Disastrous Results Await New Drug Safety Rule: Generics face flood of suits if preemption defense slips away

Wednesday, September 16, 2015 - 18:13

Over the past few years, generic drug manufacturers, whose prescriptions account for 86 percent of the market and 29 percent of total U.S. drug sales, have achieved significant legal victories. These include two Supreme Court decisions finding that federal law preempts state law failure-to-warn and design defect claims against these manufacturers. Even with these unfriendly rulings, the plaintiff’s bar has proven unflagging in its determination to find new ways of imposing liability on generic manufacturers.

In this effort, the bar has apparently found a receptive and powerful ear in the Food and Drug Administration (FDA), which, in November 2013, after meeting with the American Association of Justice, a lobbying organization for the plaintiffs’ bar, issued a Notice of Proposed Rulemaking that would effectively deprive generic manufacturers’ preemption defense by allowing them to unilaterally update their products labels. A final version of the FDA’s proposed rule, after several postponements, is expected early this fall.

If the FDA approves the rule in its current form – as most pundits predict it will – it could lead to disastrous results. Such a move would short-circuit now-established legal principles and force generic manufacturers to defend numerous costly lawsuits. The end result could be a monumental increase in the cost of generic prescriptions. In addition, the change may lead to a decrease in the availability of generic drugs that manufacturers perceive as having an elevated litigation risk.

The first major legal defeat for the plaintiffs’ bar came in 2011, with the Supreme Court’s ruling in Pliva v. Mensing, 131 S. Ct 2567 (2011). Relying on Supremacy Clause principles, the Court found that generic drug companies cannot be held liable under state law failure-to-warn claims because federal law prevents them “from independently changing their labels.” The holding essentially renders it impossible to sue generic drug companies on a failure-to-warn theory because federal law requires generic labels to mirror those of their branded counterpart. As a result, the Court concluded, it would be impossible for generic manufacturers to simultaneously adhere to the federal requirement and comply with the duty imposed by state law to revise the product’s label.

Undaunted by this legal setback, the bar targeted generic manufacturers just two years later in Mut. Pharm. Co. v. Bartlett, 133 S. Ct. 2466, 2468 (U.S.2013). Bartlett involved a state law design defect claim, and plaintiffs’ attorneys hoped the case would restrict Mensing’s preclusive effect to failure-to-warn claims. This approach gained traction when the First Circuit Court of Appeals agreed and found that generic manufacturers could be held liable under a state design defect claim. See Bartlett v. Mut. Pharm. Co., 678 F.3d 30(1st Cir. 2012). The First Circuit reasoned that, although generic manufacturers cannot alter product labels, they are not obligated to sell the product and so could comply with federal and state law by simply pulling the product off the market.

On review, the Supreme Court disagreed and instead extended Mensing to preempt state law design defect claims involving generic medications that “turn on the adequacy of the drug’s warning.” Consistent with Mensing, the Court held that because federal law requires generic product labels to match the labels of the drug’s branded equivalent, the companies should not be held liable for state law claims on the adequacy of their labels. Mensing and Bartlett effectively foreclose large-scale state law product liability claims against generic manufacturers. But this will change if plaintiffs’ lawyers get their way. They have attempted to circumvent the Mensing/Bartlett precedent through a variety of legal theories, including parallel misbranding claims and by seeking to impose liability on branded manufacturers through innovator liability claims – efforts that have met with limited success.

The Sixth Circuit was the first appellate court to consider the parallel misbranding theory in this context. See In re Darvocet, Darvon, & Propoxyphene Prods. Liab. Litig., 756 F.3d 917(6th Cir. 2014). There plaintiffs argued that Bartlett did not preclude their design defect claims because the Supreme Court had articulated an exception for misbranded products when federal law itself requires the manufacturer to pull the drug from the market. Although the Sixth Circuit declined to clarify whether Bartlett leaves room for such an exception, it suggested that the bar for creating one is extremely high. This opinion confirms that plaintiffs are unlikely to circumvent Bartlett/Mensing through the courts. And numerous district courts have dismissed similar suits against generic manufacturers in the face of this precedent.

The judiciary, however, is not the only venue where plaintiffs’ efforts to change generic labeling have failed. In April 2012, Senator Patrick Leahy (D-VT) introduced Senate Bill 2295, otherwise known as “The Patient Safety and Generic Labeling Improvement Act,” to Congress. The Act sought “to permit manufacturers of generic drugs to provide additional warnings with respect to such drugs in the same manner that the Food and Drug Administration allows brand names to do.” Endorsed by plaintiffs’ law firms and some consumer groups, the bill would have effectively nullified Mensing/Bartlett and permitted generic manufacturers to independently change their labels. Despite support from several key constituencies, the bill languished and eventually died in committee.

Having found little success in the courts or in Congress, the bar has turned its attention to a new ally: the FDA. Shortly after the Supreme Court issued its opinion in Bartlett, the FDA announced that it would consider revisions to existing generic drug-labeling guidelines. In November of 2013, the agency proposed an amendment to its regulations called the “Supplemental Applications Proposing Labeling Changes for Approved Drugs and Biological Products,” a revision that would allow generic drug companies to unilaterally issue labeling changes. It is telling that FDA regulators met with only one group in conjunction with its proposal: the American Association of Justice.

Under the proposal, generic manufacturers could modify labels based on adverse reaction reports. The FDA would review any proposed changes, as it does with changes to branded-drug labels. Essentially, the rule would put generic drug manufacturers on the same footing as brand-name drug manufacturers. The comment period for the amendment closed in April, and the FDA is expected to issue a final rule early this fall.

In February, after its proposal drew sharp criticism from patent holders and generic drug companies, the FDA announced that it would revisit its proposal and reopened the comment period.

In a self-described effort to “promote transparency,” the FDA held a public meeting on March 27, 2015, which included testimony from six purported victims apparently injured from the use of generic drugs. Opponents stressed that the rule could impair patient safety and confuse healthcare providers. The meeting also focused on an alternative approach jointly proposed by the Generic Pharmaceutical Association and the Pharmaceutical Research and Manufacturers of America called the Expedited Agency Review (EAR).

The EAR was originally proposed in November 2014 in response to the FDA’s proposal. It would require both brand-name and generic manufacturers to notify the FDA of emerging safety concerns suggesting the need for a labeling change. Manufacturers could then request an agency assessment on an expedited basis. Alternatively, the FDA could itself initiate the assessment based on its own review of data. After conducting an internal assessment of the data, the FDA would meet with manufacturers. If the FDA were to determine that the data warrants a label change, it would notify the manufacturer within 15 days, and they would have 30 days in which to issue revised electronic labeling. Unilateral labeling changes would not be permitted under the proposal.

This alternative was immediately criticized by plaintiffs’ attorneys, who argued that it could expand post-Mensing immunity to brand-name companies because they could no longer unilaterally change their labels, but rather would need FDA approval to do so. The EAR’s fate is unclear, and many expect that the FDA will move forward with its original proposal.

According to the FDA, its “proposed rule is expected to generate little cost.” The Generic Pharmaceutical Association, however, claims that the cost of added litigation could add $4 billion to the nation’s annual healthcare bill. The trade group also surveyed 450 healthcare providers and found that the proposal would require added time to keep current with labeling changes.

If approved, the FDA’s rule would effectively dismantle the regulatory scheme forming the basis of the Supreme Court’s holding in Mensing and Bartlett and expose generic manufacturers to state law product-labeling lawsuits. Because generic companies would no longer be bound by the labels of their branded counterparts, they could be sued under state law. All of the recently gained judicial protections would essentially be erased.

Congress too has been skeptical about the proposed change, noting in a recent letter to the FDA that it is unlikely to improve public health. Other groups have expressed concern that the approach might confuse healthcare providers, who would be forced to assess differing labels on the same product, a potential threat to patient safety. And some lawyers have questioned the FDA’s authority to alter the rule without congressional action because the Hatch-Waxman Act requires generic drug labeling to be the same as that approved by the FDA for the brand drug.

The rule change would have many more adverse consequences. It would effectively force generic manufacturers to operate like their brand-name counterparts, which they are not equipped to do. Generic manufacturers would be forced to analyze adverse event reports, review streams of clinical data, and modify their labels accordingly. In addition, generic companies would have to spend millions fending off lawsuits resulting from the change, as the Bartlett/Mensing protections would evaporate.

The change would come at great expense to consumers who would likely suffer from sharp drug cost increases. The FDA would do well to consider the enormous cost increase the change would engender at the expense of the very people generic medications are designed to help. Most people on both sides expect the FDA will ultimately embrace its original proposed amendment. It is almost certain that the new rule will be challenged in the courts. The saga is thus unlikely to end anytime soon.

Josh H. Joseph is a Washington, D.C.-based attorney in Dykema’s Products, Class Actions & Professional Liability group. He represents national corporations in the defense of purported class actions and other complex civil litigation with a focus on product liability matters and multi-district litigation proceedings. Kevin M. Zielke is a Detroit-based member of Dykema and leader of the firm’s Pharmaceutical Team. In his practice, he develops proactive and creative steps to anticipate, avoid and minimize the potential impact of litigation for pharmaceutical and medical device manufacturers. They can be reached at kzielke@dykema.com and jjoseph@dykema.com