July 3, 2013

Supreme Court Further Limits Liability of Generics for Faulty Drugs

By Gordon Schnell

 In what is being hailed as a major victory for generic drug makers (but not necessarily for consumers), the Supreme Court ruled last week that these companies cannot be held liable for defects in the design of their products.  The decision follows from the Court’s 2011 ruling that similarly shielded the generics from liability for inadequate safety warnings on their drug labels.  Taken together, these decisions essentially shut the door on any lawsuits that potentially might be brought by individuals injured by generic drugs.

The facts of the most recent case, Mutual Pharmaceuticals v. Bartlett, are particularly horrific.  [See our prior post for the back story.]  Karen Bartlett, as a healthy 45-year old, visited her doctor in 2004 to treat shoulder pain.  Her doctor prescribed Merck’s anti-inflammatory drug Clinoril.  She took Mutual Pharmaceutical’s less expensive generic version called Sulindac from which she contracted a devastating condition known as Stevens-Johnson Syndrome.  This caused her to lose nearly two-thirds of her skin, suffer extensive damage to her lungs and esophagus, spend months in a coma, and become legally blind.  She remains permanently disabled.

In 2010, a New Hampshire jury awarded Ms. Bartlett $21 million after finding the drug defective under the state’s consumer protection laws.  The Court of Appeals upheld the award.  But the Supreme Court struck it down in its 5-4 decision written by Justice Alito.  The Court’s reasoning was plain and simple.  The generic manufacturer is required by federal law to copy the design and label of the brand-name drug the FDA previously approved.  It therefore cannot be held liable under state law for failing to modify the design or label because of any defects subsequently discovered.  The Supreme Court rejected outright the lower court’s view that the generic manufacturer could have, and should have, chosen to stop making the drug upon learning of any such defects.

The decision mirrored the reasoning of the Supreme Court’s ruling two years ago in PLIVA v. Mensing where the issue was whether generic manufacturers could be held liable for inadequate safety warnings.  The Court held they could not because federal law requires that generics use the identical FDA-approved labeling of the brand-name manufacturer.  Central to both decisions was the principal of preemption; namely, that the federal laws governing the generics’ conduct trump the state consumer protection laws that might otherwise impose a higher and irreconcilable standard.  More specifically, if state law mandates an enhanced safety warning or design, but federal law precludes any such change, the federal law takes precedence.

What follows from these twin decisions is quite a perverse outcome.  If you are injured from a brand-name drug, you can sue the manufacturer for damages because of its ongoing obligation to ensure the drug’s safety and effectiveness, and an appropriate and up-to-date label.  But if you are injured from a generic drug, you are pretty much out of luck.  The generic makers are now essentially immune from prosecution as long as they follow the FDA-approved design and label.  Given that roughly 80 percent of prescriptions these days are filled with generics, the impact of this decision is far-reaching.

What critics of these decisions are most concerned about is that they will remove any incentive for generic manufacturers to monitor the safety and effectiveness of their drugs.  This can be a real problem, particularly when dangerous side effects of medicines are often not discovered until decades after they are approved and when there may no longer be a branded version on the market.  On the other hand, generics play a critical role in keeping our drug prices in check.  If these companies are subject to increased obligations in their research, development and monitoring, they may have to raise their prices considerably or leave the market altogether.

Apparently the FDA is aware of this dynamic and is considering ways to reconcile these competing concerns.  One way might be to permit generics, like their brand-name brethren, to change their labeling in appropriate circumstances.  This would eliminate the preemption argument that currently shelters generic manufacturers from liability.  The FDA recently acknowledged that it is considering this very change.  And it has the strong support of several legislators including Rep. Henry Waxman (Calif.), father of the 1984 Hatch-Waxman Act which is credited with spawning the generic industry in the first place.  Immediately following the Supreme Court’s recent decision, they wrote a letter to FDA Commissioner Margaret Hamburg urging the FDA to adopt this change.

Of course, the generics and their supporters are opposed to any such change, claiming it would lead to higher consumer prices and inconsistent and confusing drug labeling.  They also worry that it would unduly interfere with the FDA’s regulatory oversight and judgment.  Obviously, there is no easy solution here.  But clearly something has to give to make sure the generics continue to flourish but in a manner that best protects against (and compensates for) another horror like the one suffered by Ms. Bartlett.

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