post-coronavirus era might signify a dangerous return to a dark past. All solutions to this crisis and all contributions to building the future must as always, come from effective and accountable institutions with limited power. And they should embrace a strong private initiative and embrace its role in the global search for the most sensible solution.

And let’s also be clear that those who have seized all the power will not want to give it up easily. An uncontrollable government that has had the opportunity to manage the daily lives of its citizens will not give away that power. That is why we must take it all seriously and insist that each and every one of the individual rights given up in this crisis is preserved.

It is essential to understand these potential dangers before choosing an action plan. Before passing legislation in the fields of health, tax, labour or social affairs, we must be clear about the dangers that lie ahead and the path to follow.

More specifically, in relation to the supply of medicines and health material, I previously used the Spanish case as an example: so far it has been a public-private collaboration that helped find a way out of the gridlock that the country found itself in. And there must be rules and regulations, of course, following the simple maxim: “few and clear”.

Hyper-regulation and bureaucracy that blocks the supply channels makes the products more expensive and delays their delivery and subsequent distribution. Let’s speed up purchases by limiting the security checks instead. The liberalization of the pharmaceutical sector, allowing the sale of medicines that do not need a prescription outside pharmacies and online. It is also crucial to lower the burden faced by the pharmaceutical sector both in its internal organization and in the creation of new enterprises. This may help reduce the price of products.

Alongside this liberalisation, the institutions must focus their regulations on ensuring product quality, especially in such important areas as health. Obviously, the existence of patents that have to overcome all the demanding safety and quality filters is absolutely justifiable. At the same time, they ensure the interest of private research, necessary for public and health benefit. But it will also be the role of the institutions to facilitate the management of patents, to prevent monopolies and abuses in the market that could prevent free competition and its consequent lowering of the price of the product. 

Liberalising measures combined with the security framework to be provided by the institutions, reduction and simplification of the hyper-regulation that delays the management of solutions and public-private collaboration in the search for solutions are the way forward. And the key is that these are not ideological dogmas; they are lessons drawn from observing what is happening; from examining the disastrous reality.


Las opiniones y opiniones expresadas aquí son de los autores y no reflejan necesariamente la política oficial o la posición del Centro de Elección del Consumidor. Cualquier contenido proporcionado por nuestros bloggers o autores es de su opinión.


Consumer Choice Center es el grupo de defensa del consumidor que apoya la libertad de estilo de vida, la innovación, la privacidad, la ciencia y la elección del consumidor. Las principales áreas de política en las que nos enfocamos son digital, movilidad, estilo de vida y bienes de consumo, y salud y ciencia.

El CCC representa a los consumidores en más de 100 países de todo el mundo. Monitoreamos de cerca las tendencias regulatorias en Ottawa, Washington, Bruselas, Ginebra y otros puntos críticos de regulación e informamos y activamos a los consumidores para luchar por #ConsumerChoice. Obtenga más información en consumerchoicecenter.org

Testing – not lockdowns – may explain why some countries handle Covid-19 better

This is a post by a Guest Author
Disclaimer: The author’s views are entirely his or her own, and don’t necessarily reflect the opinions of the Consumer Choice Center.


There are ongoing debates about who has been better handling the Covid-19 pandemic: testing or lockdown?

Covid-19

With so many people confined to their homes, passions are running high, and there are ongoing debates about who has been better handling the Covid-19 pandemic. So much so that it feels like comparing and contrasting countries and their trajectories has become sort of a global pastime.

Nearly all developed countries (and others) have put their populations under severe lockdowns and emphasized social distancing as the silver bullet against the spread of the virus. Sweden, however, has recently been castigated for failing to put its population under a lockdown like every other country, especially other Nordic countries which it is compared and contrasted against. 

The problem is that it is quite hard to compare the performance of two randomly selected countries. For instance, on every level Norway seems to be doing much better than Sweden. That said, one can always find a bunch of other countries that are doing much worse despite having been under lockdown for some time.

It should be noted that Sweden has made some questionable decisions, regardless of social distancing. It failed to ramp up testing with increasing cases around March 20, and it only closed its nursing homes for visits in early April.

But aren’t lockdowns clearly working? 

Many people have still argued that lockdowns are clearly working because the epidemic has slowed shortly after their imposition. However, it is important that we are careful when inferring that lockdowns were responsible for the decline. There may be a correlation between the two, but as everyone should know, correlation does not necessarily mean causation, and there may be other intervening variables. It is vital that we not jump to conclusions too fast. While many people believe, and many epidemiological models assume, that unchecked epidemics just grow exponentially until more than half of the population gets infected, the evidence for Covid-19 increasingly suggests otherwise. 

Several research papers (e.g. here and here) argued that the dynamics of the Covid-19 pandemic are well-described by exponential functions only at the early stage, after which so-called power-law functions are a much better fit. A detailed study of the outbreak in the initially hit communes in Lombardy also suggests that in each commune, it started slowly, then briefly became exponential and then slowed, all that before any significant intervention.

To help you better understand what the mathematical jargon above means and why it is so important, consider two simple functions, y=2x and y=x2. The first function is exponential and the second function is a power-law one. You will better see the crucial difference between them if they are plotted together.

If these functions were describing an epidemic, then the x-axis would mean rounds of transmission. In the beginning there is one infected person in both cases. Then, until the fifth round the functions seem to grow in at an almost similar speed but afterwards, they diverge dramatically.

When researchers talk about an epidemic growing first exponentially and then in accordance with a power law, they mean that the growth of the epidemic looks like the hybrid function (first, y=2x and y=x2 after round 5) below. Its growth clearly slows a lot after the fifth round.

Why could an epidemic grow exponentially, first, and then slow down on its own? Here, it is important to remember that real societies are complex. Instead of interacting with random people every now and then, people tend to form groups (or clusters, in scientific terminology) and live in local areas within which interactions are much more intense than outside of them. With obvious implications for infection transmission.

What probably changes at the early stage of the epidemic is that so-called superspreader events are much likelier. Such events, where single infected people spread the virus to scores, hundreds or even thousands of people, have clearly played an enormous role in Covid-19. It is enough to mention the Shincheonji Church of Jesus in South Korea, the tragic gathering of French catholics in Mulhouse and the first coronavirus-hit hospitals in Lombardy. At these events, infected people have an opportunity to spread the virus way beyond their clusters of interactions.

After the initial stage, when everyone becomes aware that the epidemic is in the community and significant events are cancelled, the infection may get increasingly isolated within clusters, first, grow slower and then start falling off. The available data is increasingly hinting at this process in play. In Italy, cases appear to have peaked on the day the national lockdown was announced. In the US, they appear to have peaked on March 20.  

Lockdowns could even be counterproductive

A more speculative but still plausible idea is that lockdowns could, in fact, not merely coincide with the slowing-down of Covid-19 without causing it but actually create more damage than they prevent.

Many people believe that if some social distancing (like closing bars or canceling events) is desirable than extreme social distancing like lockdowns that keeps most people at home most of the time must be even more beneficial. However, this potentially ignores two important facts about Covid-19 and viral diseases in general.

First, it is abundantly clear that Covid-19 overwhelmingly spreads in closed, often poorly ventilated spaces and through close contacts. Secondly, as Robin Hanson convincingly argued, there is a wealth of evidence that the severity of viral disease depends on the viral dose received. This means that if families are forced to stay at home together all the time, this may create perfect conditions for the virus to spread and especially cause severe disease.

The data from Google about actual social distancing patterns in several countries hit by Covid-19 shows that Italy, Spain and France have had by far the most extreme social distancing, and the UK was starting to catch up with them after its lockdown. Yet, these four countries have some of the highest fatality rates in the world per population and detected cases.    

Could testing explain things better?

A better way to try to make sense of the causation is to try to identify a bunch of countries that have something important in common. The most important thing in any epidemic is to minimize deaths, and there is a group of countries that seem to have far fewer deaths by population size, and per identified infections, than others. These countries include Iceland, Germany, South Korea, Taiwan, Austria, and Norway. You can see how low their case fatality rates are compared to other countries with a lot of cases here (see the “death rates” column).

What makes those countries succeed in driving down deaths? One would actually be surprised to learn that none of these countries is, or was, under total lockdown. South Korea hasn’t even closed bars and restaurants. This shows that extreme social distancing measures are not necessarily the best explanation.

The real answer may largely lie in how many tests those countries have been doing compared to others. Testing may reduce fatality rates by giving public health responders valuable information and helping to isolate and quarantine those that carry the virus before they spread it to vulnerable groups like the elderly.

Iceland is the absolute champion at testing. It has already conducted 28,992 tests, which is more than 8% of its entire population. It also has the world’s lowest case fatality rate from Covid-19 at 0.38%. Iceland isn’t an anomaly, and using Iceland as an example isn’t cherry picking. Researchers Sinha, Sengupta and Ghosal showed that country death rates from Covid-19 are significantly correlated with the intensity of testing. They did not, however, control for the potential impact of lockdowns and other stringent social distancing measures.

Testing and outcomes by region

In addition to national data, one can also look at regional data where it is available and see if the testing/fatality relationship still holds. Italy has been publishing detailed regional statistics on Covid-19 starting from February 24. If we plot tests per confirmed cases in each region with reported fatalities per million inhabitants, we get the following picture:

The chart surprisingly shows us that Italy’s worst hit region isn’t Lombardy, and that it is actually the little-known Aosta Valley. We also see that there is a clear negative relationship between the intensity of testing and fatality rates. In fact, the former seems to explain more than half of the variation in the latter, and the regression coefficient is statistically significant (the p-value is 0.0003).

To conclude, it will take a long time and careful research to sort out why some countries and regions have gone through the Covid-19 pandemic much less damaged than others. That said, one thing seems to be increasingly clear. When the dust settles it will be clear that testing will be a significant factor, and that the importance of social distancing will be diminished. 

Guest Author: Daniil Gorbatenko


The Consumer Choice Center is the consumer advocacy group supporting lifestyle freedom, innovation, privacy, science, and consumer choice. The main policy areas we focus on are digital, mobility, lifestyle & consumer goods, and health & science.

The CCC represents consumers in over 100 countries across the globe. We closely monitor regulatory trends in Ottawa, Washington, Brussels, Geneva and other hotspots of regulation and inform and activate consumers to fight for #ConsumerChoice. Learn more at consumerchoicecenter.org

Force Majeure during the COVID-19 Pandemic

By Linda Kavuka, Trade Policy Fellow, Consumer Choice Center

Blog Post

Confirmed cases of the novel coronavirus (COVID-19), which first appeared in China at the end of last year, are currently over 800,000 as of April 1st 2020. What was initially seen as a largely China-centric shock has now become a global pandemic. 

Global consequences of the COVID-19 pandemic have included grounding of flights and limited international travel, closure of public markets, issuance of curfews and also lock-down of countries and cities where there has been rapid spread of the virus. Governments have advised employers to allow their staff to work from home, called for closures of schools and banned all social gatherings, including religious meetings. People have been urged to observe very high levels of hygiene and to thoroughly wash hands with soap and water and use sanitizers in the alternative. 

The International business community has not been spared of the said shocks. With the end of the pandemic unclear, the economic impact is expected to be very severe globally. Considering the disruptions to international supply chains that have occurred as a result of the COVID-19 pandemic, it is expected that many players in the International Trade community will be caught up with non-performance of their contractual obligations, and lawsuits shall follow. Does the COVID-19 pandemic qualify for the operation of the Force Majeure clause as a relief to affected parties?

Ordinarily, when entities and individuals trade with each other, they sign contracts that legally bind them to their agreements. The contracts list obligations of the parties and also circumstances that would call for the termination or suspension of the said obligations. One of the circumstances that could excuse non-performance or termination of a contract is legally known as “Force Majeure”, one of the standard clauses of a contract. 

Article 7.1.7 (1) of the UNIDROIT Principles defines Force Majeure as follows:

Non-performance by a party is excused if that party proves that the non-performance was due to an impediment beyond its control and that it could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences.”

If the said Impediment is temporary the defaulting party shall be excused for a reasonable period of time. The Force Majeure Clause only takes effect where the defaulting party gives notice to the other party explaining the impediment and the impact it has had on the expected performance, otherwise the defaulting party shall be liable for damages. In order for a party to rely on the Force Majeure defense, the clause must be included in their contract contract and the impediment causing non-performance of their obligation must be expressly stated.

An example of a Force Majeure clause in a Sale Contract reads as follows:

Either party shall be relieved of all responsibility for any failure or delay for the carrying out of their obligations hereunder due to product discontinuation, manufacturer price changes, supplier price changes, changing market conditions, strikes, riots, civil unrest or an act of civil or military authority, combinations or restrictions of work, Act of God, war, insurrection, fire not caused by its act or omission or that of its servants or invitees on the property, tempest, industrial disputes, an act of a public enemy, a boycott, embargoes, failure of communications systems unavoidable accident or any other circumstances beyond its reasonable control whether or not the same be ejusedem generis with those above.”

Since Pandemics with such severe impacts are uncommon they are usually not expressly provided for in contracts. Events from the past month to date are a clear indication of a situation that is beyond control, and may lead to involuntary breach of contract by parties who fail to meet their contractual obligations. Parties that do not have Force Majeure clauses and are unable to meet their obligations can plead Frustration of Contract which defense does not require prior inclusion in their contracts.

Medical professionals around the world are working tirelessly to find a cure for the COVID-19 virus and are currently testing some combinations of medication. A fact is that we cannot forecast when things will be back to normal and the International trading markets restored. While policy focus by most affected governments has been to provide safety nets for their economies with measures such as food donations and grants to needy families, tax reductions and pay cuts for some officials, unfortunately businesses have been left to think fast and make tough decisions to remain afloat.

Time is of the essence for those who wish to rely on the Force Majeure and Frustration of contract defenses for their non-performance and a reminder that ignorance of the law is not a defense as a rule of thumb. Players of the International trade market and policy makers will all have to act in good faith for the sake of survival as we all anticipate the end of the pandemic, after-which a whole new world order shall begin.


The Consumer Choice Center is the consumer advocacy group supporting lifestyle freedom, innovation, privacy, science, and consumer choice. The main policy areas we focus on are digital, mobility, lifestyle & consumer goods, and health & science.

The CCC represents consumers in over 100 countries across the globe. We closely monitor regulatory trends in Ottawa, Washington, Brussels, Geneva and other hotspots of regulation and inform and activate consumers to fight for #ConsumerChoice. Learn more at consumerchoicecenter.org

Scroll to top