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Article: September 2018: Product Liability Update

Business Litigation Reports

Innovator Liability and New Considerations for Brand-Name Manufacturers. It has long been a well-settled principle of tort law that a manufacturer can only be responsible for tort claims arising from its own product. However, a recent decision of a Massachusetts state court permitting generic drug users to sue brand-name pharmaceutical companies pursuant to an “innovator liability” tort theory suggests a potential shift away from this long-standing principle. Any expansion of tort liability for branded companies may have broader implications, with claimants seeking to disturb the scope of tort liability more generally and in other contexts.

By way of background, claimants have long sought to hold brand-name drug manufacturers liable for injuries allegedly sustained as a result of their ingestion of generic bioequivalents. The overwhelming majority of courts have rejected attempts to impose such “innovator liability,” finding it contrary to well-established tenets of product liability law and principles of fundamental fairness to deem an innovator pharmaceutical company responsible for injuries associated with a product it did not manufacture. The seminal case in this area, Foster v. American Home Products Corp., reasoned that imposing liability on the branded manufacturer where the product ingested by the plaintiff was actually manufactured and sold by a generic competitor would be unfair and would “stretch the concept of foreseeability too far.” 29 F.3d 165, 171 (4th Cir. 1994). In so doing, it noted that “[t]here is no legal precedent for using a name brand manufacturer’s statements about its own product as a basis for liability for injuries caused by other manufacturers’ products,  had no control” and that doing so “would be especially unfair when, as here, the generic manufacturer reaps the benefits of the name brand manufacturer’s statements by copying its labels and riding on the coattails of its advertising.” Id. at 170. Foster also reasoned that it would not be foreseeable to branded manufacturers that generic users would rely on their labeling, as generic manufacturers are responsible for their own labels and “are also permitted to add or strengthen warnings and delete misleading statements on labels, even without prior FDA approval.” Id.

The Supreme Court’s decision in PLIVA, Inc. v. Mensing—which found that state law tort claims against generic drug manufacturers are preempted by federal drug regulations—has since altered the landscape. 564 U.S. 604 (2011). In Mensing, the Supreme Court found that generic manufacturers could not possibly create “safer” labeling (as Plaintiffs alleged should have been done in pursuing their state law tort claims) and simultaneously comply with the federal requirement to keep their labeling the same as the branded counterpart’s. Id. at 624. Indeed, the Hatch-Waxman Act—which sought to simultaneously make pharmaceutical drugs more accessible (by lessening the testing and approval burdens on generic manufacturers) and incentivize innovation (by extending patent terms for branded companies)—generally requires generic manufacturers to maintain the same label and warnings as its brand-name competitor once FDA approval is received. Of course, multiple abbreviated approval pathways exist for generic manufacturers under the Hatch- Waxman Act, and label differences are permissible in certain identified instances, such as with a 505(b)(2) application, if there are differences in the products’ expiration dates, formulation, bioavailability, or pharmacokinetics, or if an indication or other aspect of labeling protected by patent or exclusivity is omitted. But Mensing necessarily halted claims against generic manufacturers in their tracks, with generic users resorting to filing suit against the branded manufacturer who initially developed the branded equivalent drug (but did not manufacture the product actually ingested).

The majority of courts considering such claims in the wake of Mensing have followed the reasoning in Foster and declined to expand the scope of tort liability as to branded manufacturers. For example, a 2017 decision in the Zofran Multi-District Litigation granted a motion to dismiss on that basis, noting that while “[i]t is true that dismissal would appear to leave consumers injured by generic drugs without any form of remedy, . . . it may [also] be unfair or unwise to require brand-name manufacturers to bear 100% of the liability, when they may have only 10%, or less, of the relevant market.” In re Zofran (Ondansetron) Prods. Liab. Litig., 261 F. Supp. 3d 62, 80 (D. Mass 2017). The court also noted that while Mensing exempted generic entities from state law claims, “[i]t does not clearly follow that brand-name manufacturers should bear all of the potential liability, particularly where it is unclear what the impact of such a potentially enormous shift in liability may have on the development of new drugs.” Id.

The Massachusetts Supreme Judicial Court, on the other hand, has gone in the opposite direction. In Rafferty v. Merck & Co., Inc., the plaintiff asserted state law tort claims against Merck in connection with his purported injuries after taking generic finasteride to treat an enlarged prostate. 92 N.E. 3d 1205 (Mass. 2018). Specifically, he alleged that the product label for finasteride did not adequately warn that sexual dysfunction side effects could continue after taking the drug, and that because the label conformed to Merck’s American label for Proscar, Merck’s duty to warn extended not only to users of Proscar but also to users of finasteride. Id. at 1211-12. He also alleged that international labeling for Proscar included a warning about persistent erectile dysfunction, which did not appear on the label when he ingested finasteride. Id. at 1212. Merck moved to dismiss, arguing that it did not manufacture the product the plaintiff ingested and so could not possibly be liable for his injuries, and its motion was granted, relying on a recent (and post-Mensing) Iowa Supreme Court case. Id. at 1212 (referencing the lower court’s reliance on Huck v. Wyeth, Inc., 850 N.W. 2d 353, 376-77 (Iowa 2014), cert. denied, 135 S.Ct. 1699 (2015)). The plaintiff appealed and the Supreme Judicial Court elected to review the decision. Id. at 1212. That move attracted significant amici curiae briefing in support of Merck, with a variety of entities arguing, among other things, that accepting an innovator liability theory would radically expand the scope of tort liability, unfairly subject innovators to limitless liability, significantly impact the ability to invest in (and thus chill) innovation, and would fundamentally change the pharmaceutical landscape and the intent of the Hatch-Waxman Act.

The Rafferty Court ultimately found that although a manufacturer’s duty of care usually runs only to   the users of its product—because the risk of harm would only be foreseeable as to them—the Rafferty case “presents an exception to the usual pattern.” Id. at 1215. It noted that “[w]ith generic drugs, it is not merely foreseeable but certain that the warning label provided by the brand-name manufacturer will be identical to the warning label provided by the generic manufacturer, and moreover that it will be relied on, not only by users of its own product, but also by users of the generic product.” Id. After weighing public policy considerations—including plaintiff’s inability to pursue the generic manufacturer post- Mensing on the one hand, and the potential impacts of permitting tort claims to proceed vis-à-vis the branded manufacturer on the other, including the significant increase in costs stemming from more litigation and the potential chilling of innovation— the Supreme Judicial Court imposed a duty on branded manufacturers to consumers of generic drugs “not to act in reckless disregard of an unreasonable risk of death or grave bodily injury.” Id. at 1219. In so doing, it acknowledged that imposing any duty on branded companies to warn generic consumers placed Massachusetts in the minority of courts. Id. at 1220. Commentators have since noted that they expect that plaintiffs in Massachusetts will allege recklessness in all failure to warn cases moving forward.

Relatedly, the U.S. Court of Appeals for the Seventh Circuit’s recent opinion in Dolin v. GlaxoSmithKline LLC declined to address the question of innovator liability at all, even though the trial court’s rejection of GSK’s “this was not our product” argument encouraged significant amici curiae submissions similar to those made in support of Merck in Rafferty. -- F.3d --, 2018 WL 4001208 at *11 (7th Cir. Aug. 22, 2018) (reversing the judgment and dismissing on preemption grounds, but declining to rule on “the new theory of liability that plaintiff advances”). Interestingly, this follows the Sixth Circuit’s rejection of innovator liability. See In re Darvocet, Darvon, and Propoxyphene Products Liability Litig., 756 F.3d 917 (6th Cir. 2014).

Rafferty and other similar outlier cases raise new considerations for branded companies as well as other product manufacturers, including those whose designs may be copied by competitors. Specifically, innovator companies should consider that plaintiffs will be seeking to expand tort liability in certain jurisdictions, and in turn, develop risk mitigation and preparedness strategies in order to be best-positioned to defend against these claims.