The drug delivery system is changing as the American health care economy evolves. Tort rules created during a previous era of drug production and marketing are not adequate for a rapidly evolving medical economy. The incentives of liability under the tort system are needed along with the Food and Drug Administration's (FDA) power of drug approval to control the drug industry. Enterprise liability that includes the whole distribution chain-manufacturers, hospitals, physicians, and pharmacists ­offers significant advantages for both risk reduction and consumer safety. The time has come to re-examine the old assumptions underlying the allocation of risk for drug mishaps. The protectionism inherent in current tort rules governing drug risk is extraordinary, reflecting effective industry marketing of the need for judicial deference toward the inherent risk of drug use. Courts have accepted the notion that drug firms will stop producing lifesaving products merely because of increased liability risks. An ideal drug distribution system should promote drugs that are both effective and economical. Patients want accurate physician advice as to which drugs to use, for how long, and in what dosages. Patients worry about deadly interactions and want the FDA and drug manufacturers to continue studying side effects and risks from approved drugs and to keep doctors and patients informed. While patients are willing to be partners in monitoring their own drug use up to a point, they also know they lack expertise. Patients do not want to be injured or killed by an unexpected side effect, an interaction, a contaminant, or an incorrect dosage. They would rather not have to face drug side effects if alternative therapies are available. While compensation awarded years after the fact for such harm is some benefit, minimization of such risks is always preferable.

The FDA licenses drugs. Its processes are rigorous, its approvals are careful. Most drug side effects and interactions, however; are discovered after a drug enters the market. If the FDA is the gatekeeper for the entry of new drugs, then tort liability is a risk auditor-tracking drug risks and forcing manufacturers to internalize the costs of drug injuries. The dual threat of liability judgments and bad publicity should be sufficient to force drug manufacturers into a state of constant awareness regarding the risks of drug use. The threat of liability, however, has not served this function well given the vigor of judicially created defenses and courts' inability to develop a design defect theory flexible enough to include changing product markets, physician failures, pharmacy errors, and consumers' lack of information.