The Supplemental Nutrition Assistance Program and Recent Exceptions for Prepared Foods

Posted on by Corporations and Health Watch

In August 2011, the Rhode Island Department of Human Services launched a pilot program in the Providence area that allows some elderly, homeless, and disabled households to buy “hot prepared meals” using Supplemental Nutrition Assistance Program (SNAP) benefits – but only at Subway sandwich shops.[1]

SNAP (formerly known as food stamps) is the largest government nutrition assistance program in the United States, helping one in seven Americans pay for their food.[2]  Each month, approximately 47 million people receive SNAP benefits, and the limits on how recipients can use their benefits are few.[3]

Benefits can be used at any retail establishment that accepts them in order to purchase any brand of food items. The only limitation on eligible food items is that they cannot be “hot foods” or “foods that will be eaten in the store” (i.e., prepared foods).[4]

Recognizing that certain groups of people may find it difficult or impossible to prepare foods for themselves, several states, including Rhode Island, have passed exceptions to the prepared foods restriction.

Now, Rhode Island SNAP recipients who are homeless, disabled, or elderly may use their benefits to purchase prepared foods at federally-approved restaurants in the pilot program. Thus far, however, the only establishments that have been approved are five Subway restaurants.[5]

A chain like Subway probably recognizes the financial advantage of accepting SNAP benefits. The potential revenue from the prepared foods exception is large. Approximately half of the individuals in the U.S. receiving public assistance due to disability (Supplemental Security Income) reside in households receiving SNAP benefits.[6] Add homeless and elderly SNAP recipients to that mix and the magnitude of new customer dollars is substantial.

Given the general lack of restrictions in the SNAP program, some might find it surprising that a state sub-program of SNAP has only approved one restaurant chain to do business with. The decision will potentially funnel a large amount of public funds to one business, which may cause pause in the public policy community. In addition, the pilot program’s options for participating individuals are limited, which may seem counter to the general spirit of SNAP.

But a look at the history of food stamps reveals the program’s long-standing ties to specific food producers and food products.

Unmarketable food surpluses coupled with widespread unemployment in the late 1930s gave birth to the first Food Stamp Program (FSP). In this initial incarnation, recipients would receive an extra 50 cents for each dollar they spent on food. But the fifty cents in benefits could only be used to purchase what the U.S. Department of Agriculture (USDA) determined to be surplus items.[7] Federal funds, via the FSP, went toward supporting farmers who could not sell enough goods.

When the FSP became a permanent program in 1964, its official purposes were “strengthening the agricultural economy and providing improved levels of nutrition among low-income households.”[8] At this time, the main restriction on eligible foods was that they could not be imported – the U.S. food industry, therefore, continued to be supported by the policy. To this day, SNAP is funded through the USDA, which also approves retailers for the program.[9]

It is important to note that SNAP is not the only government nutrition program with ties to specific brands. Women, Infants and Children (WIC) is a federally-funded program that provides supplemental nutrition assistance to low-income pregnant women, new mothers, and children up to age five.[10] WIC is generally more restrictive than SNAP in its categories of eligible foods, but also in that only certain brands of those eligible foods are approved by the program.[11]

For instance, women in New York who would like to use their WIC benefits to purchase breakfast cereals may only purchase cereal from a limited number of brands, including: General Mills, Kellogg’s, Post, Quaker, and Malt-o-Meal.[12]

Given the history of food stamps being used to support American food industries, and given the brand specifications of WIC, the Rhode Island prepared foods exception that uses only the American franchise of Subway Sandwiches might seem less shocking. And, if the state’s pilot program is deemed a success, it’s possible that Rhode Island will add other restaurants to its prepared foods exception.

Of note, Subway is the second largest global restaurant operator in the world, next to YUM! Brands.[13], [14] Interestingly, YUM! Brands has also entered the SNAP arena. In September 2011, the Louisville-based corporation—which owns Taco Bell, KFC, Long John Silver’s, and Pizza Hut—was lobbying to make it easier for SNAP participants to use their benefits at restaurants.[15] Since 2009, Arizona residents who are disabled, elderly, or homeless can use their SNAP benefits to purchase prepared foods from certain fast food restaurants, including YUM! Brands’ Pizza Hut and KFC.[16]

Although ties between the U.S.-based food industry and federal nutrition assistance programs are long-standing, choice of foods has typically been a heavily guarded characteristic of SNAP. For instance, proposed public health interventions to remove sodas from the list of eligible foods under SNAP caused an uproar among anti-hunger advocates (including, among others, the soft-drink industry), who claimed that the government should not “micromanage” how low-income people shop.[17] Soda bans in SNAP have been thus far unsuccessful.

Given the program’s emphasis on choice, it is somewhat surprising that the state-level specific-brand-restricted prepared meals exceptions within SNAP have not received greater attention. They highlight an on-going tension within the SNAP program, between respecting participating individuals’ autonomy relative to food choices and giving preferential treatment to specific food vendors. If prepared foods exceptions within SNAP continue to proliferate, the public health community should be prepared to bring an additional perspective to the debate, namely the need to ensure that healthy (or at least healthier) eating options are available and easily accessible for SNAP recipients. This is the surest way to truly respect the program’s traditional emphases on choice and nutrition for participating individuals.

Sarah O. Rodman is a doctoral student in Health Policy and Management and a pre-doctoral fellow at the Center for a Livable Future at the Johns Hopkins Bloomberg School of Public Health.

References:

 

[1] Rhode Island Department of Human Services, The Rhode Island Supplemental Nutrition Assistance Program (SNAP) Prepared Meals “Food Access Pilot Project” (Oct. 2011), http://www.dhs.ri.gov/Portals/0/Uploads/Documents/SNAP/Q_and_A.pdf.

[2] Food Research and Action Center, SNAP/Food Participation 2011 (last visited Mar. 14, 2012), http://frac.org/reports-and-resources/snapfood-stamp-monthly-participation-data/.

[3] Food Research and Action Center, SNAP/Food Participation 2011 (last visited Mar. 14, 2012), http://frac.org/reports-and-resources/snapfood-stamp-monthly-participation-data/.

[4] United States Department of Agriculture, Supplemental Nutrition Assistance Program (2012), http://www.fns.usda.gov/snap/retailers/eligible.htm.

[5] Rhode Island Department of Human Services, The Rhode Island Supplemental Nutrition Assistance Program (SNAP) Prepared Meals “Food Access Pilot Project” (Oct. 2011), http://www.dhs.ri.gov/Portals/0/Uploads/Documents/SNAP/Q_and_A.pdf.

[6] Trenkamp B, Wiseman M. The Food Stamp Program and Supplemental Security Income. Soc Secur Bull.  2007;67(4):71–87. Available from: http://www.ncbi.nlm.nih.gov/pubmed/18777670.

[7] United States Department of Agriculture, A Short History of SNAP (2012), http://www.fns.usda.gov/snap/rules/Legislation/about.htm.

[8] United States Department of Agriculture, A Short History of SNAP (2012), http://www.fns.usda.gov/snap/rules/Legislation/about.htm.

[9] United States Department of Agriculture, A Short History of SNAP (2012), http://www.fns.usda.gov/snap/rules/Legislation/about.htm.

[10] New York State Department of Health, Current WIC Acceptable Foods Card (2010), http://www.health.ny.gov/prevention/nutrition/wic/wic_acceptable_foods_card.htm.

[11] New York State Department of Health, Current WIC Acceptable Foods Card (2010), http://www.health.ny.gov/prevention/nutrition/wic/wic_acceptable_foods_card.htm.

[12] New York State Department of Health, Current WIC Acceptable Foods Card (2010), http://www.health.ny.gov/prevention/nutrition/wic/wic_acceptable_foods_card.htm.

[13] Subway (last visited Mar. 14, 2012), http://www.subway.com/subwayroot/default.aspx.

[14] YUM! Brands, Inc. (last visitied Mar. 14, 2012), http://www.hoovers.com/company/YUM!_Brands_Inc/hyssyi-1.html.

[15] Ellis J, Luther M. Restaurants Want a Piece of Food Stamp Pie, USA Today (Sept. 7, 2011), http://www.usatoday.com/money/industries/food/story/2011-09-05/More-restaurants-are-targeting-customers-who-use-food-stamps/50267864/1.

[16] Arizona Department of Economic Security, Arizona Restaurants/Retailers Participating in the USDA/FNS Restaurant Meals Program (2011), https://extranet.azdes.gov/faapolicymanual/FAA1/baggage/MealsProgramRestaurants.pdf.

[17] McGeehan P, U.S. Rejects Mayor’s Plan to Ban Use of Food Stamps to Buy Soda, NY Times (Aug. 19, 2011), http://www.nytimes.com/2011/08/20/nyregion/ban-on-using-food-stamps-to-buy-soda-rejected-by-usda.html.


Image Credits:


1. Supplemental Nutrition Assistance Program

2. NCReedplayer via Flickr.

State-Level Ramifications of the Citizens United Decision

Posted on by Corporations and Health Watch

In January 2010, the U.S. Supreme Court issued its Citizens United v. Federal Election Commission opinion,[1] which changed the laws that determine how corporations participate in the political process. Specifically, Citizens United overturned laws that prevented corporations from using their own funds for advertisements that support or oppose candidates running for elected office. A corporation can now spend unlimited monies to run advertisements that support candidates whose platforms it favors and to oppose candidates whose stated positions are contrary to its own interests.

On its face, the decision did not concern health, but its ramifications will likely have significant impacts for health policy, the delivery of health care, and public health initiatives.[2],[3] For example, corporations can examine incumbent legislators’ voting records on particular issues (e.g., menu-labeling requirements for restaurants) and, if candidates have voted against their interests, corporations can finance advertisements against their re-election. Similarly, corporations can now fund advertisements that support the re-election of candidates with voting records that support their interests. The potential for well-funded political advertisements may dramatically affect some legislators’ votes on important health issues, particularly if they seek to avoid a series of negative corporation-funded advertisements in the final weeks of their re-election campaigns.

In recent months, the Citizens United decision—which concerned regulatory actions taken by the federal government—has raised potential concerns in many U.S. states. Approximately half of the states have laws that entirely prohibit or partially restrict corporations’ ability to fund advertisements in advance of political elections. Several states initially considered repealing these laws, in anticipation of fallout from the Supreme Court’s Citizens United opinion.[4] The National Conference of State Legislatures (NCSL) has noted that “it is likely that states will choose not to enforce these laws [that prevent corporations from funding political advertisements], which has the potential to radically change the political landscape.”[5]

Since 2010, several states have indeed amended or repealed laws that seemed to conflict with Citizens United. For example, according to NCSL, Alaska, Arizona, Connecticut, Iowa, Minnesota, North Carolina, South Dakota, and West Virginia have repealed laws that prevented corporations from directly funding political advertisements. In addition, several state courts have heard challenges to their state laws that prohibit corporation-funded political advertisements.

National attention turned to Montana this September, when its Supreme Court heard oral arguments regarding the constitutionality of its century-long ban on political advertisements funded by corporations.[6] The case began when several corporations—Western Tradition Partnership, Inc., Champion Painting, Inc., and Montana Shooting Sports Association, Inc.—brought a lawsuit in which they alleged that the state’s Corrupt Practices Act of 1912 was unconstitutional in light of the U.S. Supreme Court’s Citizens United decision. The act states, “A corporation may not make a contribution or an expenditure in connection with a candidate or a political committee that supports or opposes a candidate or a political party.”[7]

The state of Montana presented several arguments in favor of the constitutionality of the Corrupt Practices Act. The state’s legal team also explained that the act had been drafted in response to “early corporate domination of state government,”[8] specifically “to limit the inordinate influence of the copper mining companies and their owners, known as the Copper Kings, over Montana politics. . .”[9] In October 2010, a lower Montana court held that the Corrupt Practices Act was unconstitutional after the Citizens United decision.

Activists rally for a constitutional amendment overturning the Citizens United Supreme Court decision on Friday, January 21, 2011 in Washington, DC

Shortly after the decision was released, Montana’s Attorney General, Steve Bullock, issued a statement in which he expressed his intention to appeal the ruling. He explained that:

“This isn’t just about our history: two former secretaries of state and other experts in the field testified that an influx of corporate spending will corrupt the political process and drown out the voices of everyday Montanans. . . While I have a great deal of respect for the district court, the people of Montana have long said that its citizens, not corporations, should decide the outcome of elections.”[10]

In briefs submitted in anticipation of the case’s appellate hearing, Bullock, representing the state of Montana, argued that under the Corrupt Practices Act, corporations are still able to participate in the state’s political processes. The brief stated that,

“No other corporations have challenged Montana’s law in one hundred years.  Still, one would have to ignore the record—and Montana history and politics—to suggest. . . that corporations have been silenced for the past century. To the contrary, corporations are active participants in Montana politics through accountable means such as the political committee requirements applicable to other organizations that seek to associate for campaign purposes. It is undisputed that within this system, corporations large and small are heavily involved in Montana politics through expenditures, contributions by managers, and lobbying.”[11]

In response, the plaintiffs, led by Western Tradition Partnership, argued that the Corrupt Practices Act “expressly prohibits corporations from making independent expenditures at a critical time during our election process; i.e., the campaign for political office. Furthermore, even if [corporate] managers can make expenditures, the manager is not the corporation, just as a PAC [political action committee] is not the corporation.”[12] Numerous organizations submitted amicus (i.e., friend of the court) briefs in anticipation of this fall’s oral argument.[13] The oral argument before Montana’s Supreme Court occurred on Sept. 21, 2011, and the court will likely announce its decision within the next few months.[14]

Because states have broad powers to act to protect the health, safety, and welfare of their residents, they often serve as public health innovators. The extent to which states choose to pursue efforts to protect and promote the public’s health often depends on the composition of the state’s legislature, and the priorities of its elected members. In the period leading up to an election, the public receives information about political candidates through the media, which includes advertisements that support or oppose particular individuals. If Montana’s Corrupt Practices Act is overturned, corporations will have an expanded ability to fund these types of advertisements, which may dramatically influence who Montanans vote into office.

Jennifer Pomeranz is the Director of Legal Initiatives at the Rudd Center for Food Policy & Obesity at Yale University. She publishes and speaks on issues related to marketing to children, regulating unhealthy products, labeling, weight bias, and the government’s role in obesity and food policy.

References

[1] Citizens United v. Federal Election Commission, 130 S.Ct. 876 (2010).

[2] Rutkow L, Vernick JS, Teret SP, The potential health effects of Citizens United, New Eng J Med 2010;362:1356-1358.

[3] Wiist WH, Citizens United, public health, and democracy: the Supreme Court ruling, its implications, and proposed action, Am J Public Health 2011;101:1172-1179.

[4] National Conference of State Legislatures, State laws affected by Citizens United, 2011, at http://www.ncsl.org/default.aspx?tabid=19607#laws.

[5] National Conference of State Legislatures, Life after Citizens United, 2011, at http://www.ncsl.org/default.aspx?tabid=19607#intro.

[6] Charles E. Johnson, Corporate political spending goes before Montana Supreme Court Wednesday, Missoulian, Sept. 19, 2011.

[7] Mont. Code Ann. § 13-35-227 (2010).

[8] Brief of Appellant at 2, Western Tradition Partnership, Inc., et al. v. Montana Attorney General et al., No. DA 11-0081 (Apr. 15, 2011).

[9] Charles E. Johnson, Judge throws out Montana’s ban on corporate campaign spending, Missoulian, Oct. 19, 2010.

[10] Office of the Montana Attorney General, Bullock releases statement on corporate electioneering case, Oct. 18, 2010.

[11] Appellant Reply and Answer to Cross Appeal at 9, Western Tradition Partnership, Inc., et al. v. Montana Attorney General et al., No. DA 11-0081 (June 10, 2011).

[12] Appellees and Cross-Appellants’ Reply Brief at 9, Western Tradition Partnership, Inc., et al. v. Montana Attorney General et al., No. DA 11-0081 (July 1, 2011).

[13] Charles E. Johnson, Corporate political spending goes before Montana Supreme Court Wednesday, Missoulian, Sept. 19, 2011.

[14] Charles E. Johnson, Montana Supreme court grills attorney general on corporate spending ban, Missoulian, Sept. 21, 2011.

Image Credits:

1.    Ilaannaa via Flickr.

2.    Public Citizen via Flickr

Efforts to Immunize Food Manufacturers from Obesity-Related Lawsuits: A Challenge for Public Health

Posted on by Corporations and Health Watch

Earlier this summer, Minnesota nearly enacted a law immunizing food and beverage (collectively “food”) manufacturers, marketers, and sellers from civil liability related to individuals’ claims of obesity or related health problems stemming from the purchase or consumption of a food product. The Personal Responsibility in Food Consumption Act (PRFCA) was introduced in Minnesota’s House of Representatives on January 31, 2011, by Representative Dean Urdahl. Shortly after the bill was introduced, Rep. Urdahl issued a press release saying, “My bill is about common sense and personal responsibility because, as citizens, we ultimately must be accountable for what we consume. If you eat too many cheeseburgers and get fat, don’t sue food retailers.”[1]

By late May 2011, the bill had been passed by the state’s Senate and House of Representatives. The bill’s text stated that

A producer, grower, manufacturer, packer, distributor, carrier, holder, marketer, or seller of a food or nonalcoholic beverage intended for human consumption, or an association of one or more such entities, must not be subject to civil liability based on any individual’s or group of individuals’ purchase or consumption of food or nonalcoholic beverages in cases where liability arises from weight gain, obesity, or a health condition associated with weight gain or obesity and resulting from the individual’s or group of individuals’ long-term purchase or consumption of a food or nonalcoholic beverage.[2]

The bill did not exempt food manufacturers from liability for obesity or weight gain claims that were based on “knowing and willful” violations of the law.[3]

On May 24, 2011, Minnesota’s Legislature presented the PRFCA to Governor Mark Dayton. Instead of signing the bill into law, Governor Dayton vetoed it on May 27th. In a letter to Kurt Zellers, the Speaker of the Minnesota House of Representatives, Governor Dayton explained that he supported “the bill’s expressed intent to hold individuals responsible for their own dietary choices.”[4] Despite this, he felt that the PRFCA would have created “too broad an exemption from liability” for food manufacturers and sellers.

Minnesota Governor Mark Dayton, who vetoed that state’s “Cheeseburger Bill”

Unlike Minnesota, 24 states have successfully enacted laws that limit liability or otherwise immunize the food industry from lawsuits related to claims of obesity or associated health problems.[5] These laws are largely a response to lawsuits brought in the early 2000s in which teenage-plaintiffs argued that fast food restaurants should have some responsibility for the country’s obesity epidemic, including their personal weight gain and health problems.[6]

A federal version of the Personal Responsibility in Food Consumption Act was introduced in the U.S. Congress in 2005. It received significant media attention and was the subject of heated Congressional debates. For example, in the House of Representatives, Rep. John Schwarz spoke in favor of the bill, arguing that

The most important step we can take to curb obesity is to impart to everyone in this country that obesity can be controlled when we take personal responsibility. A healthy and consistent diet, with an adequate amount of exercise, will work wonders. That’s the simple truth. . . .  Allowing consumers to sue their local restaurant, to sue half the food industry, means that we are telling our citizens, “It’s not your fault that you are obese.” . . . I support this legislation because it sends the message to everyone in the United States, young and old, that taking control of your weight is your responsibility, and taking personal responsibility is the only way that weight control can be achieved.[7]

Many public health advocates consider this type of position to be a form of victim-blaming which targets individuals who lack adequate access to healthy food and space that facilitates physical activity.

Opponents of the bill questioned why the federal government would want to allow an industry to act without the benefit of judicial oversight. Rep. Pete Stark explained that

Many of the pending cases are for false advertising, claiming food is low fat when it’s really not, and this bill is so broadly worded that it would preclude such cases from going forward. The threat of legitimate lawsuits against fast-food corporations is as much a part of creating social change as is the threat of a Congressional investigation. . . . Even more important than the issue of obesity or Congressional meddling in the judicial branch is the fundamental right of every American to have their day in court. . . . Congress has no business preemptively closing the courthouse doors to a particular group of Americans.[8]

This sentiment was echoed by consumer advocates, including Michael Jacobson, the executive director of the Center for Science in the Public Interest. He contended that “[i]f someone is saying that a 64-ounce soda at 7-Eleven contributed to obesity, that person should have his day in court. If it’s frivolous, the courts are accustomed to throwing those out.”[9] He described the food industry’s efforts “to get special exemptions from lawsuits” as “shameful.”

The federal Personal Responsibility in Food Consumption Act was reintroduced three times but ultimately has failed to become law. During the last decade, however, the National Restaurant Association has been instrumental in encouraging state legislators to pass so-called “commonsense consumption” laws,9 with Alabama’s bill being the most recently active in a state legislature.[10]

These “commonsense consumption” laws, which some have dubbed “cheeseburger bills,” raise a challenge for public health. They effectively remove or preempt individuals’ ability to turn to the court system to pursue obesity-related litigation.[11] While some of these lawsuits may be frivolous, others have the potential to influence how the food industry operates.

Some scholars have drawn parallels to the role of litigation against the tobacco industry in the 1990s. Although the thought of an individual suing a tobacco company for an illness allegedly related to smoking may not have been initially popular, those lawsuits and subsequent settlements led to the public availability of millions of pages of internal tobacco company documents. According to Professor Richard Daynard, “People changed their minds when documents started to come out about how tobacco companies misled customers about the alleged health benefits of light and low-tar cigarettes.”[9]

Daynard and others believe that a similar change could occur “when people learn the elaborate ways in which companies market products they may know to be unhealthy.”[9] The public loses the chance to learn about the food industry’s potentially harmful practices each time a state enacts a “commonsense consumption” law. In addition, the time and resources spent debating these bills could be better spent directly addressing the underlying public health issues related to obesity that persist throughout the nation.[12]

Jennifer Pomeranz is the Director of Legal Initiatives at the Rudd Center for Food Policy & Obesity at Yale University. She publishes and speaks on issues related to marketing to children, regulating unhealthy products, labeling, weight bias, and the government’s role in obesity and food policy.

 

Reference

[1] State Representative Dean Urdahl, “Cheeseburger Bill” Topped with Personal Responsibility and More, Feb. 23, 2011.

[2] Minn. HB 264, “Personal Responsibility in Food Consumption Act,” Jan 31, 2011.

[3] Minn. HB 264, “Personal Responsibility in Food Consumption Act,” Jan 31, 2011.

[4] Letter from Gov. Mark Dayton to Speaker Kurt Zellers, May 27, 2011.

[5] Trust for America’s Health, Supplement to “F as in Fat: How Obesity Policies are Failing in America, 2007,” Obesity-Related Legislation Action in States, Update, Aug. 2007.

[6] Melanie Warner, The Food Industry Empire Strikes Back, The New York Times, July 7, 2005

[7] Statement of Rep. John Schwarz, Congressional Record, p. 23085, Oct. 19, 2005.

[8] Statement of Rep. Pete Stark, Congressional Record, p. 23086, Oct. 19, 2005.

[9] Melanie Warner, The Food Industry Empire Strikes Back, New York Times, July 7, 2005.

[10] Alab. HB 193, “Commonsense Consumption Act,” Mar. 8, 2011,

[11] Pomeranz JL, Teret SP, Sugarman SD, Rutkow L, Brownell, KD. Innovative Legal Approaches to Address Obesity. Milbank Quarterly 2009;87:185-213.

[12] RWJF Trust for America’s Health, F as in Fat 2011, July 7, 2011.

 

Image Credits:

 

1. Razor 512 via Flickr.

2. GovernorDayton via Flickr.

3. Pisto Casero via Flickr.

The Supreme Court Protects Vaccine Manufacturers and the Public’s Health

Posted on by Corporations and Health Watch

Earlier this year, with its decision in Bruesewitz v. Wyeth,[1] United States Supreme Court found that the National Childhood Vaccine Injury Act[2] immunizes vaccine manufacturers from liability for claims related to vaccines’ design defects. This decision has the shared effect of protecting vaccine manufacturers and promoting the public’s health.

Congress passed the National Childhood Vaccine Injury Act (NCVIA) in 1986 to establish a no-fault compensation program for individuals who experienced vaccine-related injuries or death and to stabilize the vaccine market. In the early to mid-1980s, concerns arose about associations between the diphtheria, tetanus, and pertussis (DPT) vaccine and physical and mental disabilities in children.

These concerns led to a wave of lawsuits against manufacturers of the DPT vaccine; ultimately two of the three domestic DPT vaccine manufacturers stopped producing the vaccine to avoid the costs associated with DPT vaccine-related litigation. By 1984, parents who sought to vaccinate their children faced vaccine shortages.[3] Other parents were electing not to vaccinate their children at all, to avoid any potential vaccine-related risks.[4]

To allay the fears of parents and vaccine manufacturers, Congress created the Vaccine Injury Compensation Program.  Through this federal program, an individual with a probable vaccine-related injury (or that individual’s legal guardian) can file a petition with the U.S. Court of Federal Claims to request compensation. A court-appointed special master reviews the petition and makes a determination. This is then reviewed by the Court of Federal Claims. The process is aided by the NCVIA’s Vaccine Injury Table, which includes a list of vaccines covered by the NCVIA as well as information about compensable vaccine-related injuries.[5] If an individual’s vaccine-related injury meets the parameters specified by the Vaccine Injury Table, then the individual is compensated without needing to demonstrate causation. Compensation, which is financed via a tax on vaccines and paid by the federal government, may include medical, rehabilitative, and other costs.[6]

Individuals are permitted to reject the determination of the Court of Federal Claims and pursue a lawsuit against the vaccine’s manufacturer.[7] However, these lawsuits face certain limitations, including the requirement that the plaintiff must first present the claim to the federal Vaccine Injury Compensation Program.[8] For the most part, vaccine manufacturers are immunized from lawsuits related to their failure to warn, as long as they have met all relevant regulatory requirements and have given any vaccine-related warning to either the individual who was injured or to that person’s physician.[9] The NCVIA also immunizes vaccine manufacturers from liability due to a vaccine’s “unavoidable, adverse side effects.”[10]

This provision of the NCVIA was at the center of Bruesewitz v. Wyeth. In 1992, shortly after receiving a DPT vaccination, Hannah Bruesewitz began having seizures.[11] She was subsequently diagnosed with a “residual seizure disorder” and “developmental delay.”[12] In 1995, Hannah’s parents filed a claim on Hannah’s behalf with the Vaccine Injury Compensation Program. The Bruesewitzes rejected the Program’s determination, and they brought a lawsuit against the vaccine’s manufacturer, in 2005.  They claimed that the manufacturer should be held liable for their daughter’s disabilities due to the defective design of the DPT vaccine.[13] The Bruesewitzes argued that their claims could be brought under state law, even though the federal NCVIA appeared to prohibit, or preempt, such claims. Specifically, the NCVIA states: “No vaccine manufacturer shall be liable in a civil action for damages arising from a vaccine-related injury or death associated with the administration of a vaccine . . . if the injury or death resulted from side effects that were unavoidable even though the vaccine was properly prepared and was accompanied by proper directions and warnings.”[14]

The Court held that the NCVIA does indeed preempt the state laws upon which the Bruesewitzes based their claims, meaning that the Bruesewitzes’ claims were invalidated. In its opinion, the Court noted that the NCVIA includes a sound quid pro quo: “The vaccine manufacturers fund from their sales an informal, efficient compensation program for vaccine injuries; in exchange they avoid costly tort litigation and the occasional disproportionate jury verdict.”[15] This liability protection has “coax[ed] [vaccine] manufacturers back into the market.”[16]

Bruesewitz v. Wyeth gave the Supreme Court an opportunity to reexamine the delicate balance that has ensured on-going access to vaccines in the United States for nearly 25 years. Like other corporations, vaccine manufacturers seek profits from the sales of their products. If the costs from vaccine-related litigation surpass the revenues from vaccine sales, then vaccine manufacturers will, understandably, stop producing vaccines. Some manufacturers acted on this calculation when they left the vaccine market in the 1980s. While this might be a sound business decision, it is not one that leads to effective public health policy. Vaccines are critical to protecting the public’s health. They have been hailed by the Centers for Disease Control and Prevention as “one of the greatest achievements of biomedical science and public health.”[17] This recognition led the federal government to devise a unique system to provide broad liability protections to vaccine manufacturers.

Recently, scholars have referred to the NCVIA as a “social compact” and “a compromise that safeguards the public’s health.”[18] They have posited that the Supreme Court was correct to “protect” this compromise.18 Others have noted that “civil litigation [outside the Vaccine Injury Compensation System] could be useful in the rare cases in which a plaintiff was contending that a plausible alternative vaccine design would have prevented the adverse event at issue.”[19] A related point was raised in Justice Sotomayor’s dissent to the Bruesewitz decision. She argued that the text of the NCVIA did not preempt all design-defect claims, because the statute only grants liability protection to vaccine manufacturers for “unavoidable,” as opposed to avoidable, side effects.[20] In the majority opinion, however, the Court suggested that allowing such litigation to proceed would be undesirable, as it could potentially leave vaccine manufacturers to face a “universe of alternative designs . . . limited only by an expert’s imagination.”[21] In other words, the Court endorsed Congress’s decision to protect specific corporations to accomplish the greater goal of protecting the public’s health.

In recent years, the Court has decided several major cases, such as Bruesewitz, involving preemption and public health.  These opinions are often fact-specific, making it difficult to draw generalizations about the Court’s preemption jurisprudence.  From a public health perspective, federal preemption of state and local laws can, at times, promote public health goals. Most public health professionals would favor a strong federal law rather than “a patchwork of weaker or inconsistent state or local laws” to support a public health intervention.[22] Preemption, though, often interferes with public health goals, by preventing states or localities from enacting experimental or innovative laws to address the particular health challenges they face. AsBruesewitz demonstrated, preemption can also prevent state-level lawsuits from proceeding, which may prevent injured parties from receiving compensation for harms they experienced. Although Bruesewitz involved federal preemption, in all likelihood it will ultimately be regarded as a decision that protected the nation’s vaccine supply and, thus, the public’s health.

References:

[1] Bruesewitz v. Wyeth, 131 S.Ct. 1068 (2011).

[2] 42 U.S.C. § 300aa et seq. (1986).

[3] Centers for Disease Control. Diptheria-tetanus-pertussis vaccine shortage. Morb Mortal Wkly Rep. 1984;33:695-696.

[4] Bruesewitz v. Wyeth, 131 S.Ct. 1068, 1073 (2011).

[5] 42 U.S.C. § 300aa-14(a) (2010).

[6] 42 U.S.C. § 300aa-15(a) (2010).

[7] 42 U.S.C. § 300aa-21(a) (2010).

[8] 42 U.S.C. § 300aa-11(a)(2) (2010).

[9] 42 U.S.C. §§ 300aa-22(b), (c) (2010).

[10] Bruesewitz v. Wyeth, 131 S.Ct. 1068, 1074 (2011).

[11] Bruesewitz v. Secretary of Health and Human Servs., 2002 WL 31965744 (Ct. Cl., Dec. 20, 2002).

[12] Bruesewitz v. Wyeth, 131 S.Ct. 1068, 1075 (2011).

[13] Bruesewitz v. Wyeth, 561 F. 3d 233, 237 (3rd Cir. 2009).

[14] 42 U.S.C. § 300aa-22(b) (2010).

[15] Bruesewitz v. Wyeth, 131 S.Ct. 1068, 1080 (2011).

[16] Bruesewitz v. Wyeth, 131 S.Ct. 1068, 1080 (2011).

[17] Centers for Disease Control. Achievements in public health, 1900–1999: impact of vaccines universally recommended for children. Morb Mortal Wkly Rep. 1999;48:243-248.

[18] Kraemer JD, Gostin LO. Vaccine liability and the Supreme Court: forging a social compact. JAMA. 2011;305:1900-1901.

[19] Kesselheim A. Safety, supply, and suits—litigation and the vaccine industry. N Engl J Med. 2011;364:1485-1487.

[20] Bruesewitz v. Wyeth, 131 S.Ct. 1068, 1087 (2011).

[21] Bruesewitz v. Wyeth, 131 S.Ct. 1068, 1079 (2011).

[22] Rutkow L, Vernick JS, Hodge JG, Teret SP. Preemption and the obesity epidemic: state and local menu labeling laws and the Nutrition Labeling and Education Act. J Law Med Ethics. 2008;36:772-789.

 

Image Credits:

1.     Timojazz via Flickr

2.     OpenDemocracy via Flickr

 
 

Should Corporations Serve Shareholders or Society?: The Origins of the Debate

Posted on by Corporations and Health Watch

Discussions about corporations’ influence on health often implicitly or explicitly raise the following question: if the law allows corporations to amass money and consequent power, then why doesn’t the law require corporations to protect, and not harm, health?   This simple question has been asked, in various forms, for at least a century.

Adolph A Berle

The debate surrounding this question involves two competing versions of the corporation.[1] In the first version, the corporation is viewed as the property of the individuals who purchased its shares—the stockholders or owners.  According to this view, “the corporation’s purpose is to advance the purposes of these owners (predominantly to increase their wealth), and the function of its directors, as agents of the owners, is faithfully to advance the financial interests of the owners.”[2] Those who adhere to this view argue that corporate law should govern “little more than the private relations between the shareholders of the corporation and management.”[3] In the second version, the corporation is viewed “as a social institution.”[4] Proponents of this view believe that corporate law should be “deliberately responsive to public interest concerns,”[5] which includes health and safety considerations.

While federal and state courts have heard many legal challenges over the fundamental nature of a corporation, commentators trace the debate’s formal origin to two articles published in the Harvard Law Reviewin the early 1930s.[6] In 1931, Adolf A. Berle, a professor at Columbia Law School, wrote Corporate Powers as Powers in Trust.  In this article, he argued that “all powers granted to a corporation or the management of a corporation . . . are necessarily and at all times exercisable only for the ratable benefit of all the shareholders as their interest appears.”[7] Berle believed that corporations were simply vehicles for advancing and protecting shareholders’ interests and that corporate law should be interpreted to reflect this principle.  He suggested that any other account of corporations’ function and purpose would “defeat the very object and nature of the corporation itself.”[8]

One year later, E. Merrick Dodd, a professor at Harvard Law School, challenged Berle’s position in For Whom are Corporate Managers Trustees.  Dodd suggested that, “there is in fact a growing feeling not only that business has responsibilities to the community but that our corporate managers who control business should voluntarily and without waiting for legal compulsion manage it in such a way as to fulfill those responsibilities.”[9] He quoted the heads of several major corporations, such as General Electric, to argue that business leaders had come to recognize that corporate managers needed to consider social responsibility when running their companies. 

"If we recognize that the attitude of law and public opinion toward business is changing, we may then properly modify our ideas as to the nature of such a business institution as the corporation and hence as to the considerations which may properly influence the conduct of those who direct its activities." - E. Merrick Dodd, Jr.

Dodd provided several interpretations of this view relative to the requirements of corporate law.  First, he explained that if “social responsibility” meant that corporate managers paid more attention to the needs of their employees and consumers, this would ultimately benefit shareholders.  Dodd supported this argument by noting that employee satisfaction leads to greater productivity and ultimately increased profits.  By this logic, managers could actually increase profits by focusing on the needs of groups other than shareholders.[10] Next, Dodd argued that courts had provided great latitude to corporate managers, allowing them “a wide range of discretion as to what policies will best promote the interests of the stockholders . . .”[11] For example, Dodd suggested that corporate charitable giving, while not immediately increasing shareholder wealth, could generate good will in the community.[12] Such good will could benefit shareholders, since consumers would be more likely to think favorably of the corporation and buy its products.

For Dodd, these arguments meant that corporations are “affected not only by the laws which regulate business but by the attitude of public and business opinion as to the social obligations of business.”[13] He claimed that society’s view of the corporation as a purely private enterprise was shifting, and that corporate managers should “recognize that the attitude of law and public opinion toward business [was] changing . . .”[14] By arguing that corporate law should reflect shifts in public opinion about the purpose of corporations, Dodd paved the way for those who would later argue that corporations can and should act to benefit constituencies beyond their shareholders.[15] The echoes of Dodd’s argument are often heard among those who champion corporate social responsibility and responsible business practices.

Commentators continue to mention the Berle/Dodd debate, encapsulated by their Harvard Law Review articles, when contemplating how corporations should function within society.[16] Today, variations of this debate surface each time advocates challenge corporate practices that have harmed or may harm the public’s health.  The debate arises whenever policy-makers contemplate regulations that would require corporations to engage in behaviors that would protect the public’s health.  And, the debate over corporations’ fundamental purpose will continue for years to come, as new corporate practices come to light and new regulations are proposed.

Interestingly, the Berle/Dodd debate did resolve, but with an unexpected twist.  In 1954, Berle, who had espoused the view that corporations should be run exclusively to advance their shareholders’ interests, published The 20th Century Capitalist Revolution.  In this book, he mentioned his debate with Dodd and stated that “[t]he argument has been settled (at least for the time being) squarely in favor of Professor Dodd’s contention.”[17] Twenty years after articulating his original position, Berle conceded that the law had supported Dodd, in that it did allow directors some discretion to consider stakeholders other than a corporation’s shareholders.

Berle’s book was published one year after the New Jersey Supreme Court decided A.P. Smith Manufacturing Company v. Barlow (1953), which definitively established corporations’ ability to make philanthropic donations and offered support to Dodd’s arguments.  In all likelihood, this decision convinced Berle that even if corporations must be run with their shareholders’ best interests in mind, the law gives corporations some opportunities to consider other stakeholders.  For those who act to protect and promote the public’s health, this nuanced understanding of a corporation’s purpose is key.

 

References

[1] Kerr JE. Sustainability means profitability: the convenient truth of how the business judgment rule protects a board’s decision to engage in social entrepreneurship. Cardozo Law Rev. 2007;29:623-668, at 660.

[2] Allen WT. Our schizophrenic concept of the business corporation. Cardozo Law Rev. 1992;14:261-281, at 264-265.

[3] Millon D. Theories of the corporation. Duke Law J. 1990;1990:201-262, at 201.

[4] Allen WT. Our schizophrenic concept of the business corporation. Cardozo Law Rev. 1992;14:261-281, at 265.

[5] Millon D. Theories of the corporation. Duke Law J. 1990;1990:201-262, at 201.

[6] Schwartz DE. Defining the corporate objective: section 2.01of the ALI’s Principles. George Washington Law Rev.  1984;52:511-533, at 522.

[7] Berle AA. Corporate powers as powers in trust. Harvard Law Rev. 1931;44:1049-1074, at 1049.

[8] Berle AA. Corporate powers as powers in trust. Harvard Law Rev. 1931;44:1049-1074, at 1074.

[9] Dodd EM. For whom are corporate managers trustees. Harvard Law Rev. 1932;45:1145-1163.

[10] Dodd EM. For whom are corporate managers trustees. Harvard Law Rev. 1932;45:1145-1163, at 1156.

[11] Dodd EM. For whom are corporate managers trustees. Harvard Law Rev. 1932;45:1145-1163, at 1157.

[12] Dodd EM. For whom are corporate managers trustees. Harvard Law Rev. 1932;45:1145-1163, at 1159.

[13] Dodd EM. For whom are corporate managers trustees. Harvard Law Rev. 1932;45:1145-1163, at 1161.

[14] Dodd EM. For whom are corporate managers trustees. Harvard Law Rev. 1932;45:1145-1163, at 1163.

[15] Velasco J. The fundamental rights of the shareholder. U.C. Davis Law Rev. 2006;40:407-467.

[16] Matheson JH, Olson BA. Corporate cooperation, relationship management, and the trialogical imperative for corporate law. Minnesota Law Rev. 1994;78:1443-1491, at 1485.

[17] Berle AA. The 20th Century Capitalist Revolution. New York: Harcourt, Brace and Co; 1954, at 169.

 

Photo Credits:

1.     Columbia University

2.     Harvard Law Review

3.     Amazon