Expanded Liability for Generic, Brand Manufacturers Ahead?

May 01, 2011

John F. Brenner
Consider the following scenario: A research-based pharma company—call it "X Pharma"—discovers and patents a compound that holds great promise as a treatment for a widespread, chronic condition. The compound makes it through clinical trials and the regulatory process, and becomes a commercial success.

The compound's success attracts the attention of generics manufacturers, which launch a successful Hatch-Waxman challenge to its patent. X Pharma stops active promotion of the compound, and effectively withdraws from the market.

Sales of the generic version of the compound are strong, but reports of a serious adverse effect begin to surface. Attorney advertising campaigns are launched and lawsuits are filed, claiming that the adverse effect should have been uncovered and disclosed years earlier. Like most pharmaceutical product liability cases, these turn on a "failure to warn" theory. According to plaintiffs, the compound's manufacturers—at this point all generics—should have modified their package inserts to reflect the risk.

In response, the generics manufacturers point to federal regulations that not only require them to use, verbatim, the labeling developed by X Pharma, but also prevent them from seeking or making a label change. The generics companies argue that they can't be held liable for any inadequacy in the labeling, since they don't control its content. Their hands are tied by FDA regulations.

Various courts accept this argument, and rule in favor of the generics companies. Undeterred, plaintiffs train their sights on X Pharma, arguing that even though it long ago abandoned the market (driven out by the successful Hatch-Waxman challenge), and even though none of their clients took an X Pharma product, that company controlled the labeling, and that company should be held liable for deficiencies in the labeling. Ultimately, courts accept this argument: X Pharma is liable to thousands of people who have never used its medicine.

An unfair result? Certainly. An implausible result? Maybe not. Depending on the outcome of a case before the US Supreme Court, and other cases making their way through state and lower federal courts, this scenario may well play out before the end of 2011.

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