The overwhelming majority of courts (including all seven federal circuits that considered the issue) have rejected the so-called “innovator liability” doctrine.[1]  In 2017, however, the California Supreme Court in T.H. v. Novartis Pharm. Corp.[2] unanimously recognized the doctrine holding that brand-name prescription drug manufacturers owe a duty to warn to consumers who use generic drugs.[3]  In March of 2018, the Massachusetts Supreme Judicial Court (SJC) considered the issue, and took a middle ground.  Specifically, in Rafferty v. Merck & Co., Inc.,[4] the SJC held that plaintiffs who ingest the generic form of a drug may bring failure to warn claims against the brand-name manufacturer of the drug if the brand-name defendant acted recklessly by “intentionally fail[ing] to update the label on its drug while knowing or having reason to know of an unreasonable risk of death or grave bodily injury associated with its use.”[5]  In so doing, the SJC reasoned that a plaintiff is, in fact, injured by a brand-name product’s label despite never having used said product because statutes require identical labeling of the generically manufactured version.[6]

 

The Facts

 

In 2010, a physician prescribed Finasteride, the generic version of the brand name drug Proscar, to treat Rafferty’s enlarged prostate.[7]  Rafferty experienced anticipated temporary side effects from the drug, causing him to stop taking the medication.[8]  Rafferty, however, continued to experience these side effects and his physician informed him that they could actually continue “indefinitely.”[9]  The potential lifelong side effects of this drug were not disclosed within the brand-name manufacturer’s nor the mirrored generic manufacturer’s warning label.[10]  Rafferty presented evidence that the brand-name manufacturer became aware of these potential long-term side effects by 2008, when it updated Proscar’s warning label in select European markets to include this risk.[11]

 

Rafferty filed suit against the brand-name manufacturer in 2013, asserting a claim of negligence for, inter alia, failure to warn and for violation of the Commonwealth’s Consumer Protection Statute, G.L. c. 93A.[12]  The Superior Court dismissed Rafferty’s claims, “ruling that [the brand-name defendant] owed no duty of care to [him].”[13]  The SJC took over the case by its own motion from the Appeals Court.[14]

 

The SJC Weighs In

 

Traditionally, Massachusetts has not recognized liability for products manufactured by others.[15]  However, the SJC noted that The Restatement (Third) of Torts allows a modification to this general rule in exceptional cases.[16] The SJC considered innovator liability to require such a modification given the certainty that a user of a generic drug will rely on the label fashioned by the brand-name manufacturer and as state law shields failure to warn claims from generic manufacturers, leaving plaintiffs without recourse for their injuries.[17] However, the SJC also recognized that imposing innovator liability could impact the public policy of encouraging innovation in the drug market and a potential increase in drug pricing.[18]

 

Balancing these competing interests, the court held that, “a brand-name manufacturer that controls the contents of the label on a generic drug owes a duty to consumers of that generic drug not to act in reckless disregard of an unreasonable risk of death or grave bodily injury.”[19]  As an added protection to the manufacturers, it will be the trial judge’s responsibility to determine whether an injury constitutes an “unreasonable risk of death or grave bodily injuries.”[20]  The court went on to define recklessness as an act performed while knowing or having reason to know of facts which would lead a reasonable person to realize that his or her conduct creates an unreasonable risk of physical harm to another and that such risk is substantially greater than that which is necessary to make his conduct negligent.[21] In order to meet this threshold with regard to failure to act, there must be “an intentional or unreasonable disregard of a risk that presents a high degree of probability that substantial harm will result.”[22]

 

The court then vacated the dismissals and remanded the case to Superior Court where the plaintiff would be granted leave to amend his complaint should he believe his claims meet the newfound threshold.[23]

 

National Scope

 

In August of 2017, the United States District Court – District of Massachusetts held in In re Zofran[24] that a brand-name manufacturer is not liable for a generic version’s failure to warn claim spawning from an injury caused by the use of the generic.[25]  Judge Dennis F. Saylor IV articulated this point by emphasizing the consistency of the Circuit Courts’ decisions and citing to a Sixth Circuit multi-district litigation holding “affirming the dismissal of claims against brand-name manufacturers under the laws of 22 states.”[26]  Notwithstanding this majority view, in December of 2017, the Supreme Court of California held that a brand-manufacturer is liable for a failure to warn claim arising from “risks about which it knew of reasonably should have known, regardless of whether the consumer is prescribed the brand-name drug or its generic ‘bioequivalent.’”[27]  Here, the SJC has offered a compromise to the majority and minority viewpoints by adopting a recklessness standard, which is a higher threshold than the minority view, while still maintaining failure to warn liability against the brand-name manufacturer, in contrast with the majority.

 

The court’s concern that redress be available to those who ingest generic drugs by establishing liability to the controlling brand-name manufacturer carried the day.  Our hope is that innovators will continue to advance modern pharmaceutical products despite their increased potential for liability. We will be watching this space for further developments.

 

 

[1] In re Zofran (Ondansetron) Products Liability Litigation, 261 F.Supp.3d 62 (D. Mass. 2017) (citing In re Darvocet, Darvon, and Propoxyphene Products Liability Litigation, 756 F.3d 917, 938-939 (6th Cir. 2014)).

[2] 407 P.3d 18, 29 (Cal. 2017).

[3] Id. at 47.

[4] Rafferty v. Merck & Co., Inc. & Sidney Rubenstein, No. SJC–12347 (Mass. Mar. 16, 2018).

[5] Id. at 2-3.

[6]Rafferty v. Merck & Co., Inc., No. SJC–12347 at 3-4. The statutory and regulatory constructs pertaining to drug labeling are quite complicated.  Relevant to the matter considered by the SJC, the Drug Price Competition and Patent Term Restoration Act, informally known as the “Hatch-Waxman Act” requires the “manufacturer of a generic drug [to] provide its users with a warning label that is identical to the label of the brand-name counterpart.”  Id. at 4.  In accordance with the “federal duty of ‘sameness’” the two opportunities to alter a generic manufacturers preexisting warning are to: (1) update their label in response to their brand-name counterpart’s update; and (2) per specific FDA instruction. Id. at 6-7 (citing PLIVA, Inc. v. Mensing, 564 U.S. 604, 613-616 (2011)).  These federal laws makes it almost impossible for generic manufacturers to follow Massachusetts labeling laws because they do not have the unilateral power to act. See id.

[7] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 8.

[8] Id.

[9] Id.

[10] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 8-9.

[11] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 9.

[12] Id. Plaintiff also asserted a G.L. c.93A § 9 Consumer Protection Act claim and a negligent failure to obtain informed consent action against his physician.

[13] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 10; Rafferty v. Merck & Co., Inc. & Sidney Rubenstein, No. 2013–04459, 4 (Mass. Super. May 23, 2013) (emphasizing that because “Rafferty did not ingest the drug that Merck manufactured, Merck owes Rafferty no duty of care”).

[14] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 11.

[15] See e.g. Mathers v. Midland-Ross Corp., 403 Mass. 688, 691 (Mass. 1989); Mitchell v. Sky Climber, Inc., 396 Mass. 629, 631 (Mass. 1986).

[16] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 16.

[17] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 17. This was especially so given generic products command approximately ninety percent of the market. Id.

[18] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 20-22.

[19] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 29.

[20] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 30.

[21] See Rafferty v. Merck & Co., Inc., No. SJC–12347 at 29 (citing Boyd v. National R.R. Passenger Corp, 446 Mass. 540, 546 (Mass. 2006); Restatement (Second) of Torts, § 500, 587 (1965)).

[22] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 30.

[23] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 36. Additionally, Rafferty’s G.L. c. 93A § 9 claim was vacated because it did not satisfy the “any trade or commerce” provision, which requires that the unfair or deceptive practice is directly related to the advertising, selling, or trade of a Merck product.  Id. at 38.  Thus, because Rafferty used Finasteride, as opposed to Proscar, the claim is beyond the scope of G.L. c. 93A § 9.  Id. at 38-39

[24] 261 F.Supp.3d 62 (D. Mass. 2017). A multi-district litigation matter regarding side effects not purported within the label of Zofran and in-turn not purported on the label of the generic version, Ondansetron.

[25] In re Zofran, 261 F.Supp.3d at 64-65.

[26] In re Zofran, 261 F.Supp.3d at 71-72 (citing In re Darvocet, Darvon, and Propoxyphene Products Liability Litigation, 756 F.3d at 938-939.

[27] T.H. Novartis Pharm. Corp., 407 P.3d at 29 (citing Dolin v. SmithKline Beecham Corp., 62 F.Supp.3d 705 (N.D. Ill. 2014); Chatman v. Pfizer, Inc., 960 F.Supp.2d 641, 654 (S.D. Miss. 2013); Kellogg v. Wyeth, Inc., 762 F.Supp.2d 694, 704 (D. Vt. 2010); Wyeth, Inc. v. Weeks, 159 So.3d 649 (Ala. 2014)). See also Conte v. Wyeth, Inc., 168 Cal.App.4th 89 (Cal. Ct. App. 2008).

MillerCoors LLC, owner of the Blue Moon Brewing Company (“Blue Moon”) brand and purported brewer of the Belgian-style witbier, recently removed to the U.S. District Court for the Southern District of California a class action lawsuit filed by Evan Parent on behalf of himself and all similarly situated consumers.  Despite the fact that he claims to be a “beer aficionado,[1]” Parent alleges to have purchased Blue Moon beer from various retailers from 2011 to mid-2012 under the mistaken belief that it was a “microbrew or ‘craft’ beer.” Parent asserts that MillerCoors deceptively marketed and charged a premium for Blue Moon beer by: (1) misleadingly characterizing it as a “craft” or “artfully crafted” beer; and (2) withholding the name “MillerCoors” from its label.

In 1980, there were 8 craft breweries in the United States. By 2014, that number had grown to 3,418.  During that time, craft breweries have slowly cut into the massive share of the $100 billion domestic beer market held by large breweries, such as Anheuser-Busch and MillerCoors. Craft beer has quickly grown from roughly a 3% market share in 2000 to 19% in 2014.  The large breweries have responded by creating their own “craft beer” brands, such as Blue Moon and Shock Top, and by purchasing craft breweries, such as Goose Island, Kona Brewing Co., Leinenkugel, and 10 Barrel Brewing.

Parent’s claim is founded upon the definition of “craft beer” set forth by the Brewer’s Association, a not-for-profit trade association, “dedicated to small and independent American Brewers, their beers and the community of brewing enthusiasts.”  The Brewer’s Association defines “American Craft Brewer” as:

  • Small: Annual production of 6 million barrels of beer or less;
  • Independent: less than 25 percent is owned or controlled by an alcoholic beverage industry member that is not itself a craft brewer; and
  • Traditional: a brewer that has a majority of its total beverage alcohol volume in beers whose flavor derives from traditional or innovative brewing ingredients and their fermentation.

Parent alleges that Blue Moon is located in Coors Field, but that the Blue Moon beer sold in stores is brewed at MillerCoors’ Colorado and North Carolina breweries. Parent asserts that MillerCoors’ massive annual production takes it outside the definition of Craft Brewer set forth by the Brewers Association.

It is undisputed that MillerCoors does not qualify as a “Craft Brewer” pursuant to the guidelines set forth by the Brewer’s Association. Contrary to plaintiff’s assertion, however, the Brewer’s Association is not the arbiter of how “Craft Brewer” is defined.  Additionally, it remains to be seen whether “craft beer” can only be brewed by a “Craft Brewer.” In other words, it is unclear whether the term “craft beer” is reflective of the brewer who produces it or relates to the product itself. Does MillerCoors’ size preclude it from producing a “craft beer,” even if it uses quality ingredients and small batch sizes? Presumably, Parent will have a difficult time disputing the “quality” of Blue Moon beer given he purchased and consumed it regularly over an 18 month period. Despite being an “aficionado,” over that lengthy time period, Parent was unable to distinguish the “quality” of Blue Moon from the other craft beers he presumably consumed.

craft beer 2Parent’s suit is the latest foray of plaintiffs into the requirements of truth in labeling, as it relates to the beer industry, following Anheuser-Busch’s settlement with a class of consumers alleged to have been misled that Kirin Ichiban beer was brewed in Japan. Similar battles have been fought within the food and soft drink industry over terms such as “all natural” and “organic.”

Parent’s initiation of a legal battle over the definition of the term, “craft beer,” and the ability of the large breweries to use that phrase in reference to their product represents the culmination of a significant “craft beer” movement that has dramatically changed the landscape of the beer industry.  The outcome of this case will not only set an important precedent for future mislabeling and deceptive marketing class actions, it could also have a significant and widespread impact on the beer industry, particularly in how large breweries, such as Anheuser-Busch and MillerCoors, respond to their market share losses, and promote their own “craft beer” brands and subsidiaries. Many interested parties will be watching this case carefully, including this writer.

 

[1] No self-respecting beer nerd buys Blue Moon., or refers to themselves as an “aficionado.”

 


Certified Gluten Free Lable

The Food & Drug Administration (FDA) is preparing to release a regulation on the labeling of “gluten-free” food by the end of 2012. Although the regulation will provide much needed guidance to consumers and food manufacturers, it will also establish a standard that food manufactures will need to follow in order to use a “gluten-free” label.  If food manufacturers use the “gluten-free” label without properly following the regulation, they could face lawsuits from consumers purchasing their products.

An increasing number of people in the U.S. follow a gluten free diet.  Gluten is a protein contained in grains such as wheat, barley, rye and triticale.  Packaged Facts, a Maryland based research firm, estimates that U.S. retail sales of gluten-free products in 2010 was $2.3 billion dollars, up from $1 billion dollars in 2006.  The firm projects retail sales of gluten-free food to reach $2.6 billion in 2012, and $5.5 billion in 2015.

Although the recent increase in dollars spent in the gluten-free market presents opportunities to businesses, it also presents risks.  People choose to follow a gluten-free diet for a variety of reasons, and some individuals require that food they consume be prepared in a completely gluten-free environment. If individuals with Celiac disease consume gluten, they may suffer symptoms ranging from gastrointestinal issues to neurological problems and cancer (PDF download). According to a 2010 study, 10% of gluten-free consumers purchase gluten-free products because they or a member of their household have Celiac disease or an intolerance to gluten, wheat or other ingredients. Scientists estimate that approximately 18 million Americans have some degree of gluten sensitivity. This requires that businesses take food labeling and food handling procedures seriously.

Confusion over what is gluten and what type of special handling is required to comply with a “gluten free” label has made the universe of food labels confusing to both gluten-free consumers and manufacturers.  Food labels range from being marked “gluten-free,” “made with no gluten ingredients,” and “manufactured in a gluten-free environment.” Currently, a company can label a product as gluten-free regardless of whether the food has been tested for the presence of gluten.

McDonalds received a great deal of negative publicity in 2006 when the company admitted that the fries they had previously claimed were gluten-free, are actually prepared with an oil that uses hydrolyzed wheat bran.  After an outcry from gluten-free consumers, McDonald’s removed fries from their list of gluten-free options and began labeling them as containing the allergen wheat. Although lab results indicated that no gluten was present in the fries, McDonald’s has not relabeled the fries as gluten-free (and appears to no longer have a gluten-free list at all) possibly out of fear of more lawsuits.

The FDA has twice opened the comment period for the public to weigh in on the agency’s proposed rule on how to label food as gluten-free. The proposed rule may require, among other criteria, that food bearing the claim of gluten-free cannot contain 10 parts per million (ppm) or more of gluten (available testing methods cannot reliably detect the amount of gluten in a food when the level is less than 20 ppm).  76 Fed. Reg. 46671, 46673 (August 3, 2011).  This is also the rule in many European countries. Adopting the same rule in the U.S. could make the process of exporting U.S. manufactured gluten-free products to these countries easier for U.S. manufacturers. U.S. gluten-free consumers could benefit by a broader and easier to navigate market for gluten-free foods, which would include gluten-free food from European countries bearing the same label as U.S. manufactured gluten-free food.

The FDA has set a goal of establishing the regulation on the labeling of “gluten free” food by the end of 2012. Until then, manufacturers are left to decide which label is best to use—leaving gluten-free consumers and manufacturers confused.

We will continue to monitor and report on this issue as well as any further FDA developments.  Should you have a specific question, please feel free to contact us.

 

Genetically modified organism lemons

California’s Secretary of State recently announced that the California Right to Know Labeling Initiative will be Proposition 37 on this November’s state ballot. If passed, this initiative would require labeling by food manufacturers of any genetically modified organisms (GMOs), also known as genetically engineered organisms (GEOs).

GMOs made their first public appearance in 1994, when a tomato became the first genetically engineered product sold. Since then, GMOs have become increasingly more common in everyday products. In fact, the Grocery Manufacturers of America estimates that approximately 70 to 75% of processed foods available in U.S. grocery stores contain a GMO.   Furthermore, the FDA, which oversees product labeling requirements, considers GMOs to be “generally regarded as safe” (GRAS) and does not require that they be identified on product labels.  Nevertheless, despite nearly two decades of main stream retailing, it seems that the American public remains largely unfamiliar with the both the benefits and commonality of GMOs, as well the scientific community’s support for their safety.

How will Prop 37 impact the food manufacturing industry?

Should California vote in favor of Proposition 37, the imposition of similar labeling requirements is likely to follow in other states around the country.  As a result, manufacturers will likely experience increases in operational costs, as they are forced to adjust their manner of handling and preparing their products to account for GMOs.  Furthermore, food companies will also see increased legal costs,  because increased labeling requirements would also increase the potential for litigation, namely false-labeling class actions, which are becoming increasingly more common.  These class actions are not only costly to defend, but also harmful to a food company’s brand.

Where will these impacts manifest?   

  • Food producers will need to implement a system for maintaining separate inventories of product, so as not to mix the GMOs and non-GMOs.
  • Companies will be forced to amend their HACCP plans to address the handling of GMOs.
  • Overhead may increase as a result of inconsistent GMO labeling requirements nationally.
  • Companies will be forced to choose between having one label which adheres to each state’s requirements and utilizing different labels depending on the state in which the GMO containing product will be sold.
  • In response to potential consumer backlash against products containing GMOs, food manufacturing companies may need to raise the price of their products, discontinue certain brands, or engage in costly marketing campaigns to ensure future profitability.
  • Increased labeling requirements would also increase the potential for litigation in the form of false-labeling claims.

In business, smart companies aim to do business ethically and place the health and safety of their consumers first; they have the ability to meet goals while still complying legally with an ever-changing legislative landscape.

What are smart companies in the California food industry doing to prevent consumer backlash and insulate themselves from potential lawsuits in a post-Proposition 37 market?

  • Communicating: In-house counsel and litigation counsel should be having frequent conversations regarding the short and long impact of this initiative. Great litigation firms not only understand how legislative changes impact their clients’ ability to remain profitable, but they are proactively providing solutions that address present and future challenges, as well as ensuring that their clients understand the risks and outcomes associated with each.
  • Searching for Opportunities: Proposition 37 is an agent of change. Whether that change has a positive or negative impact on a company can depend largely on the ability of the organization’s leadership to seek out opportunities to enhance performance and value. This is another area where outside counsel can be particularly effective by providing in-house training, trend analysis and creative, cost-effective solutions.
  • Understanding that Knowledge is Power: In a real-time, social media driven world smart companies are making sure that their websites are not only current but linked across their social media platforms so that brand loyal consumers have easy access to product information that is transparent and accurate.
  • Seeing the Bigger Picture: Should Proposition 37 pass, other states may soon follow suit and impose similar labeling requirements which could increase the potential for litigation, including class action law suits. Often these types of suits can be prevented by aggressively and rapidly responding to an initial claim. Make sure your litigation attorneys have an intimate understanding of legal nuances and variances for each state where you do business so that they can respond to any threats immediately and appropriately.

Like the food industry, we will watch carefully this fall to see whether California votes in favor of Proposition 37.  Until then, the authors would be pleased to respond to any questions our readers may have regarding Proposition 37 and the potential impact we believe it could have on the food industry.