California high court ruling in Novartis liability case differs from existing law, experts say

By Glenn Minnis | Jan 26, 2018

SAN FRANCISCO – John Doherty argues the recent California Supreme Court innovator liability verdict holding brand-name pharmaceutical-maker Novartis AG liable for sickness caused by generic versions of the drugs the company once manufactured is quite different from what is widely perceived to be the letter of the law.  

In a complaint seeking claims for negligence, negligent misrepresentation, strict liability, intentional misrepresentation, concealment and medical negligence, the court found Novartis liable even though the company no longer manufactured the drugs in question and had divested all interest in its production.

“This is where there is a disconnect between what the average person thinks the court should do and what they are now doing,” Doherty, president of the Civil Justice Association of California, told the California Record. “The company being sued had followed all the rules, had government approval and they’re still being told to pay damages they had no direct hand in causing. This is not how most people believe the system should work.”

The case is T.H. v. Novartis Pharmaceuticals Corp. As disappointed as Doherty is about its early verdict, he said nothing about it should come as a surprise.

John Doherty, president of the Civil Justice Association of California  

“We’ve developed a court system where if someone has been harmed, the perception is someone needs to pay even if they may not really be responsible,” he said. “It seems for every harm, judicial tries to find someone remotely involved with enough resources to pay. We’re now to that point, making people pay just because they are perceived to be able to do so.”

The Novartis suit stems from the case of twin children diagnosed with autism and other developmental issues that attorneys for their plaintiff father argue are the direct result of their mother being prescribed a generic version of the asthma drug Brethine for premature labor pains.  

Instead of the generic manufacturer, the suit named Novartis as a defendant. The company had stopped producing the drug years before and had sold its rights to another manufacturer.

With consumers legally prohibited from suing generic drug-makers because federal law requires them to use the brand-name versions’ labels, the court ruled Novartis should have known the generic version of the drug “carried a risk of serious side effects for newborns.”

The verdict also stipulated that federal law further required the company to promptly report those findings to the Food and Drug Administration and update Brethine’s labeling as needed.

“So, a duty of care on behalf of all those who consume the brand-name drug or its bioequivalent ensures that the brand name manufacturer has sufficient incentive to prevent a known or reasonably knowable harm,” Justice Mariano-Florentino Cuéllar wrote in the California high court’s 4-3 decision.

The verdict left Steven J. Boranian, a partner with Reed Smith’s San Francisco office, as baffled by the reasoning behind it as he is clear about the repercussions it could have for brand-name pharmaceutical manufacturers across the state.

“I don’t know what else Novartis could have done to protect itself,” Boranian told the Northern Record. “This ruling deviates significantly from existing law. It will remain a minority view by and large, but it could lead to much more litigation here in California. Manufacturers of brand drugs are now tracking these kinds of cases more intently than they ever have before.”

When all is said and done, Boranian said more drug and technology companies will almost certainly be forced to defend themselves in other such product-liability proceedings.

In offering its own defense, Novartis turned to an argument that centered on the theory to hold the company liable would effectively render it the “market’s insurer.”

In further asserting that its duty to educate and keep the public abreast did not extend to generic versions of the drug, Reuters has reported the Switzerland-based company had the support of industry groups including the U.S. Chamber of Commerce.

“No other court has ever said anything like this, that the brand name company can be held liable even though it was not directly involved,” said Boranian. “It’s a big departure from the way the law has always been.”

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