MGMT 520 Final Exam

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MGMT 520 FINAL EXAM(TCO D) Short Answer Questionand Facts for Page 1 Questions:A well-known pharmaceutical company, Robins & Robins, is working through a public scandal.Three popular medicationsthat they sell over the counter have beendetermined to be taintedwith small particles of plastic explosive.The plastic explosives came from a Robins & Robinssupplier 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. Theinventory is located throughout the Western United States, and it is possible that it has also madeits way into parts of Canada.Last fall, the FDA had promulgated an administrative proposedrulethatwould have requiredallpharmaceutical companiesthat sold over-the-counter medicationsto incorporate a specialtracking bar code (i.e., UPC bars) ontheir packaging to ensure that recalls could be done withvery 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 publiccomments period. They utilized multiple arguments, including the cost (which would be passedon to consumers). They also raised“privacy” concerns, which theydiscussed simply to getpublic interest groups upset.(One of the drugs impacted is used for assisting with alcoholismtreatment–specifically for withdrawal symptoms–and many alcoholics were afraid their use ofthe drug could be tracked back to them.) Robins& Robins argued that people would beconcerned about purchasing the medication with a tracking mechanism included with thepackaging and managed to get enough public interest groups against the rule. The FDA decidednot to impose the rule.Robins & Robins' contract with Casings, Inc., states, in section 14 B.2.a., "The remedy fordefects in supplies shall be limited to the cost of the parts supplied."Casings, Inc. had negotiatedthat clause into the contract after a lawsuit from a person who was shot by a gun resulted in apartial judgment against Casings for contributory negligence.Robins & Robins sues Casings, Inc., for indemnification from suits by injured victims from themedication, for the cost of the capsule shells, for attorney's fees, and for punitive damages. Listany defenses Casings, Inc., would have under contract theory ONLY. (short answer question)Answer:The contract between Casings, Inc. and Robins & Robins indicated a contractuallimitation that Casing Inc.’s obligation to provide remedies for defects would be limited to thecosts of the parts supplied. Although warranty still applied, the contractual limitation that isstated in the contract would limit the recoveries and damages that can be filed against or claimedfrom Casings, Inc. As such, although Robins & Robins might be able to recover some of thedamages from Casings by reason of contributory damages, Robins & Robins’ major role in thedistribution of the medicines, together with their stand against tracking, would also make themliable for the defective product.2.(TCO B)The FDA decides to require all pharmaceutical companies to immediatelyimplement 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 theirproducts.However, McFadden, Inc., a New York pharmaceutical company,realizes that this newrequirement 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 rulethat went through thatpublic comment period in that it specifically namesfour companies as being impacted: Robins &Robins, McFadden, Inc., Bayer, and Johnson & Johnson.On what bases can McFaddenchallenge this requirement imposed by the FDA, and can they be successful? Provide at least twobases under the Administrative Procedures Act and justify your answer. (Points: 30)Answer-Two ways in which McFadden can contest the FDA ruling, and challenge therequirement that is imposed by the FDA are discussed below1. Substantial Evidence Test-Given that the rule specifically states four companies that havebeen impacted, there is no evidence that the three other companies apart from Robins & Robinshave been impacted. Due to this, the FDA would need to provide more evidence and data pointsto support its claim that McFadden was one of the companies impacted by not havingimplemented the tracking.2. Failure to comply with APA-The FDA should have followed the right process and ensuredthat there is proper public notice, publication of the rule and period for public comment beforethe rule is passed. As the FDA had not followed this procedure and wanted to immediatelyimplement the rule, McFadden can contest saying that the rule implementation was not incompliance with the APA, and hence would not be able to put a law practice without it goingthrough the public notice and comment period.Based on the above two points, McFadden would be able to stop the rule from being appliedimmediately, and it could be decided that the FDA meet the above two points before it canexecute the ruling.Answer:The two ways by which McFadden can contest the FDA ruling are through theSubstantial Evidence Test and through a claim against the FDA’s failure to comply with theAPA guidelines. With the Substantial Evidence Test, it can be noted that the rule specificallyindicated 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 toaffect the three companies. In this regard, the FDA has to provide more evidence and data pointsto support its claims that the three other companies–aside from Robins & Robins–were alsonegatively 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 thatthe FDA did not follow the correct procedure for ensuring that a proper public notice has beenissued or that the publication of the rule and the period for public comment has been made priorto the rule being passed. Because the FDA failed to follow this procedure due to its haste inimplementing 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 inconformance 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 newruling. The FDA would first be required to address the defenses presented by McFadden beforethey can go ahead with the new rule’s implementation.3.(TCO C)Robins & Robins immediately issued a massive recall for the tainted medicationupon learning of the situation.Despite the recall, 1,400 children and 350 adults have beenhospitalized after becoming very illupon taking the tainted medication.Each of them had failedto note the recall after having already purchased the medication.It is quickly determined thatthey 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 both402A and negligence.Theattorneys stated that but for the lobbying efforts, the recall process would have been automatedand 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) youwould file against Robins & Robins, the FDA, and the bribed FDA member.List the elements ofthe causes of action, and set forth the factsthat you have that would support a lawsuit againsteach of the three named defendants.State any defenses any of the three would have. Analyze thesuccess of the defenses.The two major theories that would apply in this case are the Tort Liability (402 A) theory and theNegligence 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 standseven if there were contractual limitations that indemnified the seller and even if the seller tookthe necessary measures and precautions. To support this case, it would be necessary to presentthe number of people and children who were affected and who died as a result of Robins andRobins’ defective manufacturing and inadequate testing of the drugs. Because the case againstRobins & Robins would be very strong, they might not have a defense for the complaint filedagainst 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 thepeople’s exposure to harm as well as to the subsequent loss of life. In particular, the deaths thatoccurred would have not happened if the FDA has implemented the ruling on the use of thetracking code. This then establishes that the deaths have occurred because of the FDA. Indefense, the FDA can assert sovereign immunity, especially if the complainants or plaintiffs arefrom outside the county or state. However, they remain accountable to the people within the statewhere they operate.For the case against the bribed FDA member, a case of negligence can be filed against them asthey had breached their duty to care, in turn leading to the deaths of many people. If it is proventhat this FDA member has indeed received a bribe in order to hinder the enactment of the FDAruling in favor of Robins & Robins then he or she would be liable for contributory andcomparative negligence.It should be noted that the Robins & Robins case has sparked the interest of a number of activistgroups, 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, FDAcontends 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 & Robinswere tainted with plastic explosives; thus, leading to the hospitalization of 350 adults and 1400children. Although Robins & Robins recalled their medicines, the recall was not automatic due tothe absence of the special tracking bar code on the medicine, and this led o many people takingin the contaminated medicine.In the previous year, the FDA promulgated an administrative rule that required allpharmaceutical companies that sold over-the-counter medicines to place a special trackingbarcode 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 thepublic comments period.The FDA was right, though, in discontinuing the bar code rule because of the public’s sentimentsthat this would violate people’s privacy and would lead to cost increases among over-the-counterdrugs. In addition, many public interest groups lobbied against the rule. As such, the illnessesand 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 therule 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 rulebut it had to discontinue the rule’s imposition because of public protests and protests frominterest groups. Moreover, they can assert that Section 402 (a) applies only to food and not tomedicines. On the other hand, since Robins ad Robins was the strongest opponent to the saidrule, the negligence claim should be against them and not against the FDA. In other words, ifRobins & Robins had not lobbied against the rule then the children's lives would have beenspared.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 questionYou are the public relations advisor for Robins & Robins, and your boss tells you to write him amemothat he will use todraft a public announcement.He needs you to explain to him whyRobins & Robins should not be found negligent for these deaths and illnesses. Draft thememoutilizing the elements of 402A and negligence.Include (and fully explain) any defenses you feelthat Robins & Robins may have. Recall that your boss needs all pertinent information for him towrite an announcement to the public after reading your memo.

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