The Supremes Shape Pharma

Aug 01, 2011

Jill Wechsler
It was a boom year for pharma at the Supreme Court of the United States. Right up to the end of June, the Justices addressed key issues involving free speech, federal preemption, and patents—many, but not all, in favor of manufacturers. Rulings involving other parties also promise to affect how drugmakers do business, as do Court decisions to reject certain cases (see sidebar).

Next year may be even more momentous if the High Court decides to take on the constitutionality of Obama Administration health reform policy. In June, the federal appeals court for the 6th circuit surprised the experts by supporting the individual coverage mandate. The judges declared the policy a legal regulation of interstate commerce, and that allowing people to go uninsured would permit "free riders" to take advantage of other taxpayers.

The Importance of Rejects
The Supremes also will hear a complex case on generic drug competition (Caraco Labs v. Novo Nordisk). The dispute centers on whether Caraco can market its generic version of diabetes drug Prandin for additional uses under a "carve-out label," or whether Novo Nordisk can block such action, as a federal circuit court ruled two years ago. It's a fairly narrow and technical issue for the Supremes, but will be closely watched.

Pro Preemption

Of particular importance to government-regulated pharma companies are several key decisions this past term supporting federal preemption of state laws. Vaccine makers and patients won an important victory when the High Court ruled against damage suits charging manufacturer malfeasance. The justices affirmed that the National Childhood Vaccine Injury Act of 1986 protects vaccine makers from injury suits, agreeing with Pfizer that siding with the plaintiffs in a 1992 DPT vaccine case (Bruesewitz v. Wyeth) would expose manufacturers to countless design defect charges and undermine the no-fault vaccine compensation policy. The American Academy of Pediatrics praised the High Court's ruling, while Justice Sonia Sotomayor dissented, arguing that more should be done to assure that vaccine manufacturers properly design and distribute their products.

Another preemption case involving generic drug labeling was more contentious, but also supported federal food and drug law over state policy. In a close 5-4 decision, the court ruled that generic drug companies Actavis and Pliva cannot be sued under state law for failing to warn patients of new safety problems if the information is not on innovator labels—and FDA requires generics labels to be exactly the same as the brand. In an opinion written by Justice Clarence Thomas, the majority advised that state laws must give way to federal policy when the two directly conflict, as is the case when following the state law would place generics firms in an impossible bind by forcing them to violate FDA policy.

Two years ago, in the Wyeth v. Levine case, the Supremes came to the opposite conclusion for a brand-name firm, ruling that the company failed to provide sufficient warnings on its label, even though it complied with FDA requirements. In this year's case, the minority argued that federal law should not immunize generics manufacturers from all state failure-to-warn claims, and that companies should propose changes to FDA if existing labels are inadequate. Thomas agreed that brand firms can be liable for inadequate safety warnings, and that the court should not rule differently for generics, but ended up acknowledging that the High Court has to adhere to the law.

In another case involving federal and state authority (Astra USA v. Santa Clara County), the Supremes ruled that California health facilities cannot sue drugmakers for withholding discounts authorized by Medicaid and the 340B discount program. A unanimous decision written by Justice Ruth Bader Ginsburg explains that only the federal government can bring suit for violations of federal contracts involving these and other health programs. The Obama Administration backed the drug companies, while hospitals and providers claimed that they need stronger recourse to obtain low-cost medicines.

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