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September 18, 2026

Innovation and liability

The impact of product liability litigation on medical device firms.

Tyler Smith

Source: romavin

In recent decades, product liability lawsuits against manufacturers have grown sharply, reaching almost 60,000 filings across US courts in 2019. But there is limited empirical evidence on how lawsuits aimed at specific manufacturers affect their innovation decisions.

In a paper in the American Economic Journal: Microeconomics, Alberto Galasso and Hong Luo examine the effects of litigation on the medical device industry, a research-intensive sector that accounts for a large share of product liability cases. 

The authors combine FDA application data for 45 leading device firms between 1995 and 2020 with records of multidistrict litigations, the dominant procedure for large product liability cases. They find that during years of litigation, defendant firms are about 33 percent less likely to submit an FDA application in the litigated product category.

Figure 2 traces the impact of litigations on new product launches over time.

Figure 2 from Galasso and Luo et al. (2026)

The horizontal axis marks years relative to the start of litigation, from six years before to six years after, and the vertical axis reports the estimated difference in the probability of introducing a new product between litigated product categories and nonlitigated controls. The red vertical bars represent 90 percent confidence intervals. The year before litigation is normalized to zero, indicated by the dashed vertical line. 

In the six years before litigation, the estimated differences remain close to zero and are statistically insignificant. But in the first year after litigation begins, the probability of launching a new product in the litigated product categories falls roughly 20 percentage points compared with the control categories, and remains near that level throughout the litigation period.

The researchers go on to find that new product introductions return to prelitigation levels around the second year after litigation concludes and that declines do not spill over to nonlitigated product categories. In addition, devices introduced during and after litigation were associated with fewer future adverse events and a lower share of serious injuries and deaths.

The authors conclude that although litigation slows the pace of new production introductions, the effects are localized and the current US liability regime does not substantially chill innovation in medical devices.