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WILL FEDERAL PREEMPTION PROTECT GENERIC PHARMA FROM PLAINTIFFS’ STATE LAW CLAIMS OF FAILURE TO WARN? By: Kristin D. McMahon, Esq.,
Chief Claims Officer, IronHealth *
On March 30, 2011 the Supreme Court heard oral argument in Pliva Inc. et al v. Mensing, Dkt No. 09-993, and two companion cases. 1 This Supreme Court appeal has been one of the most closely watched cases by the pharmaceutical industry and its insurers since Wyeth v. Levine -- a March 2009 decision in which the Supreme Court dealt a blow to the pharmaceutical industry’s preemption defense against state law tort claims. 2 At stake is whether the generic manufacturers, and their insurers, will have to defend against lawsuits brought in courts throughout the United States alleging that their labels and package inserts failed to provide adequate warnings of the dangers posed by their drugs: an outcome that would likely expose them to millions of dollars in defense costs and potential damages.
By a 6-3 decision, 3 the Court in Wyeth ruled that a brand drug manufacturer (Wyeth) could be found liable, under state law, for failing to provide a warning that was stronger and more detailed than the warning on a label the FDA had approved. Although the Federal Food, Drug and Cosmetic Act (“FDCA”) requires that the FDA approve every prescription drug label, and although Wyeth’s label for its proprietary drug Phenergan ful y complied with FDA requirements, the Court held that it was possible for Wyeth to comply with both the federal labeling requirements, and parallel state-law duties to warn of risks presenting substantial dangers to users, which were known or knowable in light of the knowledge available at the time of sale. According to the Court’s review of, the history of the FDCA, Congress did not intend to preempt state failure-to-warn actions against prescription drug manufacturers. An important factor in the Wyeth de-cision was the Court’s finding that Wyeth, a brand manufacturer, could have used the FDA’s CBE (“Changes Being Effected”) Regulation, 21 CFR §314.70(c)(6)(iii) to unilaterally strengthen its warning without the FDA’s preapproval. The three Mensing defendants are pharmaceutical manufacturers who face similar claims for failure to warn end-users of product hazards under state law. 4 But Mensing comes with a twist: the defendant pharmaceutical companies, unlike the defendant in Wyeth, are generic pharmaceutical manufacturers. Under the Hatch-Waxman Act, generic drugs are required to be true copies of their identical brand drugs in all significant respects, including the labeling. Consequently the generic defendants claim that they are prohibited by the FDCA and the relevant FDA regulations from making any unilateral safety changes to their labels. Thus, the generic defendants claim that they -- unlike the brand manufacturers -- are prohibited from using the CBE regulation to make label changes without prior approval by the FDA; and they claim that they may only use the CBE process to copy warning language that a brand manufacturer has already added to its label by using the same regulation. The question before the Supreme Court in Mensing is whether the earlier reasoning and decision in Wyeth should be applied to these generic pharmaceutical manufacturers; or conversely, whether the Hatch-Waxman Act preempts state law failure-to-warn claims against generic pharmaceutical companies whose warning labels were required by the Hatch-Waxman Act and the FDA regulations to be “the same as” those which the FDA approved for the brand-name equivalent drug * The assistance of Craig Stewart and Eric Hermanson of Edwards Angell Palmer & Dodge LLP in the preparation of this article is gratefully acknowledged.
Actavis Elizabeth v. Mensing, Docket No. 09-1039, and Actavis, Inc. v. Demahy, Docket No. 09-1501.
Wyeth v. Diana Levine, 555 U.S. 555 (2009) (Slip Opinion), 129 S.Ct 1187 (hereafter, “Wyeth”).
In the majority were Justices Stevens, Kennedy, Breyer, Souter and Ginsburg, with Justices Breyer and Thomas writing separate opinions concurring in the result. Dissenting were Chief Justice Roberts and Justices Scalia and Alito. In Mensing the plaintiffs’ doctors prescribed Reglan, the brand name for a drug manufactured by A.H. Robins to treat their respective diabetic gastroparesis and gastroesophageal reflux disorders. Their pharmacists filled the prescriptions with the generic equivalent drug, metoclopromide. The plaintiffs each took the drug as prescribed for approximately four years and as a result of their long term use, both developed tardive dyskinesia, a severe and irreversible neurological disorder. The labels in place at the time the plaintiffs took the drug failed to warn that use of the drug for more than six months could cause severe side effects, including tardive dyskinesia One of the interesting aspects of the Mensing case is the U.S. Supreme Court’s unusual eagerness to grant the generic manufacturers’ petition for certiorari. This is a case that the Supreme Court seems to have really wanted to hear. At the time cert was granted, there were only two circuit decisions -- in the Fifth and Eighth Circuits -- addressing preemption in the context of generic manufacturers; and both of those decisions came out the same way: finding that failure-to-warn claims against generic manufacturers were not preempted by federal law. The Court then asked for the Obama Administration’s views as to whether certiorari should be granted. The Administration recommended that the Court decline to hear the case. 5 Having sought out the Administration’s recommendation, the Supreme Court then rejected it. It decided to review the case -- which means, under the traditional (though unwritten) “Rule of Four,” that at least four justices must have voted in favor of certiorari. At the narrowest level, the Mensing case offers an opportunity for the Court to evaluate whether the generic defendants are prohibited by the FDCA and the relevant FDA regulations, from making any unilateral safety changes to their labels. In asserting federal preemption, the generic defendants assert that they, unlike the brand manufacturers, may only use the CBE process to copy warning language that a brand manufacturer has already added to its label by using the same regulation. By contrast, the plain-tiffs in Mensing have invited the Court to reject this reading, and hold that the generic manufacturers can utilize the CBE process, and other means, to deliver warnings to physicians and end-users as to known risks of their products. This question will require the Court to construe the FDCA statute and implementing regulations; and will provide generic manufacturers with a much-needed clarification of their ability to issue warnings that go beyond the FDA-approved labeling of the equivalent branded products. At a broader level, the Mensing case may cause the Court to evaluate the competing public- policy goal of the Hatch-Waxman Amendments to the FDCA, which one court has summarized as “to get generic drugs into the hands of patients at reasonable prices – fast.” Andrex Pharms., Inc. v. Biovail Corp. Int’l 256 F.3d 799, 809 (D.C. Cir. 2001). This goal appears to be of particular interest to Justice Breyer. In his concurring opinion in Wyeth, he expressed his concern that “state tort law can sometimes raise prices to the point where those who are sick are unable to obtain the drugs they need.” Wyeth, Breyer J., concur-ring, at 1204. In such cases, Justice Breyer acknowledged the authority of the FDA to “seek to determine whether and when state law acts as a help or a hindrance to achieving the safe drug-related medical care that Congress sought.” Id. And he agreed that if the FDA embodied those determinations in specific regu-lations, including those pertaining to labeling, then “such determinations would have preemptive effect.” Although the Administration made clear that it did not agree with the merits of the generic manufacturers’ argument -- that they could not provide enhanced safety warnings while still “remaining faithful” to the Hatch-Waxman Amendments – the Administration argued that the time was not yet ripe for the Supreme Court to address the issue: since the Fifth and Eighth Circuits had each ruled the same way (against preemption), there was no split in the circuits for the Supreme Court to resolve.
Not surprisingly, the generic pharmaceutical defendants in Mensing -- with an eye toward Justice Breyer’s vote -- have pointed to the public policy concerns that underlay the Hatch-Waxman Amendments: to maintain low prices and maximize access to healthcare, by facilitating a streamlined administrative process for the supply of generic equivalents to branded pharmaceutical products. They have argued that the FDA regulations implementing the Hatch-Waxman Amendments were designed specifical y to implement such a streamlined administrative process, by curtailing any deviation from the branded manufacturers’ FDA-ap-proved labeling. As stated in the Amicus Curiae brief of the Generic Pharmaceutical Association (“GPA”): The intended consequence of precluding any variation between ge-neric drugs and the approved brand drugs was to foster vigorous price competition among generics. Hatch-Waxman had a clear and overriding purpose – to increase the availability of low-cost generic drugs, with the twin benefits of decreasing healthcare costs for everyone and increasing access to quality medical care millions of poor and elderly Americans. Simply stated, the essential point of Hatch-Waxman was “to get generic drugs into the hands of patients at reasonable prices – fast.” Andrex Pharms., Inc. v. Biovail Corp .Int’l 256 F.3d 799, 809 (D.C. Cir. 2001). Based on these and similar statements, the GPA argued that only by limiting the duties of generic pharmas to copying exactly the more expensive brand drug will the generics be able keep costs low, and that the additional costs engendered by having to defend against state failure-to-warn claims would interfere with that objective.
By contrast, the opponents of preemption have pointed to the public policy concerns that are served by preserving and allowing individuals to pursue state tort remedies against manufacturers (including generic manufacturers), in aid of the limited resources of the FDA, who become aware of known dangers of the products they distribute and produce. Justice Breyer, and perhaps other Justices as well, may be tempted to address the balance of these competing policy interests, as part of the backdrop for their decision in Mensing.
A Close Call: How Will The Justices Decide? A review of the transcript of the March 30, 2011 oral argument in Mensing confirms the signifi- cance of the issues discussed above, and provides some clues as to the ultimate disposition of the case. It is clear, from his questioning, that Justice Alito will vote in favor of finding that the state law claims against the generic manufacturers are preempted, and it is highly likely that Justices Scalia and Roberts will do the same. From the questions asked by Justices Ginsburg, Sotomayor and Kagan, it seems equal y clear that they will go the other way: finding that the generic defendants are not relieved from a state law duty to warn of in-creased dangers, even if they could not unilaterally change their labels. These Justices seem to have accept-ed the plaintiffs’ argument that the generic manufacturers could have “taken steps” to warn the public of metaclopromide risks – such as advising the FDA of newly discovered information, or issuing “Dear Health Care Professional” (“DHCP”) letters directly to health care providers -- and that these measures would not be in conflict with the FDA’s authority to require an approved warning label. If the foregoing analysis is correct, there are three justices reasonably certain to find in favor of preemption and three justices who are likely to find against preemption. If so, the outcome in Mensing may come down to Justices Thomas, Breyer and Kennedy. Two votes either way, would create the necessary five-vote majority to either affirm the circuit courts or reverse them and hold that state-failure-to warn claims against generic drug makers are preempted. On balance, while any prediction is difficult and risky, it seems slightly more likely than not, that two of the “swing” Justices will vote in favor of preemption. One of those two votes will probably not be Clarence Thomas. As noted, Justice Thomas has a sharply defined judicial philosophy against federal pre-emption, which is sometimes at odds with his conservative political orientation. Consequently, even though his sympathies may lie with his conservative col eagues, how he wil vote in Mensing is too close to call (Unfortunately, Justice Thomas adhered to his practice of asking no questions at oral argument, and he has given us no fresh clues as to how he will decide the issue.) Justice Breyer is a different story. Based on his concurring opinion in Wyeth, he is certainly open to finding preemption, and he may also be sympathetic to Congress’s overall purpose -- in passing the Hatch-Waxman Act -- to increase the supply of safe, low-cost prescription drugs. Justice Kennedy’s questions at argument leave his views difficult to predict. On the one hand, the operative assumption -- since he joined Justice Stevens’ sweeping decision in Wyeth – has been that he will vote to reject broad federal preemption. On the other hand, both he and Justice Breyer asked several questions at oral argument suggesting that preemption may be mandated in the Mensing case by the Court’s decision in Buckman Company v. Plaintiffs’ Legal Committee, 531 U.S.341 (2001). This could produce a narrow ruling in favor of preemption.6 While generic manufacturers and their counsel have at least some reason to hope for a favorable outcome, even if the Court rules that state failure-to-warn claims are preempted, the manufacturers will still have to deal with exposure to liability and damages from a variety of other claims.
Products Liability Exposure for Generic Manufacturers: Regardless of the Court’s Decision in Mensing Regardless of the outcome of the Mensing case, generic pharma can expect to face litigation chal- lenges into the future. The state-law failure to warn theories that are at the heart of the Mensing are only one of several theories of liability that are generally pursued by plaintiffs against manufacturers or distribu-tors. Other theories pursued by plaintiffs -- apart from the failure to warn under state law -- include strict liability, negligence, fraud, deceptive advertising, or even intentional or malicious conduct. See, e.g., Prather v. Pfizer Inc., 02-L-480 (Ill.Cir.Ct. Dec. 2, 2004) ($80 million class action settlement based on unfair business conduct in falsely advertising product as a “breakthrough new drug” that was as “safe as a placebo”). Thus, even if the Supreme Court in Mensing finds that state-law failure to warn claims are preempted, that ruling will not protect the generic manufacturers from these other cases, theories, and causes of action. If the Supreme Court rejects federal preemption of the state law failure-to-warn claims, generic manufacturers’ costs of defending and settling claims will be even higher. Defense of negligent misrepresen-tation and failure to warn claims wil likely require generic manufacturers to engage in costly discovery to defend the labeling of their products, and to explain to state-court juries any failure on their part to advise the FDA of newly discovered post distribution health issues, or to issue “Dear Health Care Professional” (DHCP) letters. Legal and regulatory costs may also increase, as generic drug manufacturers are required to monitor drug related laws in all fifty states.
The generic pharmaceutical industry is anxiously awaiting the Supreme Court’s ruling in Mensing regarding federal preemption of state law failure to warn cases. If the Court rejects federal preemption, it will significantly affect generic manufacturers’ ability to defend themselves against failure-to-warn cases in the future, and will spark renewed interest by the plaintiffs’ bar in pursuing such claims. If preemption is upheld by the Court, the plaintiffs’ bar will need to reformulate their failure-to-warn claims against generic manufacturers: recasting those claims in terms of negligence, defective design or manufacturing, fraud, false advertising, or the like. One thing is certain. No matter what conclusion is reached by the Supreme Court, it is critical that generic drug manufacturers review their current liability insurance programs to ensure that the limits of those programs are adequate to protect against future product liability claims.
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth® When considering a long-term insurance partner for your business, please call 1-877-IRON411, visit www.ironshore.com or email: [email protected] IRONSHORE® with U.S. executive offices at One State Street Plaza, 7th Floor, New York, NY 10004 includes Ironshore Claims LLC, a licensed claims administration company, Ironshore Insurance Services LLC, a licensed insurance agency and surplus lines broker, Ironshore Indemnity Inc., a Minnesota domiciled property and casualty insurer, and Ironshore Specialty Insurance Company, an Arizona domiciled surplus lines insurer.
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