California Court Recognizes Innovator Liability
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California Court Recognizes Innovator Liability

Thursday, February 22, 2018By Richard Alexander

The market for generic drugs has grown at a rapid pace. The global market for generics was valued at around $228 billion in 2016. As a percentage of total drugs dispensed in the United States, generic drugs dominate. IMS Health estimated that unbranded generics accounted for 80% of all prescriptions distributed in 2013. This growth is triggered by governments and other providers searching for reasonable alternatives to rising healthcare expenses. While demand for generic drugs has soared, some important questions regarding the liability of the brand-name drug manufacturer have emerged.

The Supreme Court of California tackled the question of the liability of a brand-name drug manufacturer for injuries resulting from its generic offshoot. The Court was the first high court to establish a duty under the theory of innovator liability. This places a duty on the brand-name drug manufacturer to warn consumers who use generic versions of their products.

Does the Brand-Name Drug Manufacturer Owe a Duty to Generic Users?

The liability of the brand-name drug company was the central issue in T.H. v. Novartis Pharmaceuticals Corp, No. S233898, slip op. (Cal. Dec. 21, 2017). The case was brought by twins who claimed that they developed autism as a result of their mother’s use of a generic drug named terbutaline to avoid pre-term labor. They sued Novartis Pharmaceuticals Corporation (Novartis) for negligence, negligent misrepresentation, and strict liability. Novartis manufactured Brethine, an asthma medication that was prescribed to women to slow premature labor, until it sold the new drug application to another company. The plaintiff’s mother took terbutaline, the generic form of Brethine, in 2007. The plaintiffs maintained that Novartis was aware or should have known of the serious side effects of terbutaline for newborns whose mothers took the drug and that the medication should have been equipped with adequate warnings.

The Court concluded that brand-name manufacturers have a duty of care to users of both the brand name product and its generic equivalent. This duty requires the manufacturer to provide product labeling that contains sufficient warnings about the drug. But the duty does not end there- the brand-name manufacturer can be found liable for failure to warn even if it no longer manufactures the product if the subsequent manufacturer fails to provide adequate labeling.

What Does This Decision Mean for Brand-Name Manufacturers?

The extension of liability was based on the following reasoning: federal law requires generic labeling to mimic brand-name labeling so it is foreseeable that deficiencies in the labeling of the brand-name drug would be mirrored in the generic label. It was foreseeable that not taking action to update the warning label would harm users regardless of whether they were prescribed the brand-name or generic drug. The Court included limitations, such as exempting the manufacturer from liability for injuries that resulted from the manufacturing process. Nevertheless, this is a substantial expansion of liability for brand-name drug manufacturers in California.

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