Investors should celebrate a Supreme Court ruling in favor of Medtronic (NYSE: MDT) that could save the company millions of dollars. But what should really excite them is the ruling's potential to save the entire medical-device industry billions of dollars.
In an 8-1 decision, the high court ruled this week against the estate of a patient who suffered serious injuries when one of Medtronic's catheters burst during a medical procedure. The court ruled that the estate couldn't sue under state law because the device was approved by the FDA under federal law.
The ruling extends beyond Medtronic since it protects other medical-device makers, such as Johnson & Johnson (NYSE: JNJ) and Boston Scientific (NYSE: BSX), from lawsuits over whether FDA standards are strict enough. Given the recent FDA environment, not too many investors or Foolish pundits would argue that the FDA isn't being stringent enough.
The decision could also affect biotech and pharmaceutical companies like Amgen (Nasdaq: AMGN) and Pfizer (NYSE: PFE), since they're also regulated by the FDA. In fact, Wyeth (NYSE: WYE) has a case pending with the Supreme Court in which it claims that it can't be sued because the company has an FDA-approved warning label on its drug.
The ruling is a huge win for investors, reducing the costs involved with fending off and losing lawsuits as well as helping alleviate the uncertainty that almost always hangs over stocks with pending lawsuits.
More Foolishness on medical devices:
J&J and Pfizer are both picks of the Income Investor newsletter. Pfizer was also picked by the Inside Value team.
Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool's disclosure policy acts as judge and jury to protect you.
