High Court Rules Drug Cos. Not Immune To State Courts

The 6-3 ruling by the court in Wyeth v. Levine is not the first case concerning state law preemption of medical products lawsuits decided by the Supreme Court in recent years. In February 2008, the court in an 8-1 decision ruled that state cases against medical device makers are preempted once their devices have been approved by the FDA.

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

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

In the underlying case, Diana Levine had sued Wyeth after she received an injection of an anti-nausea drug--a method that put her at risk of infection and ultimately led to the amputation of her forearm.

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

"Wyeth's cramped reading of the CBE regulation and its broad assertion that unilaterally changing the [drug] label would have violated federal law...are based on the fundamental misunderstanding that the FDA, rather than the manufacturer, bears primary responsibility for drug labeling," Judge Stevens wrote in the 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 bears responsibility for the content of its label at all times," he wrote.

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

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

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

Later he noted, "In keeping with Congress' decision not to preempt common-law tort suits, it appears that the FDA traditionally regarded state law as a complementary form of drug regulation." He said the agency has "limited resources to monitor the 11,000 drugs on the market, and manufacturers have superior access to information about their drugs."

He continued, "State tort suits uncover unknown drug hazards and provide incentives for drug manufacturers to disclose safety risks promptly. They also serve a distinct compensatory function that may motivate injured persons to come for-ward with information."

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

NO INSURANCE PRICE RATE IMPACT EXPECTED

The Supreme Court ruling should not raise insurance rates for pharmaceutical companies because historically the sector has had no protection, according to James Walters, managing director of Aon's life science industry practice in Philadelphia.

Mr. Walters said while there may be precedent-setting possibilities from the decision, Aon does not believe it will lead to an increase in rates because "federal preemption has not applied to pharmaceuticals," unlike medical devices which do have this protection.

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 decision will energize the plaintiff bar to file more suits against drug companies, but if that does not happen "it should be business as usual."

He called the decision disappointing because there were six warnings on the drug's label "and they argued a seventh would have done the trick."

Mr. Walters said last year's Riegel v. Medtronic decision upholding labeling protections for device manufacturers also failed to impact rates because insurers in their underwriting had already been factoring in that protection.

Meanwhile, the latest high court decision is likely to prompt legislative action. In its wake, Rep. Frank Pallone, D-NJ, chairman of the House Energy and Commerce Subcommittee on Health, announced he intended to reintroduce legislation in the near future that would 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 said during his campaign that he supports legislation to overturn the Riegel decision and would sign it if elected.

LAWYER'S PERSPECTIVE

Victor Schwartz, a partner at Shook, Hardy & Bacon LLP in Washington, D.C. and a veteran defense lawyer for pharmaceutical firms, said that based on the oral argument, the Supreme Court decision was "not a surprise," and "insurers were not banking on winning this case."

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

Mr. Schwartz said experienced insurers are aware "that implied preemption as compared to express preemption is very chancy, or iffy."

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

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

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

Mr. Schwartz said the decision seemed to imply the FDA might have had more credibility in its argument before the court if it had undertaken an administrative process before announcing its change in policy.

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

"The court may have given through its decision 'a little of a road map' of how a drug company might obtain preemption, if that is, if they want to change a warning," Mr. Schwartz said. To get that preemption, he said, the company "should go to the FDA and obtain a specific decision as to whether an added warning was necessary."

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