WASHINGTON -- The U.S. Supreme Court on Monday voted notto cap punitive damage awards in a case closely followed bypharmaceutical and biotechnology interests.

The court's 7-1 vote upheld a $1 million award to an Alabamawoman victimized by health insurance fraud. Justice Harry A.Blackmun, writing for the court, said the amount of the awardin excess of actual damages may Iindeed may be close to thelineJ of unconstitutionality. But, he said, Ithe award here didnot lack objective criteria.J

The effect of the decision is to leave the issue in the hands ofthe individual states.

The justices were asked whether a jury's discretion to awardunlimited punitive damages violates a defendantLsconstitutional right to due process under the 14th Amendment.

In a brief to the court, the Pharmaceutical ManufacturersAssociation (PMA) and the American Medical Association(AMA) had argued that drug development was hampered bythe fear of "excessive multimillion dollar punitive damageawards" imposed without sufficient constitutional safeguards.Because all drugs are inevitably associated with adverse sideeffects in some patients, the pharmaceutical industry isuniquely vulnerable to punitive damage awards, the brief said.

Consumer groups said that limiting punitive damages wouldallow defendants to insure themselves against costly cashsettlements.

"Although it is disappointing that the court failed to place anyrestrictions on punitive damages, which continue to plague thepharmaceutical industry, (on the positive side) the court didstrongly encourage the individual states to develop systems toscrutinize and challenge excessive jury awards,J said AMAcounsel Carter Phillips.

The PMA and AMA also had said in their brief that punitivedamages should never be awarded when a drug has gonethrough the stringent Food and Drug Administration approvalprocess.

The biotechnology industry supports the abolition of punitivedamages against an FDA-approved drug, said the Association ofBiotechnology Companies' general counsel Bruce Mackler. "Thebiotechnology industry sees (punitive damages) as a potentialproblem ... although it has not sinned yet," he said.

In his ruling, Blackmun wrote, IWe need not, and indeed wecannot, draw a mathematical bright line between theconstitutionally acceptable and the constitutionallyunacceptable that would fit in every case.J

In her lone dissent, Justice Sandra Day OLConnor said the rulingwill Isubstantially impede punitive damages reforms.J

II see a strong need to provide juries with standards toconstrain their discretion,J she said.

-- Rachel Nowak Washington Bureau Chief

(c) 1997 American Health Consultants. All rights reserved.

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