Yesterday, the California Supreme Court in T.H. v. Novartis Pharmaceuticals Corp., became the first state high court to recognize the doctrine of “innovator liability,” unanimously holding that brand-name prescription drug manufacturers owe a duty to warn to consumers who use generic drugs. The court also recognized (in a split 4-3 decision) “predecessor liability,” extending the duty to warn to former brand-name manufacturers who at one time held the NDA to the brand-name product but have since sold those rights to another company.

The plaintiffs in T.H. were fraternal twins who alleged that they developed autism as a result of their mother’s use of generic terbutaline (brand-name Brethine) off-label to prevent pre-term labor. They brought negligence and negligent misrepresentation claims against Novartis, the previous holder of the Brethine NDA, alleging that Novartis failed to warn of the risk that the drug could cause developmental or neurological damage to a fetus. Despite the fact that the plaintiffs’ mother had never taken Brethine, the court held that Novartis still owed a duty to warn under California law, “regardless of whether the consumer is prescribed the brand-name drug or its generic bioequivalent.”

The court’s analysis focused largely on the federal regulatory scheme applicable to prescription drug labeling. The court emphasized that under applicable federal regulations, the label for a generic drug must be the same as the label for the brand-name drug, and, as a result, any deficiency in the brand-name label is necessarily reflected in the generic label. In other words, federal law “explicitly conveys to the brand-name manufacturer—and only that manufacturer—the responsibility to provide an adequate warning label” for both the brand-name and the generic bioequivalent because only the brand-name manufacturer can change or modify the labeling. The court thus held that it was foreseeable that the brand-name labeling would influence the labeling of—and the decision to prescribe—its generic bioequivalent.

The court also relied on “public policy considerations” in its holding. In particular, the court explained that the brand-name manufacturer is in the best position to warn of a drug’s harmful effects; reiterated the Supreme Court’s statement that state tort law is a “complementary form of drug regulation” (Wyeth v. Levine); and emphasized that imposing a duty on brand-name manufacturers would sufficiently incentivize them to prevent known or reasonably knowable harms even as their market share declined. The court also held that this duty would impose no additional burden on brand-name manufacturers. In addition, the court rejected the “impressive case authority” from other jurisdictions overwhelmingly rejecting innovator liability, noting that the vast majority of decisions rejecting innovator liability were from federal courts, which entertain a presumption against expanding state law.

Finally, the court held that Novartis still owed a duty to the plaintiffs even though it had sold the rights to Brethine years before the plaintiffs’ mother had been prescribed the drug. Thus, under California law, even former brand-name manufacturers owe a duty of care to users of generic competitors’ products.

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The California Supreme Court has now become the first state court of last resort to recognize innovator liability, and the first court to recognize predecessor liability in this context. It remains to be seen whether T.H.’s recognition of innovator liability is an outlier or the start of a trend, but we may know soon: Two more state high courts—Massachusetts and West Virginia—will soon consider the question.