Drug-originator liability for generic-drug injuries

by Walter Olson on March 15, 2013

A WSJ editorial and news coverage have called attention to a case from the Alabama high court holding Pfizer liable for a drug it didn’t produce, namely a generic knockoff of its acid reflux drug Reglan. Michael Greve agrees that it’s daffy to allow such suits, but traces the problem to the U.S. Supreme Court’s popular (at least with the media) 2009 decision in Wyeth v. Levine, okaying state tort actions over federally approved labels — and cautions that any victories for regulated business on the issue of federal-state preemption tend to be temporary at best. More: Coyote, FedSocBlog.

{ 9 comments }

1 david7134 03.15.13 at 3:42 pm

I hate to admit it, but I can understand the plaintiff lawyers in this issue. The originator of the medication is responsible for several phases of investigation of the drug and for followup of the drugs late term side effects once it is produced. Generic drug companies simply pick up the drug and copy its formula, usually with alterations to the delivery mechanism, thus the decreased cost. Unless they have altered the fundamental aspects of the drug, then they are under the protection of the mother company in respect to safety issues. The problem in the US is that many of the big drug companies have doctored the trial results. I have been in charge of several trials at different levels and can assure you that there are problems with the way drug safety profiles are obtained. Take the issue of statins, those drugs that control cholesterol. They are basically useless and have a range of side effects which include death. But ask the average physician and they will swear that the drugs eliminate CV disease and have no side effect profile. This is secondary to the sharp marketing of the medications. Thus the mother company should be held responsible for what occurs after they stop production.

2 David Schwartz 03.15.13 at 9:58 pm

david7134: Nothing prevents the generic manufacturers from running their own safety studies. And nothing prevents the generic manufacturers from entering into an agreement whereby the originator guarantees to them that the drug is safe. It makes no sense that the originator should do all the work and bear all the risk while the generic manufacturers get a free ride.

To see the reductio ad absurdum, consider an originator who spends tens of millions on development and studies and gets FDA approval and then decides the drug is not sufficiently well-tested to actually sell. Now, a generic manufacturer can make billions selling that drug, having borne none of the research cost, and the originator bears the liability?

3 Hugo S. Cunningham 03.15.13 at 10:25 pm

In cases like this, of real and predictable, but rare damages, I like the approach of the vaccine court: reasonable compensation for actual damages on a no-fault basis.

4 William Nuesslein 03.16.13 at 8:42 am

Mr. Cunningham has an excellent suggestion. I would make the court benefits available to public members who pay premiums. Benefits would be by schedule.

Our litigation system is an expensive and totally irrational form of adverse outcome insurance. My point has been demonstrated often by suits based on cancer from a lifetime of heavy smoking. Plaintiffs say, fraudulently, that they didn’t know the hazard of heavy smoking.

By making the adverse outcome insurance explicit, premiums would better match benefits to costs.

The high costs of vaccines is due to premiums for the vaccine court. The court is much too generous in my opinion.

5 david7134 03.16.13 at 1:59 pm

david s,
I never, ever said the system is fair. In fact, in my experience it is corrupt and uneven. I am only making an argument under the system that we have. As to generic manufacturers doing there own safety studies, actually the system prevents this. There are various rules governing drug performance that result in an inability to do significant testing. Then, most of the generic manufacturers are in India and elsewhere and they could give a flip. As to the last paragraph, once a drug company gets FDA approval, they proceed. They don’t really care if the drug does nothing, look at the statin example that I gave. If they determine that liability would preclude continued use, then they might withdraw the drug or take it to a foreign market. This has been done numerous times.

6 Max Kennerly 03.16.13 at 7:59 pm

In PLIVA v. Mensing, the Supreme Court held that generic manufacturers aren’t responsible for label warnings, because brand-name manufacturers are responsible for the label warnings.

Now the claim is that brand-name manufacturers aren’t responsible? Please. That was already decided. Big Pharma was behind that decision.

@David Schwartz — Seems you need to read PLIVA v. Mensing. The plaintiffs’ lawyers tried every argument you’re making here and lost. The 5 Republicans on the Supreme Court said generics are immune because it’s all up to the brand name.

7 OBQuiet 03.17.13 at 4:49 pm

david7134,

That may have been how it worked but I expect that to change if this ruling stands.

It used to be that the company could look at the risk of the product and price the expected negative results into it. If they could sell enough while holding exclusive rights( and with it price control) to produce a profit after paying out for the negative outcomes, it was worth bringing to market. They also had the option to remove a product from distribution to prevent accumulating additional liabilities.

Now they will have to price the negatives from both their sales in the short term and all other in perpetuity into the price. And add the cost of changing legal environment in the non-immediate future. So while the profits are severely limited, the liabilities are potentially endless.

This will only raise the cost of medicine and keep worthwhile products off the market.

8 OBQuiet 03.17.13 at 4:59 pm

I should have given an example.

Company come up with new pain med. Looks good and it goes to market. 5 years in , they find that accumulated exposure can cause some truly HORRIBLE issue like intense, chronic and untreatable pain. Fortunately, this is discovered either before more than 1-2 people have to suffer. So since it is still safe to use in limit amounts, THE FDA decides to allow it to continue but the company has already pulled it since the risk of $XXMillion lawsuits is too great.

Too late! The Generics have little risk here so they start manufacturing and leave the original maker on the hook for the damage.

Great policy our courts stick us with.

9 David Schwartz 03.17.13 at 10:13 pm

Max Kennerly: I recognize this is the system we have, but it’s mind-bogglingly broken. It is absolute idiocy to assign liability to a company that has nothing to do with how much of the product they’ve sold. The only rational way to handle liability is to assign some portion of the revenue from selling a product to cover potential liability expenses. How can you do this when other company’s sales subject you to liability?

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