Holding the Third-Party Litigation Financing Industry Accountable: AdvaMed Urges Congressional Reform to Protect Patients and Innovation

Washington, D.C. – The U.S. House Oversight Committee held a hearing on September 13, 2023, to address the concerns surrounding third-party litigation financing. AdvaMed and its members have expressed significant worries about the impact of these financing practices. They argue that third-party speculators, along with the attorneys they fund, are taking advantage of the mass tort litigation system, prioritizing their own financial gain over the well-being of patients, medical device manufacturers, and the general public. By investing substantial amounts into advertising campaigns, these attorneys and financial backers can generate a large number of cases, many of which lack merit. This places companies in a difficult position, as they must either spend significant resources defending against these meritless claims or choose to settle in order to limit costs and reputational risks. Unfortunately, generating more cases often leads to higher settlements, with a significant portion going to attorneys and third-party financiers. This system ultimately benefits the litigation speculators at the expense of the public.

The congressional hearing demonstrates an initial step towards much-needed reform. AdvaMed believes that such reform is crucial in order to prevent harm to patients and protect the future of healthcare. As part of their efforts to address this issue, AdvaMed submitted a letter to the Oversight Committee, shedding light on the negative consequences of litigation financing and advocating for common-sense reforms.

One of the major concerns surrounding third-party litigation financing is the harm it causes to patients. Large attorney-advertising campaigns, funded by third parties, often use fearmongering tactics to attract potential plaintiffs. These advertisements can be deceptive, falsely suggesting product recalls or government affiliations. They prey on patients’ fears and create a perception that their medical devices are defective or unsafe. AdvaMed has partnered with healthcare and civil justice groups to advocate for legislation that promotes responsible advertising to ensure patient safety.

Furthermore, these widespread advertisements not only recruit potential plaintiffs but also foster mistrust in medical devices. Some patients may delay or forego necessary treatments due to an overexaggerated perception of risk. In some cases, fear can even lead to unnecessary medical procedures, causing more harm than good. The Federal Trade Commission (FTC) has warned consumers about the potential risks associated with attorney advertising. They encourage patients to consult their doctors before discontinuing treatment based on these advertisements.

Another major concern is the harm to innovation caused by third-party litigation financing. Companies facing significant litigation risks may have to divert resources from research and development, slowing down progress towards new treatments and improved health outcomes. The financing schemes also harm companies’ reputations, as massive advertising campaigns cast doubt on the credibility of their products. This reputational damage can discourage support for innovative companies and impede progress in the field. Additionally, when FDA-approved devices become subjects of frivolous litigation, it undermines the credibility of the federal regulatory framework and may lead to a loss of public trust in other treatments.

Lastly, frivolous litigation poses a threat to justice itself. The large number of cases flood the judicial system and create significant backlogs. Additionally, there is a lack of transparency when it comes to third-party funding relationships. Defendants are required to disclose their insurance coverage, but the funding sources for plaintiffs remain largely unknown. This lack of transparency raises concerns about the influence that financiers may have over litigation strategy, potentially depriving patients of control and reducing their compensation.

AdvaMed is taking action to address these pressing issues. They advocate for greater transparency in third-party funding relationships and have called for mandatory disclosure in federal civil actions. AdvaMed has partnered with other organizations and has been actively involved in advocating for reforms that ensure fairness in the judicial system. They emphasize the importance of protecting patients and ensuring continued access to safe medical devices for patients worldwide.

This congressional hearing and AdvaMed’s efforts highlight the need for reform in third-party litigation financing to safeguard patients, promote innovation, and preserve justice. By shining a light on the negative impacts of these financing practices, AdvaMed hopes to drive meaningful change and foster a system that prioritizes the well-being of patients and the future of healthcare.