Hatch-Waxman and Defective Generic Drug Labels: The Disjunction Between Federal Drug Safety Law and State Warning Defect Law (Part I)

by Bernard Bell — Tuesday, May 29, 2018

Consider the following hypothetical.  A drug company develops and patents a pharmaceutical to sell under brand-name.  It secures FDA approval and enjoys its patent monopoly for many years.  But after that patent monopoly expires, generic brand-makers flood into the market and undercut the brand-name’s price.  Pharmacists substitute the generic for the brand name.  The label on the generic drug, which replicates that of the brand-name drug, fails to warn of a potential adverse effect many consumers may experience. One such consumer who suffers those adverse effects brings suit seeking compensation for the resultant injuries from the maker of the generic and the brand-name manufacturer.

Amazingly, in many states neither manufacturer is liable.  The generic manufacturer is absolved from liability by operation of federal law, and the brand-name manufacturer by application of standard state strict products liability doctrine.  The consumer is thus left uncompensated.  This result contravenes the sixty-plus year trend toward imposing strict liability for defective products.  Perhaps even more disturbingly, had our customer’s pharmacist not substituted the generic for the brand-name, he would have been able to recover for his injury from the brand-name drug company.  A recent case, McNair v. Johnson & Johnson, 2018 WL 2186550 (W. Va. S. Ct. May 11, 2018), provides the latest example of the challenges the federal pharmaceutical regulatory scheme poses for state courts’ application of their strict products liability law.  The case drew a number of amicus briefs.

I will discuss this quandary raised by the scenario above in two posts. This post will outline how this odd regulatory/products liability regime came to be.  A later post will offer some thoughts regarding the options for addressing it.

Regulatory Framework

The regulatory framework governing drug warnings results from uncoordinated congressional, agency, and judicial action.  Congress established the policy of encouraging availability of generic drugs.  The FDA implemented that policy, in doing so limiting generic drug manufacturer’s power to alter the labels on their pharmaceuticals.  Neither Congress nor the FDA reconciled the regulatory framework established with the law of strict products liability (though the FDA did attempt to do so).  This was hardly surprising, given that traditional preeminence of state law on such questions (and Congress’ decision not to include an express preemption clause).  The U.S. Supreme Court was called upon to reconcile the regulatory framework and state tort law in two cases Wyeth v. Levine, 555 U.S. 555 (2009), and PLIVA, Inc. v. Mensing, 564 U.S. 604 (2011), and the inconsistent results in the two cases exacerbated the problems caused by the regulatory framework.

Congressional Action.  The Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. 98–417, 98 Stat. 1585 (1984)(codified in scattered sections of 35 U.S.C.), popularly known as the Hatch-Waxman Act, was designed to address two competing concerns.  H.R. Rpt. No. 98-857, 98th Cong. 2d Sess. 3-6 (Aug. 1, 1984).  The first was the delay in generic drugs getting to market once the period of patent exclusivity for a brand-name drug expired.  Id. at 4-5. Congress sought to facilitate the availability of lower priced generic prescription drugs to made prescription pharmaceuticals more affordable.  The FDA had required manufacturers of generics to “virtually duplicate the . . . health and safety tests conducted by the [brand-name manufacturer to secure] marketing approval.” Id. at 4.  Congress sought to expedite approval of generic drugs, by relieving generic drug manufacturers of the obligation to engage in substantial additional testing.  Essentially the generic manufacturer could obtain approval by showing that its product was identical to the brand name drug; in effect, generic manufacturers were allowed to rely upon the extensive testing the brand-name manufacturer had performed to obtain initial approval.

Congress provided that generic brand manufacturers would merely need to submit an abbreviated new drug application (ANDA) to the FDA to secure approval to market generic versions of a brand-name drug.  The warning on the generic had to exactly match the warning on the brand-name.  21 U.S.C. §§ 355(j)(2)(A)(v), 355(j)(4)(G).  The result of this approach was relatively unusual — a manufacturer’s warning for its own products was the legally-mandated warning for a competitor’s products.

Hatch-Waxman simultaneously addressed a second issue — brand-name manufacturers’ complaints that much of their period of patent exclusivity was lost in securing FDA approval to market the drug.  H.R. Rpt. 98-857, at 3.  Congress allowed brand-name manufacturers to obtain an extension of their patent monopoly, for up to five years, to account for the time required to navigate the FDA approval process.

Hatch-Waxman was thus a compromise resulting from “extensive” negotiations involving brand-name manufacturers and manufacturers of generics.  H.R. Rpt. No. 98-857, at 4 (reporting that negotiations over the bill primarily involved the Generic Pharmaceutical Industry Association and the Pharmaceutical Manufacturers Association).  Public choice scholars might characterize Hatch-Waxman as a negotiated agreement between two concentrated interest groups.  See, Frank H. Easterbrook, Foreword: The Court and the Economic System, 98 Harv. L. Rev. 4, 17 (1984).

Wyeth and Mensing.  In Wyeth v. Levine, the Supreme Court held that brand-name manufacturers could be held liable in strict products liability for warning defects, even though drug warnings must be approved by the FDA.  The opinion was written by Justice Stevens; Justice Alito, writing for himself, Chief Justice Roberts, and Justice Scalia, dissented.  The majority noted that the FDA’s “changes being effectuated” (“CBE”) regulation, 21 C.F.R. §314.70(c)(6)(iii), allowed the brand-name manufacturer to change an approved drug label to add or strengthen warnings and instructions.  Wyeth v. Levine, 555 U.S. at 568.  The Court also rejected comments the FDA had made in the preamble to its warning regulation, Requirements on Content and Format of Labeling for Human Prescription Drug and Biological Products, 71 Fed. Red. 3922, 3934-36, cmt. 13 (2006), indicating that FDA requirements set both the floor and the ceiling for drug labels and thus preempted “conflicting or contrary” state “failure-to-warn” actions challenging FDA-approved labels.  In this respect, the FDA’s position conflicted with legislative intent.  Wyeth v. Levine, 555 U.S. at 573-75.  In short, the general requirement that a brand-name manufacturer seek FDA approval before altering the warning label did not irreconcilably conflict with state imposition of strict liability for a defect in the label.

However, in PLIVA, Inc. v. Mensing the Court held that generic drug manufacturers could not be subject to warning defect liability based on the content of their labelling, because they lacked any power to alter the drug label.  Justice Thomas wrote the opinion for the Court; Justices Ginsburg, Breyer, Kagan, and Sotomayor dissented.  The FDA had interpreted drugmakers’ authority under the CBE regulation to apply only to original applicants for approval to market a drug (i.e., the brand-name manufacturer), not companies who used the ANDA process.  Brief of the United States as Amicus Curiae 15-16, PLIVA Inc. v. Mensing, 564 U.S. 604 (2011), accessible at, 2011 WL 741927 (“U.S. Brief”) (citing 21 C.F.R. §314.97);  see, Mensing, 564 U.S. at 614. The FDA interpreted similar authority to issue “Dear Health Care Provider” letters, see, 21 C.F.R. §200.5, as inapplicable to generic drug manufacturers who gained approval to market the generic through the ANDA process.  U.S. Brief at 18-19; see, Mensing, 564 U.S. at 615.  At most, generic manufacturers could urge the brand-name manufacturer or the FDA to do so.  Id., at 616-17; accord, Abbreviated New Drug Application Regulations, 57 Fed. Reg. 17950, 17961 cmt. 40 (Apr. 28, 1992); U.S. Brief at 16-17.  The Court upheld the FDA’s interpretation, relying on Seminole Rock/Auer deference. Mensing, 564 U.S. at 614-15; see, Auer v. Robbins, 519 U.S. 452, 461-63 (1997); Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414 (1945).  Thus, the Supremacy Clause rendered generic drug manufacturers immune from liability because they could not change the label from that of the brand‑named drug.  Mensing, 564 U.S. at 618.  The Court acknowledged the arbitrariness and unfairness of this result, namely that customers who took the brand-name drug could sue the brand-name manufacturer, but customers who took the generic drug could not sue the maker of the generic. Mensing, 564 U.S. at 625.  Indeed, only Justices Thomas and Kennedy were in the majority in both Wyeth and Mensing.

Suits against Brand-Name Pharmaceutical Companies for Defective Brand Labels on Generics.  Litigation, like water, will always find an outlet.  Mensing, having immunized generics from liability, has led to suits against brand-name manufacturers for defects in generic manufacturer’s labels.  McNair, 2018 WL 2186550 *7-8; Victor E. Schwartz, et al., Warning: Shifting Liability To Manufacturers Of Brand-Name Medicines When The Harm Was Allegedly Caused By Generic Drugs Has Severe Side Effects, 81 Fordham L. Rev. 1835, 1849-52 (2013)(noting that such litigation had begun even before Mensing).  McNair v. Johnson & Johnson is one such suit.  Generally, these claims have been rejected.  Courts have held that strict products liability should be limited to liability for a manufacturer’s own products, not those of other companies.  McNair, 2018 WL 2186550 *11 (explaining that it and other courts had adopted “products liability to place responsibility for the harm caused by a product on the party who profits from its manufacture and sale”(quoting Huck v. Wyeth, Inc., 850 N.W.2d at 353, 378 (Iowa 2014)).  Indeed, not only are the generic manufacturers the sellers of the pharmaceuticals, they compete with the brand-name manufacturers whose lower-priced products the injured consumers purchased.

However, as the dissenting justices in McNair noted, some court have breached that barrier of limiting defect claims to the manufacturer and seller of the product and held that sometimes the brand name manufacturer can be held liable.  McNair, 2018 WL 2186550 (Justice Workman, dissenting).  In T.H. v. Novartis Pharmaceuticals Corp., 4 Cal.5th 145, 407 P.3d 18, (2017),  the California Supreme Court  held that an entity that promulgates and maintains exclusive authority over the content of warning labels is liable for flaws in such labels. Id. at 180. In Rafferty v. Merck & Co., Inc., 479 Mass. 141, 92 N.E.3d 1205 (2018), the Massachusetts Supreme Judicial Court held that a brand-name manufacturer could be liable to consumers of a generic drug if it acts in reckless disregard of an unreasonable risk of death or grave bodily injury by failing to appropriately update its labelling.  Id. at 156-57.

In my next post I will lay out five options for addressing the cost of injuries consumers of generics suffer due to inadequate labels, and assess each in turn.

 

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