United States: Breaking News: TH v. Novartis – California Supreme Court Recognizes New Tort Duties As Traditional Limits Slide Into The Sea

Last Updated: December 28 2017
Article by Steven Boranian

We posted our 2017 "Worst 10 decisions" list a day too soon, because the California Supreme Court issued its anticipated decision in TH v. Novartis, No. S233898, slip op. (Cal. Dec. 22, 2017) today, and if it is not the worst drug and device decision of 2017, it is awfully close. With an emphasis on awful.

This case presents two issues of duty: (1) Does an innovator prescription drug manufacturer owe a duty to patients who used a competitor's generic product; and (2) does that manufacturer also owe a duty to patients who used a competitor's product years after the innovator sold the NDA and stopped selling the drug altogether?  The California Supreme Court decided "yes" on both counts, and in doing so it has broken away from decades of precedent placing responsibility for defective products on the companies that made and sold the products.

We will have more to say on this opinion, but our first read reveals that the Supreme Court fundamentally misframed the issue as whether the Court should create an "exception" to the duty to warn that all branded drug manufacturers owe. That is exactly backwards, and the Court framed "duty" in absurdly broad fashion (everyone owing a duty to everyone else not to be negligent in giving warnings) in order to posit an "exception" rather than what is really happening, that being a huge expansion of liability.  The law in every jurisdiction, including California, is that one manufacturer generally does not owe duties to those who use other manufacturers' products.

So how did the California Supreme Court justify its departure from this general rule? Let's take innovator liability first.  The Court held unanimously that an innovator drug manufacturer can be liable for its competitors' generic products, with a particular fixation on a listed manufacturer's exclusive right to "unilaterally" update a label.  For one thing, the Court considerably overstates a listed manufacturer's ability to "unilaterally" change a label under the CBE regulations, which require "newly acquired information" among other things.  On the case-specific facts – off-label use – the opinion is simply wrong.  Only the FDA, and not a company "unilaterally," can require a warning about an off-label use – it's right there in the regulations.

The main problem, however, is the Court's overreliance on foreseeability to define a new tort duty. Although the Court discusses other factors, its core rationale is that a listed manufacturer can foresee that a generic manufacturer will use substantially the same label.  Fine, but why does the law not require more than that to deviate from decades of product liability law?  And why are other factors not as relevant?  The Court, for example, quantifies the burden on brand-name manufacturers' as "zero," which is astonishing as it is potentially shifting 100% of liability onto 10% (if that) of the prescription drug market.  The Court also assumes that insurance against this new liability would be readily available.  If any reader knows of such a policy actually existing, please tell us.  When expanding duties so fundamentally, we are not sure how the Court can purport to draw these conclusions.

The opinion on predecessor liability—or as we would call it, "perpetual liability"—deviates from prevailing law by equal measure, if not more. By a vote of 4 to 3 (with the margin provided by an "assigned" judge filling an open seat), the Court held that an innovator owes duties to users of a competitor's product, even after the innovator has sold the NDA and stopped selling the drug.  Again, the focus is on foreseeability, because a listed drug manufacturer purportedly can foresee that another manufacturer will make a generic product using a similar label in the future.  Is such a manufacturer supposed to "foresee" off-label promotion (alleged in the complaint but not mentioned in the opinion) as well?  We will definitely have more to say on this, but to start, what exactly can the innovator foresee and for how long?  Who will sell the product?  For how long, to whom, and for what purposes?  What scientific developments will come down the pike, and what will the new owner of the product do with the label, into which the innovator now has no input?  The result goes far beyond any other version of innovator liability ever adopted, in particular leaving in the dust the time limited, learned intermediary rule-respecting version adopted in the briefly extant Weeks v. Wyeth decision in Alabama.

We also take issue with the majority framing the issue as whether selling a product line "automatically terminates" liability for its negligence. The defense never proposed such a thing—a product manufacturer will continue to owe duties to users of its own products, even after it has left the market.  We again think the Court has it backward:  The issue is not whether liability "terminates"; the issue is whether the law should create a new form of liability in the first place.

We cannot help but think that the Court was motivated to create a remedy for plaintiffs who otherwise may not have one. Footnote 2 suggests that the decision is, at least in part, intended to lobby the FDA (and federal authorities generally) to trade generic preemption for elimination of this radical new innovator liability theory.  In this regard, the opinion treats innovators like insurers of competing products, potentially forever, and seeks to hold them hostage in a larger, more political game.  More to come.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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