California Supreme Court Decision Quashes Innovation, Threatens Health, and Encourages Costly Lawsuit Abuse

Traditional tort law holds that manufacturers are responsible only for their own products, not those made by competitors. The California Supreme Court changed that in late January by declining to review Conte v. Wyeth, which leaves name-brand drug manufacturers liable for harm caused by another manufacturer’s generic version. This unprecedented and unfair extension of product liability spells bad news for innovators and consumers alike.

Elizabeth Conte took a generic version of Reglan, a heartburn medication originally manufactured by Wyeth Pharmaceuticals and approved for 12 weeks of use. Conte took the generic drug for nearly four years and claimed she developed the movement disorder tardive dykinesia. Conte originally sued the generic manufacturers, who made the product she actually took, but the City and County of San Francisco Superior Court dismissed her lawsuit.

California’s First Appellate District Court ruled last November that it is “foreseeable” that Conte’s physician might have relied on labeling information from Wyeth, the pioneer manufacturer of the drug she didn’t take, whom Conte sued for labeling fraud and misrepresentation. The appellate court allowed Conte to sue Wyeth. On January 21, the California Supreme Court refused to review the appellate decision, allowing Conte’s lawsuit against Wyeth to proceed and extending product liability far beyond the usual boundaries.

Conte, which is essentially new California law now, holds manufacturers responsible for the products of competitors, which they are powerless to do anything about. This unfair decision has stunned observers across the spectrum and has drawn warnings of negative consequences. Conte-style liability, said the Drug and Device Law blog, “will inevitably serve as a lead weight around the ankles of the companies that invented the most significant breakthrough products.” The Conte ruling “expands liability to deep-pocket defendants, while letting free riders—whose conduct probably should subject them to liability—off the hook.” And it gets worse.

Courts, politicians, and regulatory bodies do not discover or manufacture new medicines. Pharmaceutical innovators do, at great expense in research and development and after a long approval process by the U.S. Food and Drug Administration. Pharmaceutical innovators must also deal with theft of intellectual property, the reimporation of their products, and outright piracy. Adding to these rigors the unprecedented liability from Conte will surely discourage the very kind of innovation that produced the new medicines in the first place.

Conte guarantees that new medicines will take longer to develop and cost more. Those higher prices will make life more difficult for Americans on fixed incomes, who rely on life-saving medications. Imposing limitless liability in perpetuity on pioneer manufacturers, for products they don’t make or sell, means that the original innovators must recoup the liability expense somewhere. The only place is as a mark-up on drugs they currently sell. Generic manufacturers, who make cheap copies of the original, will escape this cost. Free riders will soar while innovation will plummet.

Conte will also cause an avalanche of costly, abusive lawsuits at a time when tort reform is needed in California to make the state’s economy more competitive globally. California had the highest tort losses of any state in 2006, nearly $20 billion, and it had the 11th-worst overall tort rules, according to the Pacific Research Institute’s 2008 U.S. Tort Liability Index. On the other hand, according to a forthcoming report, Tort Law Tally, tort reform lowers costs dramatically—if allowed to work.

As in traditional tort law, manufacturers of all kinds should be responsible only for their own products, not those made by competitors. Conte is bad law, bad public policy, and a national embarrassment that will cost California and the nation jobs and new medicines.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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