The 6-3 ruling by the court in Wyeth v. Levine is notthe first case concerning state law preemption of medical productslawsuits decided by the Supreme Court in recent years. In February2008, the court in an 8-1 decision ruled that state cases againstmedical device makers are preempted once their devices have beenapproved by the FDA.

In the drug company case, Wyeth had argued that it would havebeen impossible to comply with the state-law duty to modify thelabeling of the drug in question without violating federal lawrequiring FDA label approval. The drug company argued further thatrecognition of state tort action creates an unacceptable "obstacleto the accomplishment and execution of the full purposes andobjectives of Congress" by substituting a lay jury's decision aboutdrug labeling for the expert judgment of the FDA.

Justice Stevens, who authored the Supreme Court opinion,addressed the first argument, noting there is an FDAregulation--"changes being effected [CBE] regulation"--allowingcertain label changes before receiving FDA approval. These includelabel changes that "add or strengthen an instruction about dosageand administration that is intended to increase the safe use of thedrug product."

In the underlying case, Diana Levine had sued Wyeth after shereceived an injection of an anti-nausea drug--a method that put herat risk of infection and ultimately led to the amputation of herforearm.

She alleged that the labeling was defective because Wyeth failedto instruct clinicians to use a safer method (IV-drip). The trialcourt that heard the case noted there were 20 reports ofamputations similar to Ms. Levine's since the 1960s.

"Wyeth's cramped reading of the CBE regulation and its broadassertion that unilaterally changing the [drug] label would haveviolated federal law...are based on the fundamentalmisunderstanding that the FDA, rather than the manufacturer, bearsprimary responsibility for drug labeling," Judge Stevens wrote inthe Supreme Court opinion published Tuesday.

"It is a central premise of the Food, Drug and Cosmetic Act(FDCA) and the FDA's regulations that the manufacturer bearsresponsibility for the content of its label at all times," hewrote.

Wyeth's second argument--that requiring it to comply with astate-law duty to provide a stronger warning would interfere withCongress' purpose of entrusting an expert agency with drug labelingdecisions--"is meritless," Judge Stevens said, "because it relieson an untenable interpretation of congressional intent and anoverbroad view of an agency's power to preempt state law."

"The history of the FDCA shows that Congress did not intend topreempt state-law failure-to-warn actions," he wrote.

"If Congress thought state-law suits posed an obstacle to itsobjectives, it surely would have enacted an express preemptionprovision at some point during the FDCA's 70-year history," hewrote. "But despite its 1976 enactment of an express preemptionprovision for medical devices...Congress has not enacted such aprovision for prescription drugs."

Later he noted, "In keeping with Congress' decision not topreempt common-law tort suits, it appears that the FDAtraditionally regarded state law as a complementary form of drugregulation." He said the agency has "limited resources to monitorthe 11,000 drugs on the market, and manufacturers have superioraccess to information about their drugs."

He continued, "State tort suits uncover unknown drug hazards andprovide incentives for drug manufacturers to disclose safety riskspromptly. They also serve a distinct compensatory function that maymotivate injured persons to come for-ward with information."

He added that failure-to-warn actions, in particular, "lendforce to the FDCA's premise that manufacturers, not the FDA, bearprimary responsibility for their drug labeling at all times."

NO INSURANCE PRICE RATE IMPACT EXPECTED

The Supreme Court ruling should not raise insurance rates forpharmaceutical companies because historically the sector has had noprotection, according to James Walters, managing director of Aon'slife science industry practice in Philadelphia.

Mr. Walters said while there may be precedent-settingpossibilities from the decision, Aon does not believe it will leadto an increase in rates because "federal preemption has not appliedto pharmaceuticals," unlike medical devices which do have thisprotection.

Pharmaceuticals, he said, "have never enjoyed that protection.They've been operating without a clear federal preemption forever."Rates might have improved, he noted, had Wyeth been successful.

On the flip side, he said there has been talk that the decisionwill energize the plaintiff bar to file more suits against drugcompanies, but if that does not happen "it should be business asusual."

He called the decision disappointing because there were sixwarnings on the drug's label "and they argued a seventh would havedone the trick."

Mr. Walters said last year's Riegel v. Medtronicdecision upholding labeling protections for device manufacturersalso failed to impact rates because insurers in their underwritinghad already been factoring in that protection.

Meanwhile, the latest high court decision is likely to promptlegislative action. In its wake, Rep. Frank Pallone, D-NJ, chairmanof the House Energy and Commerce Subcommittee on Health, announcedhe intended to reintroduce legislation in the near future thatwould overturn Riegel.

Energy and Commerce Committee Chairman Henry Waxman, D-Cal.,will be a co-sponsor.

Giving the measure more impetus is the fact President Obama saidduring his campaign that he supports legislation to overturn theRiegel decision and would sign it if elected.

LAWYER'S PERSPECTIVE

Victor Schwartz, a partner at Shook, Hardy & Bacon LLP inWashington, D.C. and a veteran defense lawyer for pharmaceuticalfirms, said that based on the oral argument, the Supreme Courtdecision was "not a surprise," and "insurers were not banking onwinning this case."

He said that based on the oral arguments, the justices were verymuch divided, "and if they had sided with Wyeth, it would have beenon a technicality."

Mr. Schwartz said experienced insurers are aware "that impliedpreemption as compared to express preemption is very chancy, oriffy."

In this case, he said, "the court simply found that impliedpreemption did not exist."

An important point about the decision, Mr. Schwartz said, is thelack of deference it showed to the FDA's views on preemption.

"The court seemed to focus sharply on the fact that the FDA hadchanged its mind on preemption without any public vetting of thatproposed change in the agency's perception of its authority topreempt state law."

Mr. Schwartz said the decision seemed to imply the FDA mighthave had more credibility in its argument before the court if ithad undertaken an administrative process before announcing itschange in policy.

Specifically, he said, the Supreme Court found that in thiscase, the change in view "was too much of an 'inside job.'"

"The court may have given through its decision 'a little of aroad map' of how a drug company might obtain preemption, if thatis, if they want to change a warning," Mr. Schwartz said. To getthat preemption, he said, the company "should go to the FDA andobtain a specific decision as to whether an added warning wasnecessary."

(Broker and lawyer reactions reported by Daniel Hays and ArthurD. Postal. Decision details reported by Susanne Sclafane.)