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Drugmakers face potential expanded liability after generic ruling

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A ruling by Massachusetts’ highest court that says brand-name prescription drug manufacturers can be held liable for reckless failure to warn a user of the drug’s generic equivalent is expected to lead to more litigation against brand-name manufacturers.

Furthermore, that ruling — in combination with a related California Supreme Court ruling late last year and similar rulings in Illinois and Vermont — may increase momentum for litigation against brand-name manufacturers nationally, some experts say.

Experts say the ultimate resolution of the question of who is responsible for harm caused to users by generic drugs, which account for about 90% of all prescriptions, may have to be resolved at the federal level.

Meanwhile, most observers do not expect this issue, at least initially, to significantly effect pharmaceutical manufacturers’ rates or capacity.

The March 16 ruling by the Massachusetts Supreme Judicial Court in Boston in Brian Rafferty v. Merck & Co. Inc. concerned Mr. Rafferty’s charge that he suffered long-term problems from taking a generic version of finasteride, a drug developed by Kenilworth, New Jersey-based Merck & Co., to treat his enlarged prostate.

As the ruling points out, federal law requires generic drug manufacturers to use the same labels as the brand-name counterparts who developed them, as the brand-name manufacturers are the only ones with the power to change the labels.

Mr. Rafferty charged in his litigation that Merck had failed to change its label to include a warning about finasteride’s negative side effects in the United States, even though it had done so in other countries in response to reports and studies.

The Massachusetts court said “public policy is not served if generic drug consumers have no remedy for the failure of a brand-name manufacturer to warn in cases where such failure exceeds ordinary negligence, and rises to the level of recklessness.”

“In cases where, for instance, a brand-name manufacturer learns that its drug is repeatedly causing death or serious injury, or causes birth defects when use by pregnant mothers, and still fails to warn consumers of this danger, public policy does not dictate that these consumers be left with no remedy when those risks are realized, or that the manufacturer have little financial incentive to reveal these risks.”

Joseph G. Blute, a member of law firm Mintz Levin Cohn Ferris Glovsky & Popeo P.C. in Boston, said the ruling applies a recklessness standard to the “innovator liability” doctrine, which says an initial developer can be held liable for a drug sold by a nonrelated generic company. The ruling is “an important expansion of liability principles,” he said.

“The decision is significant, and the impact is real,” said Tarifa Laddon, a partner with Faegre Baker Daniels L.L.P. in Los Angeles. “This will likely increase the number of cases that brand-name manufacturers will have to defend.”

The Massachusetts ruling follows a broader ruling issued by the California Supreme Court in December, which held in T.H., a Minor, etc., et al. v. Novartis Pharmaceuticals Corp. that brand-name drug manufacturers have a duty to warn about their drugs’ safety risks regardless of whether they are sold in brand-name or generic versions.

“These sorts of cases are almost inevitable, because of the lack of ability for people to sue generic companies for failure to warn,” said James Walters, Philadelphia-based managing director of Aon Risk Solutions’ life sciences and chemical group. “It doesn’t seem reasonable that somebody could be sued for a product they didn’t even make.”

The situation has developed, Mr. Blute said, because of the interplay of statutes and U.S. Supreme Court rulings, but it is “the kind of thing some courts are just not comfortable with,” he said.

The Supreme Court’s 2011 ruling in Pliva Inc. v. Messing and its 2013 ruling in Mutual Pharmaceutical Co. v. Bartlett essentially protected generic manufacturers from state law liability for injuries caused by their products.

Meanwhile, the Massachusetts ruling, along with the California Supreme Court ruling, could create momentum toward litigation against brand-name manufacturers, say observers.

The Massachusetts ruling “certainly adds to the relatively recent authority of the California Supreme Court,” which did not limit claims to those of recklessness, said David G. Geiger, a partner with Foley Hoag L.L.P. in Boston.

“It’s possible there is some momentum and other state courts may join in. I would hope they would look at the rationale” and the long history of the law and realize “this is a very radical departure,” Mr. Geiger said.

Mr. Geiger submitted a brief in the Merck case supporting the company on behalf of the Reston, Virginia-based Product Liability Advisory Council.

“The entire legal system watches very closely cases like this that can create opportunities for the plaintiffs bar to find a different pathway to sue,” said Mr. Walters. “I think they’re watching this very carefully and will be looking at ways to take advantage” of the Massachusetts ruling.

It is important to recognize that the “overwhelming majority of states continue to reject innovator liability.”

“Nonetheless, there is a trend towards increased acceptance” of innovative liability that can no longer be denied,” said Ms. Laddon, noting the Massachusetts ruling followed the California decision by only three months.

Observers generally say they do not expect the ruling to have at least an immediate direct impact on brand-name manufacturers’ insurance

Darlene Villoresi, Morristown, New Jersey-based national life science casualty advisory leader for Marsh L.L.C., said, “There are so many factors that go into underwriting and pricing and rates … I don’t think it’s going to have an impact on insurance.”

“I don’t think there’ll be much of an immediate effect, frankly, unless insurers see a lot more cases,” Mr. Walters said. “The immediate effect on coverage and availability will be minimal, but certainly they’ll be watching these cases very closely and over time, you can see it having an effect long term unless the FDA and the federal government makes some hard decisions to drive uncertainty out of this equation.”

“What this situation is crying out for now is for the (Food and Drug Administration) to actually opine and rule on who is responsible” for labeling, said John Connolly, Radnor, Pennsylvania-based life sciences practice leader for Willis Towers Watson P.L.C.

The agency’s latest 2013 proposal on generic labeling “withered and died on the vine. It’s sitting out there as a discussion point with absolutely no action on it at all.”

Furthermore, the Supreme Court’s Messing rule also left unanswered questions on the issue of who can be sued if not the generic manufacturer, Mr. Connolly said.

“I think it’s logical that at some point the Supreme Court will be asked to fill in the gaps in the original ruling,” he said.