Wyeth Ruling Could Bring More Focus on Drug Safety, More Lawsuits

March 6, 2009

A Supreme Court ruling this week that federal approval of a drug is no protection from lawsuits in state courts could make drugmakers more cautious about safety issues and may lead them to halt development of some medicines and even pull others off the market.

Drug industry analysts said the ruling, upholding a $6.7 million jury award against Wyeth, will make drugmakers scrutinize safety issues of all experimental drugs in development, as well as existing products.

“They will weigh how prevalent the side effect is, how serious the side effect is, versus the number of people benefiting from the drug and the amount of money being made by the drug,” said Erik Gordon, an analyst and professor at University of Michigan’s Ross School of Business.

“This is like blood in the water for plaintiff lawyer sharks,” and will encourage more lawsuits, Gordon added.

The case, involving Vermont musician Diana Levine, who lost her arm after a botched injection of Wyeth’s former nausea medication Phenergan, was closely watched by drugmakers, which face thousands of lawsuits over serious side effects.

Drugmakers, backed by the Bush administration, had argued that product liability lawsuits in state courts are barred, or pre-empted, if the Food and Drug Administration approved the product and any warnings in the package insert. In a 6-3 decision, the court rejected that claim.

Bert Rein, a Washington lawyer representing Wyeth, told The Associated Press the company was disappointed by the verdict but will pay the jury award promptly. He said Wyeth believed it could not change the FDA-approved warning in the package insert, which disclosed the risk of gangrene if a Phenergan injection accidentally hit an artery but left it up to the doctor whether to give it to a patient that way or through a slow intravenous drip or shot in a muscle.

“The practical impact of this is going to be much greater caution” by doctors in deciding whether to use the most effective or least risky method of administering a drug, Rein said.

He said he doesn’t expect more lawsuits against drugmakers but expects any future pre-emption defense will focus on narrow issues the ruling raised, such as whether there was evidence the FDA would have rejected proposed warning changes.

“Today’s decision is a huge victory for Diana, for patients across the country and for public health,” consumer group Public Citizen said in a statement. It said FDA “is overworked and underfunded, and it depends almost entirely on drug companies for information about the safety and effectiveness of drugs,” including problems that don’t surface until thousands of people use a drug.

Analyst Steve Brozak of WBB Securities said due to the ruling, drugmakers are “going to make a dollars-and-cents decision on what (research) programs will go ahead and what drugs will be pulled” from the market.

“They’ll defend the blockbusters, but the smaller drugs with meaningful downside” will be sold to small companies, possibly overseas, or shelved quickly, Brozak said.

Brozak and Gordon, the Michigan professor, said the industry could reduce innovation, or shift to slight improvements in existing drugs rather than breakthroughs, to avoid lawsuits.

Rob Gordon, a plaintiff’s lawyer involved in lawsuits over Vioxx and other medicines, said the ruling’s key impact is to preserve the right of “tens of thousands of people injured by products” to bring claims against their makers that would have been barred, had the court ruled differently.

Ken Johnson, senior vice president of trade group Pharmaceutical Research and Manufacturers of America, said FDA experts “are in the best position to evaluate voluminous information” about a drug, but now health-care providers and patients could “second-guess FDA-approved labeling.”

Investors seemed unfazed.

Wyeth shares rose 45 cents to $40.72 Wednesday, and other major drug companies had jumps of 2 percent to nearly 6 percent _ more than the rally in the broader market.

Last year, the Supreme Court agreed with the pre-emption policy in a case involving medical devices, ruling a patient injured by a catheter from Medtronic could not sue under state laws. That case turned on a provision of federal law prohibiting states from imposing their own requirements on the devices. There’s no similar provision for drugs.

Since then thousands of lawsuits against Medtronic and other device makers have been dismissed by lower courts, citing the decision. However, Democratic lawmakers have stated their opposition to the ruling and said Wednesday they plan “in the coming weeks” to introduce a bill to repeal that provision.

Wyeth sold the rights to the intravenous version of Phenergan in 2004 to Baxter International Inc., according to Wyeth spokesman Doug Petkus. A syrup version of the drug was sold to another company in 2003, and tablet and suppository forms were both discontinued several years ago.


AP Business Writer Matt Perrone in Washington contributed to this article.

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