Massachusetts Says Brand Name Drug Manufacturers Are Not Liable for Generic Drugs, Except . . .  

Jordan Lipp | Attorney, Managing Member | Childs McCune

On March 16, 2018, the Massachusetts Supreme Court weighed in on the issue of whether a brand name drug manufacturer is liable for a plaintiff’s use of the generic form of the drug, and it reached a surprising result.  As discussed in the previous blog post on December 22, 2017, Conte on Steroids, most states conclude that a brand name drug manufacturer cannot be liable for damages caused by the generic version of the drug.  In a detailed analysis, the Massachusetts Supreme Court followed the vast majority of its sister courts, concluding that a brand name drug manufacturer cannot be held liable in product liability or negligence for a plaintiff who ingested the generic version.

But then, borrowing from case law involving such disparate subjects as landowner duties to trespassers and liability releases for sporting activities, the Massachusetts Supreme Court explained that “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.”  Rafferty v. Merck & Co., No. SJC-12347, 2018 Mass. LEXIS 161, at *29 (Mar. 16, 2018).  As such, the Court found that a brand name drug manufacturer can be liable for the generic version of the drug “where, for instance, a brand-name manufacturer learns that its drug is repeatedly causing death or serious injury, or causes birth defects when used by pregnant mothers, and still fails to warn consumers of this danger.”  Id. at *29-30 (Mar. 16, 2018).

The ramifications of this novel approach are significant.  Setting aside the fact that this decision comes from a court in one of the hubs of innovation in the life sciences, it is important to note that the decision is the very first of its kind.  No other court has determined to bar negligence claims yet permit reckless claims with regards to brand name drug liability resulting from generic use.  The Massachusetts Supreme Court even admits that it is “the only court” to make this distinction.  Id. at *32.

While this is a new issue in the context of drug and device litigation, other types of litigation shed light on what the repercussions of this decision may be.  As referenced above, this distinction of not permitting negligence claims but permitting reckless claims exists in the context of both sporting participants who have signed a release and trespassers who claim injury.  On one hand, the higher standards in these types of cases has discouraged lawsuits and made summary judgment easier for defendants to obtain.  On the other hand, requiring a plaintiff to meet a reckless standard certainly does not eliminate litigation.  And, depending upon the situation and insurance policy, the reckless standard can have serious insurance ramifications as some insurance policies do not cover reckless conduct.  The other question, of course, is whether courts in other jurisdictions may start to follow Massachusetts’ novel approach on brand name drug liability.

Regardless, for brand name drug manufacturers, it is a brave new world in Massachusetts.

Conte on Steroids — The California Supreme Court Finds that Novartis Can Be Liable for a Drug It Hasn’t Made in Years

Jordan Lipp | Partner, Davis Graham & Stubbs LLP

 

A basic premise of product liability law is that it is the manufacturer of a product, not its competitors, is the sole entity liable for the harm caused by its own defective product.  This issue is of particular importance in the context of brand name versus generic drug manufacturers.  Courts throughout the nation have faced the question of whether the manufacturer of a name brand version of a drug is liable to a plaintiff who only took the generic version of the same drug.  The overwhelming precedent, with a handful of exceptions, has been that a name brand manufacturer cannot be liable if the plaintiff consumed a generic version of the drug.  One of those handful of exceptions was Conte v. Wyeth, a 2008 decision from the California Court of Appeals, which held that a brand name drug manufacturer has a duty to warn the prescribers of the generic versions of their drug.

On December 21, 2017, the California Supreme Court rejected the overwhelming precedent from other states, and following the Conte decision.  It held that brand name drug manufacturers have a duty to warn about their drugs, regardless of whether the plaintiff used the brand-name or generic version of the drug, so long as the plaintiff relied upon the brand name drug manufacturer’s warning.

Perhaps even more surprising was the California Supreme Court’s holding that the brand-name manufacturer’s sale of the rights to the drug did not terminate its liability.  The case, T.H. v. Novartis Pharmaceuticals Corp., — P.3d —,  2017 WL 6521684 (Cal. 2017), arose from a claim by two children (through their guardian ad litem) that their developmental delays and autism were caused by their mother’s use of terbutaline in 2007 during her pregnancy with them.  The brand name version of terbutaline is Brethine, which was manufactured by Novartis until 2001.  In 2001, six years before the generic version of the drug was actually used, Novartis sold its rights to the brand name drug to another drug company.

In spite of the facts that (1) the plaintiffs’ mother took the generic drug, not the brand name drug, and (2) when the mother took the generic drug, Novartis no longer held the rights to the brand-name equivalent, the California Supreme Court still found that Novartis could be liable.  On the first issue, the California Supreme Court held that “Because the same warning label must appear on the brand-name drug as well as its generic bioequivalent, a brand-name drug manufacturer owes a duty of reasonable care in ensuring that the label includes appropriate warnings, regardless of whether the end user has been dispensed the brand-name drug or its generic bioequivalent.”  On the second issue, the Court found that “If the person exposed to the generic drug can reasonably allege that the brand-name drug manufacturer’s failure to update its warning label foreseeably and proximately caused physical injury, then the brand-name manufacturer’s liability for its own negligence does not automatically terminate merely because the brand-name manufacturer transferred its rights in the brand-name drug to a successor manufacturer.”

Well aware that this decision runs contrary to the great weight of authority in other states, the California Supreme Court ended its opinion stating: “We do not doubt the wisdom of crowds in some settings. But the value of an idea conveyed by or through a crowd depends not on how loudly it is proclaimed or how often it is repeated, but on its underlying merit relative to the specific issue at hand.”  With this decision, California will continue to be a hotbed for pharmaceutical litigation for years to come.

Of Pens, Delays, and Balloons

Some stories in the life sciences are years in the making while others take a more swift course to resolution. Below are three stories of varying degrees of persistence, but it may be that we have not heard the last of any of them just yet.

EpiPen Settlement a Sore Spot for Some

The EpiPen settlement between Mylan and the Department of Justice is finally in the books, but there were several interesting developments involved in this action, which has spanned at least the better part of a decade. The company has agreed to pay $465 million to settle these allegations, but there are indications that this matter is not finished.

To recap, the EpiPen controversy was already the subject of federal government interest in 2009, when the Office of Inspector General at HHS cited the Epipen as a product of interest in a report on the accuracy of drug prices for Medicaid rebates. The Aug. 17 DoJ statement announcing the settlement said Mylan had “violated the False Claims Act by knowingly misclassifying EpiPen as a generic drug to avoid paying rebates,” but the DoJ nonetheless stated that the claims “settled by this agreement are allegations only, and there has been no determination of liability.”

The department’s announcement lists only one relator in this qui tam action, Sanofi-Aventis, but Ven-a-Care of Key West, Fla., was also on board. Ven-a-Care is purportedly a pharmacy, but some see the company as more of a bounty hunter, given the frequency with which its owners avail themselves of large sums for similar cases. Thus, the Mylan case was driven by two relators rather than the more typical single relator, suggesting the data provided by Ven-a-Care and Sanofi were substantially different.

Another interesting facet of this case is that non-governmental 340B drug programs will enjoy rebates from the action, which is not ordinarily the case. In any event, this settlement might not be the last word on the controversy as Sens. Chuck Grassley (R-Iowa) and Richard Blumenthal (D-Conn) have criticized the amount of the damages as grossly inadequate.

The drug pricing controversy is providing plenty of whiplash for Valeant as well. Recently, Valeant investor Lord Abbett & Co. filed suit in New Jersey with the argument that Valeant’s actions violate that state’s Racketeer Influenced and Corrupt Organizations law. Should a judge accept that argument, Valeant could face treble damages.

340B Final Rule Delayed Again

In spite of all the consternation about drug prices, the Department of Health and Human Services has announced that it will once again delay a rule that would have dinged drugmakers for overcharging several types of institutions, including safety net hospitals.

The related provisions of the Affordable Care Act had expanded the types of institutions eligible for participation in the 340B program to include children’s hospitals and free-standing cancer centers, but the latest 340B final rule would have hit drugmakers with a $5,000 fine for each instance in which the charge for a drug exceeded the ceiling price. This is the third time the implementation date of this final rule has been pushed back, which is now suspended until at least July 2018. The move was blasted by a number of affected entities, but there are rumblings that the 340B reporting portal administered by the Health Resources and Services Administration is not fully operational.

Rates for Drug-Coated Balloons may Crater

A Medicare advisory board will recommend that the Centers for Medicare & Medicaid Services allow reimbursement for drug-coated balloons (DCBs) to lapse to the rates paid for standard angioplasty of the lower limbs. The decision flew in the face of clinician input, but whether CMS will go along with the advisory panel’s recommendation is not yet clear.

The Medicare advisory board for the outpatient prospective payment system said the rates paid for DCBs – such as Medtronic’s Admiral InPact and the Lutonix by C.R. Bard – should be allowed to fall to the rates paid for standard angioplasty balloons used in the femoral and popliteal arteries. DCBs enjoyed a higher reimbursement rate under the Medicare new technology pass-through program, but these devices have used up their eligibility for the program. This predicament leaves Bard and Medtronic facing a rate as low as $4,999 in calendar year 2018, a rate that clinicians said would impede access and possibly trigger a spike in the amputations DCBs are credited with preventing.

Physicians have argued that the use of a DCB requires both pre- and post-dilatation of the target vessel with a plain balloon to achieve the desired effect on vessel patency, a necessity that boosts both procedure time and costs. An industry representative suggested a rate closer to $8,000 for DCBs, but the panel clearly was not amenable. The panel endorsed a proposal that CMS track costs and utilization of these devices in CY 2018 in order to evaluate whether a new ambulatory payment classification code is needed to account for the costs associated with DCBs, but that proposal leaves patients and physicians with a 12-month question mark.

In the meantime, hospitals and other institutions will have to decide whether to take the financial hit for these devices in an effort to avoid readmissions, which are squarely in CMS’s crosshairs via several well-known health care delivery reform programs.