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Justices block generic drug liability lawsuits

By Lawrence Hurley and Bill Berkrot

WASHINGTON/NEW YORK (Reuters) - The Supreme Court ruled on Monday that generic drugmakers cannot be sued under state law for adverse reactions to their products, a decision that consumer advocates called a blow to patient safety.

In a 5-4 vote, the court ruled for Mutual Pharmaceutical Co, owned by Sun Pharmaceutical Industries Ltd, overturning a multimillion-dollar jury award to a badly injured patient in New Hampshire who alleged a generic drug she had taken was unsafe based on its chemical design.

The majority opinion, written by Justice Samuel Alito, said the state's law could not run against federal laws on prescription medicines whose design has been approved by the Food and Drug Administration.

A Supreme Court ruling in 2011 found that pharmaceutical companies that make branded drugs are liable for inadequacies in safety warnings of a medicine's label, but not the makers of cheaper copies of those medicines.

Consumer watchdog group Public Citizen said the Supreme Court decision on Monday undermines patient safety at a time when about 80 percent of U.S. prescriptions are filled with generic medicines.

"Today's court decision provides a disincentive for generic makers of drugs to monitor safety of their products and to make sure that they have a surveillance system in place to detect adverse events that pose a threat to patients," Michael Carome, director of Public Citizen's Health Research Group, said in an interview.

He pointed out that, in many cases, the potentially dangerous side effects of medicines have not come to light until decades after they were approved and often after there was no longer a branded version on the market.

With the threat of litigation removed, "groups that think this undermines patient safety could be onto something," said David Maris, an industry analyst with BMO Capital Markets. "The blanket protection that they are under now is that if the FDA says you are approved, as long as they (generic company) don't introduce new problems into the drug then they're fine."

UMBRELLA PROTECTION FOR GENERIC DRUGMAKERS

Mutual Pharmaceutical had asked the court to overturn a $21 million jury award to Karen Bartlett, a New Hampshire woman who took Mutual's generic non-steroidal anti-inflammatory drug, sulindac, in 2004 after her doctor prescribed it for shoulder pain. Sulindac is a generic version of Merck & Co Inc's Clinoril.

Bartlett suffered a rare hypersensitivity reaction three weeks after she started taking it. Her skin began to peel off, leaving her severely disfigured with burn-like lesions over two-thirds of her body and nearly blind.

Mutual, backed by the Obama administration, said federal law trumped state law claims such as those Bartlett had made, pointing to the fact that the drug had already won FDA approval with an agency-approved label carrying safety warnings.

Federal law requires generic drugs to have the same design and warning labels as their brand-name equivalents, Mutual argued.

The high court agreed.

"Because it is impossible for Mutual and other similarly situated manufacturers to comply with both state and federal law, New Hampshire's warning-based design-defect cause of action is pre-empted with respect to FDA-approved drugs sold in interstate commerce," the majority decision said.

In the ruling, the justices said Bartlett's situation was "tragic and evokes deep sympathy," but added a straightforward application of pre-emption law requires that the judgment of the lower court be reversed.

At the time Bartlett filled her prescription, sulindac's label did not specifically refer to the serious skin reaction known as toxic epidermal necrolysis, although the FDA later added the warning for drugs in that class of medicines.

Because the high court had previously ruled that generic companies could not be sued based on safety warnings in the label, Bartlett's lawyers brought their suit under New Hampshire's design-defect cause of action that says manufacturers have a duty to design products reasonably safely for the uses which they can foresee.

They had successfully argued before the lower court that generic manufacturers facing design-defect claims could comply with both federal and state law by choosing not to make the drug at all. The high court said the District court's rationale that Mutual could escape the impossibility of complying with both state and federal laws by ceasing to sell sulindac was not a viable option and incompatible with prior rulings.

Anthony Nguyen, a legal analyst for Wolters Kluwer, said Monday's ruling further protects generic drugmakers on top of the 2011 decision.

"Now they've got that umbrella protection of 'We can't make any changes to our drugs. We can't preemptively make any changes without having to come up with a new drug ourselves and that's not the business that we're in,'" Nguyen said.

"The generic industry dodged a bullet on this one," BMO's Maris said. "Had it gone against them it would have put a big cloud over the industry."

The case is Mutual Pharmaceutical v. Bartlett, U.S. Supreme Court, No. 12-142.

(Reporting by Bill Berkrot and Lawrence Hurley; Editing by Michele Gershberg, Howard Goller, Will Dunham and Andre Grenon)

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