Source: https://casetext.com/case/th-v-novartis-pharm-corp
Timestamp: 2019-04-21 12:56:32+00:00

Document:
T.H. v. Novartis Pharm. Corp.
T.H., a Minor, etc., et al., Plaintiffs and Appellants, v. NOVARTIS PHARMACEUTICALS CORPORATION, Defendant and Respondent.
Public Justice, Leslie A. Brueckner ; Thorsnes Bartolotta McGuire, Benjamin I. Siminou, San Diego, Kevin F. Quinn and Charlynne I. Rejaian for Plaintiffs and Appellants. Alan Charles Dell'Ario, Napa, and Jeffrey R. White for Consumer Attorneys of California and American Association for Justice as Amici Curiae on behalf of Plaintiffs and Appellants. Chavez & Gertler, Nance F. Becker, San Francisco; Public Citizen Litigation Group and Allison M. Zieve for Public Citizen, Inc., as Amicus Curiae on behalf of Plaintiffs and Appellants. William Alvarado Rivera for AARP and AARP Foundation as Amici Curiae on behalf of Plaintiffs and Appellants. Hollingsworth, Eric G. Lasker, Joe G. Hollingsworth, Katharine R. Latimer ; Morrison & Foerster, Erin M, Bosman and Julie Y. Park, San Diego, for Defendant and Respondent. H. Sherman Joyce, Lauren Sheets Jarrell; Manufacturers' Center for Legal Action, Linda E. Kelly, Patrick N. Forrest, Leland P. Frost; Shook, Hardy & Bacon, Phil Goldberg, Paul B. La Scala, Irvine, and Gabriel S. Spooner, Irvine, for National Association of Manufacturers and American Tort Reform Association as Amici Curiae on behalf of Defendant and Respondent. Hugh F. Young, Jr. ; Reed Smith, David E. Stanley, Los Angeles, and James M. Beck for Product Liability Advisory Council, Inc., as Amicus Curiae on behalf of Defendant and Respondent. Gregory Herbers and Michelle Stilwell for Washington Legal Foundation as Amicus Curiae on behalf of Defendant and Respondent. Martin S. Kaufman ; Greenberg Traurig, Robert P. Charrow and Anna B. Laakmann for Atlantic Legal Foundation as Amicus Curiae on behalf of Defendant and Respondent. Deborah J. La Fetra, Sacramento, and Anastasia P. Boden for Pacific Legal Foundation as Amicus Curiae on behalf of Defendant and Respondent. Covington & Burling, Jeffrey M. Davidson, San Francisco, Michael X. Imbroscio, Paul W. Schmidt and Gregory L. Halperin for Pharmaceutical Research and Manufacturers of America as Amicus Curiae on behalf of Defendant and Respondent. Fred J. Hiestand, Sacramento, for The Civil Justice Association of California as Amicus Curiae on behalf of Defendant and Respondent. Williams & Connolly, Kannon K. Shanmugam, Allison Jones Rushing and Connor S. Sullivan for Chamber of Commerce of the United States of America as Amicus Curiae on behalf of Defendant and Respondent. Haynes and Boone, Mary–Christine Sungaila, Costa Mesa, and Polly Fohn for International Association of Defense Counsel and Federation of Defense & Corporate Counsel as Amici Curiae on behalf of Defendant and Respondent. Shook, Hardy & Bacon and Alicia J. Donahue, San Francisco, for Genentech, Inc., and California Life Sciences Association as Amici Curiae on behalf of Defendant and Respondent.
Public Justice, Leslie A. Brueckner ; Thorsnes Bartolotta McGuire, Benjamin I. Siminou, San Diego, Kevin F. Quinn and Charlynne I. Rejaian for Plaintiffs and Appellants.
Alan Charles Dell'Ario, Napa, and Jeffrey R. White for Consumer Attorneys of California and American Association for Justice as Amici Curiae on behalf of Plaintiffs and Appellants.
Chavez & Gertler, Nance F. Becker, San Francisco; Public Citizen Litigation Group and Allison M. Zieve for Public Citizen, Inc., as Amicus Curiae on behalf of Plaintiffs and Appellants.
William Alvarado Rivera for AARP and AARP Foundation as Amici Curiae on behalf of Plaintiffs and Appellants.
Hollingsworth, Eric G. Lasker, Joe G. Hollingsworth, Katharine R. Latimer ; Morrison & Foerster, Erin M, Bosman and Julie Y. Park, San Diego, for Defendant and Respondent.H. Sherman Joyce, Lauren Sheets Jarrell; Manufacturers' Center for Legal Action, Linda E. Kelly, Patrick N. Forrest, Leland P. Frost; Shook, Hardy & Bacon, Phil Goldberg, Paul B. La Scala, Irvine, and Gabriel S. Spooner, Irvine, for National Association of Manufacturers and American Tort Reform Association as Amici Curiae on behalf of Defendant and Respondent.
Hugh F. Young, Jr. ; Reed Smith, David E. Stanley, Los Angeles, and James M. Beck for Product Liability Advisory Council, Inc., as Amicus Curiae on behalf of Defendant and Respondent.
Gregory Herbers and Michelle Stilwell for Washington Legal Foundation as Amicus Curiae on behalf of Defendant and Respondent.
Martin S. Kaufman ; Greenberg Traurig, Robert P. Charrow and Anna B. Laakmann for Atlantic Legal Foundation as Amicus Curiae on behalf of Defendant and Respondent.
Deborah J. La Fetra, Sacramento, and Anastasia P. Boden for Pacific Legal Foundation as Amicus Curiae on behalf of Defendant and Respondent.
Covington & Burling, Jeffrey M. Davidson, San Francisco, Michael X. Imbroscio, Paul W. Schmidt and Gregory L. Halperin for Pharmaceutical Research and Manufacturers of America as Amicus Curiae on behalf of Defendant and Respondent.
Fred J. Hiestand, Sacramento, for The Civil Justice Association of California as Amicus Curiae on behalf of Defendant and Respondent.
Williams & Connolly, Kannon K. Shanmugam, Allison Jones Rushing and Connor S. Sullivan for Chamber of Commerce of the United States of America as Amicus Curiae on behalf of Defendant and Respondent.
Haynes and Boone, Mary–Christine Sungaila, Costa Mesa, and Polly Fohn for International Association of Defense Counsel and Federation of Defense & Corporate Counsel as Amici Curiae on behalf of Defendant and Respondent.
Shook, Hardy & Bacon and Alicia J. Donahue, San Francisco, for Genentech, Inc., and California Life Sciences Association as Amici Curiae on behalf of Defendant and Respondent.
Cuéllar, J.Under California law, a brand-name drug manufacturer has a duty to warn of known or reasonably knowable adverse effects arising from an individual's use of its drug. (See Stevens v. Parke, Davis & Co. (1973) 9 Cal.3d 51, 65, 107 Cal.Rptr. 45, 507 P.2d 653.) In this case, we examine whether—and if so, under what circumstances—a brand-name drug manufacturer may be sued under a theory of "warning label" liability when the warning label for its drug was alleged to be deficient, but the plaintiffs were injured by exposure to a generic bioequivalent drug bearing the brand-name drug's warning label.
Plaintiffs' mother, J.H., was prescribed terbutaline, a generic form of the brand-name drug Brethine, to suppress premature labor during her pregnancy. Plaintiffs T.H. and C.H. were born full term, but were diagnosed with developmental delays at three years of age and autism by the time they turned five. Through their father as guardian ad litem, the minors allege that those responsible for the terbutaline label knew or should have known—based on studies of the drug's effects in rats and in humans—that the drug posed a serious risk to fetal brain development. They further allege that the drug's label unreasonably failed to include a warning about this risk.Federal law explicitly conveys to the brand-name manufacturer—and only that manufacturer—the responsibility to provide an adequate warning label for both generic terbutaline and its brand-name equivalent, Brethine. As explained in more detail below, only the brand-name drug manufacturer has unilateral authority to modify the drug's label by adding to or strengthening a warning. Generic drug manufacturers are required to follow the brand-name manufacturer's label to the letter. Accordingly, the manufacturer of Brethine controlled both the form and content of the terbutaline warning label.
Plaintiffs brought suit against defendant Novartis Pharmaceuticals Corporation (Novartis), which manufactured Brethine until December 2001, and aaiPharma Inc. (aaiPharma), which purchased the rights to and manufactured Brethine thereafter—using the same label Novartis had used—when plaintiffs' mother was prescribed the generic bioequivalent in 2007. Plaintiffs claim that Novartis knew or should have known that its warning label failed to alert pregnant women or their physicians to the risk Brethine posed to fetal brain development; that manufacturers of terbutaline were compelled by federal law to include Brethine's deficient label on their own products; that it was foreseeable Novartis's successor (aaiPharma) would not change or update Brethine's deficient label; and that in reliance on the deficient warning label, plaintiffs' mother was prescribed terbutaline, which adversely affected plaintiffs' developing brains in utero. What Novartis asserts in response is that its duty to provide a safe and adequate warning label for Brethine did not encompass those who were prescribed terbutaline in reliance on the Brethine label. Novartis further contends that any such duty should not extend to those who were exposed to terbutaline after Novartis ceased manufacturing Brethine and sold its rights in the drug to aaiPharma.
Such contentions, and the case in which they arise, reach us at a very early stage in the litigation. In reviewing a demurrer, we ask only whether the plaintiff has alleged—or could allege—sufficient facts to state a cause of action against the defendant. ( Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081, 6 Cal.Rptr.3d 457, 79 P.3d 569.) In our view, plaintiffs have indeed shown that they could allege a cause of action against Novartis for warning label liability. Because the same warning label must appear on the brand-name drug as well as its generic bioequivalent, a brand-name drug manufacturer owes a duty of reasonable care in ensuring that the label includes appropriate warnings, regardless of whether the end user has been dispensed the brand-name drug or its generic bioequivalent. If the person exposed to the generic drug can reasonably allege that the brand-name drug manufacturer's failure to update its warning label foreseeably and proximately caused physical injury, then the brand-name manufacturer's liability for its own negligence does not automatically terminate merely because the brand-name manufacturer transferred its rights in the brand-name drug to a successor manufacturer. We therefore affirm the Court of Appeal, which had directed the trial court to enter an order sustaining Novartis's demurrer with leave to amend plaintiffs' negligence and negligent misrepresentation causes of action.
From a certain perspective, the claim underlying this lawsuit is quite straightforward. Plaintiffs T.H. and C.H., who are fraternal twins, sued defendant Novartis for negligence and negligent misrepresentation arising from Novartis's failure to warn of the risks of Brethine, an asthmadrug sometimes prescribed "off label" to stop or slow preterm labor. Plaintiffs allege that Novartis knew or should have known that Brethine carried a substantial risk of causing developmental and neurological damage to the fetus, yet failed to warn of this risk.
What removes this case from the realm of the ordinary is that plaintiffs' mother was never prescribed Brethine. Rather, she—like many pregnant women experiencing premature labor —was prescribed terbutaline sulfate (terbutaline ), the generic bioequivalent drug. Moreover, Novartis stopped manufacturing Brethine and sold all rights to the drug in 2001, six years before plaintiffs' injury. During the period it was the brand-name manufacturer, however, Novartis had the legal duty to disclose Brethine's known and reasonably knowable risks in the drug's warning label. All generic manufacturers, in turn, had a specific legal responsibility regarding the label: to ensure the terbutaline label was identical to the Brethine label. We therefore examine plaintiffs' allegations against the backdrop of the distinctive legal framework governing labeling for brand-name and generic pharmaceuticals.
On review of a demurrer, we accept as true all properly pleaded facts. ( Shirk v. Vista Unified School Dist. (2007) 42 Cal.4th 201, 205, 64 Cal.Rptr.3d 210, 164 P.3d 630.) Where particular facts are set out below, they are those alleged in plaintiffs' first amended complaint.
Terbutaline is a beta-adrenergic agonist, acting upon the beta2 receptors in smooth muscle tissue and causing muscles to relax. The drug was originally developed by Draco, a Swedish company, and released for use as a bronchodilator to treat asthma. In 1974, the FDA approved terbutaline as a treatment for asthma in the United States. Astra AB (and later, AstraZeneca LP) licensed the right to manufacture and market terbutaline in its oral form to Ciba–Geigy (a predecessor to Novartis) under the brand name Brethine. Novartis owned the NDA for Brethine until 2001.
In 1976, a Swedish physician with ties to Draco published the results of a small study indicating that terbutaline was safe and effective as a tocolytic—a drug to suppress premature labor in pregnant women—on the theory that the drug could relax uterine smooth muscle tissue. Terbutaline subsequently gained wide acceptance as a tocolytic, but neither Novartis nor any other manufacturer sought FDA approval for this off-label use. Later studies cast doubt on the safety and efficacy of terbutaline as a tocolytic.In 1978, a study published in the British Journal of Obstetrics and Gynaecology questioned the validity and conclusions of the original Swedish report. According to plaintiffs' complaint, the British study warned that the benefits of this class of drugs on preterm labor was " ‘not yet established,’ " that the evidence was " ‘too scanty to make conclusions about side effects possible,’ " and that other data suggested " ‘that labor inhibitors are potentially dangerous.’ " A year later, a study published in the American Journal of Obstetrics and Gynecology reported adverse effects in both the pregnant mother and in the fetus following terbutaline exposure.
A team of American clinical investigators in 1982 sought to replicate the results of the 1976 Swedish study. They could not. In fact, the investigators were unable to find any benefit among the pregnant mothers who had been prescribed terbutaline as compared to those who received a placebo. A 1984 study published in the Journal of Reproductive Medicine similarly failed to confirm any benefits.In 1985, Dr. Theodore Slotkin and a team of Duke University Medical Center researchers found that a single dose of terbutaline given to pregnant rats interfered with an enzyme necessary for neuronal development in the fetal brain. Dr. Slotkin's study showed that terbutaline can cross the placenta and fetal brain barrier in sufficient quantities to affect brain development. Other studies in the 1980s revealed that children born to mothers who had received a different beta-adrenergic agonist had poorer academic achievement and were more likely to have impairments in vision and language development than children born to mothers who did not receive such treatment.
In 1989 and 1990, Dr. Slotkin published studies showing that terbutaline may interfere with the fetus's neurobehavioral development, presumably through its effects on receptors in the fetal cerebellum. Shortly thereafter, in 1992, scientists from the University of Texas undertook a comprehensive and critical evaluation of the literature relating to terbutaline and concluded, in a study published in the American Journal of Obstetrics and Gynecology, that the drug had not been shown to arrest preterm labor and that chronic exposure may adversely affect the fetus. A 1995 meta-analysis by researchers from the University of Pennsylvania likewise concluded that the relevant literature did not support the claimed benefit from maintenance tocolytic therapy. The American College of Obstetricians and Gynecologists (ACOG) subsequently issued a "Technical Bulletin on Preterm Labor" to its more than 40,000 members, which noted the asserted benefit from maintenance tocolytic therapy lacked any evidentiary basis and warned that the potential risks of such therapy, to both the mother and the fetus, were well documented. ACOG's bulletin stated that the risk associated with beta-mimetic agents (such as terbutaline ) appeared greater than that associated with other tocolytic agents. In 1997, the FDA's Associate Commissioner for Health Affairs issued a "Dear Colleague" letter, which endorsed ACOG's assessment of the benefits and dangers of long-term tocolytic therapy.
In 2001, the German Central Institute of Mental Health issued a report concluding that children whose mothers had received beta-agonist tocolysis had a significantly higher rate of psychiatric disorders and psychopathology, and that such children scored lower on psychometric tests of cognitive development. Dr. Slotkin's Duke team released another study in October 2001, which revealed that beta2 receptors in the fetal brain, unlike those in mature brains, do not desensitize when exposed to continuous doses of terbutaline. Instead, the fetal receptors intensify their sensitivity to terbutaline and thus increase their response to the drug as the dosage increases (and the brain develops).
Over the years, researchers developed—and companies brought to market—newer and more effective bronchodilators and other asthma treatments. Novartis continued to manufacture and distribute Brethine with the intention that it be used as a tocolytic. By 2001, nearly half of all prescriptions for terbutaline were for tocolysis, even though the drug was never approved by the FDA for that purpose. In December 2001, Novartis transferred the NDA for Brethine to NeoSan Pharmaceuticals Inc., a wholly owned subsidiary of aaiPharma.
On September 5, 2007, plaintiffs' mother, J.H., was hospitalized because of concerns about premature labor. She was prescribed terbutaline, to be administered every six hours, and was discharged on September 25, 2007. While in the hospital, J.H. received a generic version that was manufactured by Lehigh Valley Technologies, Inc.; after discharge, she received a generic version that was manufactured by Global Pharmaceuticals. J.H. continued taking terbutaline as directed until plaintiffs were born on October 9, 2007. Plaintiffs appeared to be normal until their pediatrician, during a routine checkup in December 2010, reported that the twins may have developmental delays. Despite specialized treatment for both children, a pediatric neurologist diagnosed them with autism in August 2012.Plaintiffs' first amended complaint alleges that terbutaline passed through the placenta and the blood-brain barrier. As a result, plaintiffs contend, terbutaline caused them to suffer severe and permanent neurologic injuries, including an inability to speak and significant limitations and abnormalities in their motor skills. Plaintiffs further allege that Novartis knew or should have known that terbutaline was of questionable efficacy as a tocolytic agent, that terbutaline carried serious risks of side effects for newborns whose mothers received the drug during pregnancy, and that federal law required Novartis to report this information to the FDA and to update the warning label—something Novartis could have done unilaterally. (See 21 C.F.R. § 314.70(c)(6)(iii)(A).) Instead, Novartis falsely represented that terbutaline was safe and effective and would not cause serious side effects in newborns, and it intended for pregnant mothers and their physicians to rely on these representations. The complaint asserted causes of action for negligence and negligent misrepresentation, as well as strict liability, intentional misrepresentation, concealment, and medical negligence.
To support and place in factual context their negligence cause of action, plaintiffs made a variety of specific allegations regarding Novartis. They alleged that Novartis had a duty to update the label to warn of the drug's effects on fetal development, that Novartis knew or should have known of these effects, that J.H.'s physicians prescribed her terbutaline because of their erroneous belief that terbutaline was safe to use as a tocolytic, that plaintiffs suffered neurological damage as a result of their exposure to terbutaline in utero, and that plaintiffs' injuries were foreseeable. Meanwhile, plaintiffs' negligent misrepresentation cause of action alleged that Novartis falsely represented that terbutaline was safe to use as a tocolytic, that Novartis had no reasonable basis for believing terbutaline was safe to use as a tocolytic, that Novartis intended for pregnant mothers and their physicians to rely on their false representations concerning the drug's safety as a tocolytic agent, that J.H. and her physicians relied on Novartis's representations, that plaintiffs suffered neurological damage as a result of their exposure to terbutaline in utero, and that plaintiffs' injuries were foreseeable.
Novartis's core assertion in its demurrer was that it had no duty to plaintiffs. To justify its position, the company offered two overarching rationales: It did not manufacture the terbutaline ingested by their mother; and it had transferred the Brethine NDA to another company in December 2001, nearly six years before plaintiffs' mother was prescribed terbutaline. In addition, Novartis argued that plaintiffs had failed to identify with specificity any misrepresentation by Novartis or allege that plaintiffs had relied on any such misrepresentation. In opposition to the demurrer, plaintiffs responded that Novartis had a duty to warn about the drug's effects on fetal development during the period it owned the NDA and manufactured Brethine ; that the six-year gap between Novartis's divestiture of the NDA and plaintiffs' in utero exposure is relevant to causation (and not the existence of the duty); and that the first amended complaint adequately pleaded the misrepresentations with specificity, given that the specific misrepresentations are more likely to be within Novartis's knowledge, and adequately pleaded reliance on those misrepresentations.The trial court sustained the demurrer without leave to amend. It concluded that Novartis owed plaintiffs no duty as a matter of law relating to claims arising from terbutaline exposure in 2007. Agreeing with Novartis, the court also found that the fraud-based claims suffered from a lack of specificity and that this defect could not be remedied by allegations about Novartis's conduct prior to the 2001 NDA divestiture.
The Court of Appeal reversed and directed that the order sustaining the demurrer be modified to grant plaintiffs leave to amend their causes of action for negligence and negligent misrepresentation. The appellate court reasoned that if plaintiffs could allege that Novartis failed to warn about fetal risks it knew or should have known were associated with terbutaline when used as a maintenance tocolytic prior to its divestiture of the brand-name drug in 2001, that the warning would have remained on the label in 2007 had Novartis added a suitable warning to the label before divestiture in 2001, and that their mother's physician would not have prescribed terbutaline as a maintenance tocolytic had the drug been properly labeled, then their claims for negligence and negligent misrepresentation can survive demurrer.
We granted Novartis's petition for review to decide the existence and scope of warning label liability for brand-name drug manufacturers under California law.
The sole issue before us is whether the demurrer should have been sustained with respect to the negligence and negligent misrepresentation claims on the ground that Novartis owed no duty of care to plaintiffs. In reviewing an order sustaining a demurrer, we examine the operative complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory. ( Lee v. Hanley (2015) 61 Cal.4th 1225, 1230, 191 Cal.Rptr.3d 536, 354 P.3d 334.) Where the demurrer was sustained without leave to amend, we consider whether the plaintiff could cure the defect by an amendment. The plaintiff bears the burden of proving an amendment could cure the defect. ( Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.)The gist of plaintiffs' warning label liability claim is that Novartis negligently failed to warn about the drug's risk to fetal brain development. They contend that the deficient label foreseeably and proximately caused harm not only to the children of women who were prescribed Brethine, but also to the children of women who were prescribed its generic bioequivalent, which was legally required to—and did—bear the same deficient label. Among other things, plaintiffs rely on section 311 of the Restatement Second of Torts (section 311), which addresses negligent misrepresentation involving physical harm. Under section 311(1), "[o]ne who negligently gives false information to another is subject to liability for physical harm caused by action taken by the other in reasonable reliance upon such information, where such harm results [¶] ... [¶] to such third persons as the actor should expect to be put in peril by the action taken."
Section 311's theory of liability is intended to be "somewhat broader" than that for mere pecuniary loss. ( Rest.2d Torts, § 311, com. a.) It "finds particular application where it is a part of the actor's business or profession to give information upon which the safety of the recipient or a third person depends." (Id ., § 311, com. b; see also Prosser, Misrepresentation and Third Persons (1966) 19 Vand. L.Rev. 231, 254 [explaining that one has a duty not to make a false representation to "[t]hose to whom a public duty is found to have been created by statute, or pursuant to a statute ... [and to] [t]hose members of a group or class whom he has special reason to expect to be influenced by the representation"].) This court applied and followed section 311 in Randi W. v. Muroc Joint Unified School Dist. (1997) 14 Cal.4th 1066, 60 Cal.Rptr.2d 263, 929 P.2d 582 ( Randi W. ). There, we concluded that a school district's negligent misrepresentations about a former employee in a letter of recommendation could render the school district liable for the employee's molestation of a third person—a student at the employee's new school—even though the student had no special relationship with the former school district and never received the misleading information. ( Id . at p. 1081, 60 Cal.Rptr.2d 263, 929 P.2d 582.) In accordance with the Restatement, we held "that the writer of a letter of recommendation owes to third persons a duty not to misrepresent the facts in describing the qualifications and character of a former employee, if making these misrepresentations would present a substantial, foreseeable risk of physical injury to the third persons." ( Ibid . ) Plaintiffs urge us to hold, in similar fashion, that a brand-name drug manufacturer owes a duty to third persons not to misrepresent the safety of its drug, if making those misrepresentations would present a substantial, foreseeable risk of physical injury to those third persons.
In this case, plaintiffs allege that the terbutaline label failed to warn about the risks to fetal brain development and falsely represented that the drug was safe for use by pregnant women. They further claim that Novartis's control over the Brethine label rendered it responsible for any deficiencies in the terbutaline label, given that generic drug manufacturers are legally obligated to use the label crafted by the brand-name drug manufacturer. Novartis contends that it owed no duty to plaintiffs to update or maintain an accurate label because (1) it did not manufacture the terbutaline that caused plaintiffs' injuries; and (2) it had divested ownership of Brethine, the name-brand drug, several years before plaintiffs' mother was prescribed terbutaline.
In determining whether to create an exception to the general statutory duty of care, the "major" ( Cabral , supra , 51 Cal.4th at p. 771, fn. 2, 122 Cal.Rptr.3d 313, 248 P.3d 1170 ), and ultimately "most important" ( Kesner , supra , 1 Cal.5th at p. 1145, 210 Cal.Rptr.3d 283, 384 P.3d 283 ), consideration under California law is the foreseeability of physical harm. Novartis could reasonably have foreseen that deficiencies in its Brethine label could mislead physicians about the safety of terbutaline, Brethine's generic bioequivalent, which was legally required to bear an identical label.
The third Rowland factor implicates the closeness of the connection between the defendant's conduct and the plaintiff's injury. The label for a generic drug is (and must be) the same as the label for the brand-name drug, so any deficiency in the brand-name label will be reflected in the generic label. Plaintiffs allege that the deficient Brethine label led their mother's physician to prescribe terbutaline, which caused their neurological injuries. This scenario describes a close connection between Novartis's allegedly negligent conduct and plaintiffs' injuries.
Here, by contrast, federal regulations granted the brand-name drug manufacturer—and no other manufacturer—control over the active ingredients in the generic drug and the content of the warnings included in the generic's label. In addition, the temporal connection between Novartis's allegedly negligent conduct, on the one hand, and plaintiffs' exposure to harm and subsequent injury, on the other, is much closer than was the case in O'Neil .
The FDA has been considering for some time a rule that would effectively abrogate PLIVA and enable generic drug manufacturers to update a drug's warning label unilaterally, even if the brand-name manufacturer had not yet done so. (See FDA, Supplemental Applications Proposing Labeling Changes for Approved Drugs and Biological Products, 78 Fed.Reg. 67985 (Nov. 13, 2013) ; see Dept. of Health and Human Services, Regulatory Agenda, 82 Fed.Reg. 40277, 40279 (Aug. 24, 2017).) If adopted, the new rule "would create parity between NDA holders and ANDA holders with respect to submission of CBE–0 supplements for safety-related labeling changes based on newly acquired information" (78 Fed.Reg., supra, at p. 67989 ) and may conceivably justify reweighing of the Rowland factors and some reconsideration of the brand-name manufacturer's duty in this category of cases.
Foreseeability alone, however, is not sufficient to justify a duty of care in every instance. ( Erlich v. Menezes (1999) 21 Cal.4th 543, 552, 87 Cal.Rptr.2d 886, 981 P.2d 978.) We will not recognize a duty of care even as to foreseeable injuries "where the social utility of the activity concerned is so great, and avoidance of the injuries so burdensome to society, as to outweigh the compensatory and cost-internalization values of negligence liability." ( Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 502, 110 Cal.Rptr.2d 370, 28 P.3d 116.) Novartis contends that the circumstances here present such an exceptional case. We disagree.
Time and again we have recognized how " ‘[t]he overall policy of preventing future harm is ordinarily served, in tort law, by imposing the costs of negligent conduct upon those responsible.’ " ( Kesner , supra , 1 Cal.5th at p. 1150, 384 P.3d 283, quoting Cabral , supra , 51 Cal.4th at p. 781, 122 Cal.Rptr.3d 313, 248 P.3d 1170.) A brand-name drug manufacturer is not only in the best position to warn of a drug's harmful effects ( Sindell v. Abbott Laboratories (1980) 26 Cal.3d 588, 611, 163 Cal.Rptr. 132, 607 P.2d 924 ): It is also the only manufacturer with the unilateral authority under federal law to issue such a warning for the brand-name drug or its generic bioequivalent. Although federal regulations impose a continuing duty on the brand-name manufacturer to update and maintain an adequate warning label (see 21 C.F.R. § 201.80(e) ), a brand-name manufacturer's incentive to comply with that duty declines once the patent expires and generic manufacturers enter the market, since the market share for the brand-name drug at that point "may drop substantially." (78 Fed.Reg., supra , at p. 67988 ["Among drugs for which a generic version is available, approximately 94 percent are dispensed as a generic"].) The possibility that any consumer injured by a deficient drug label, including those who were dispensed the generic bioequivalent drug, could assert a claim of warning label liability restores the brand-name manufacturer's incentive to update the warning label with the latest safety information, even as the brand-name drug's market share declines.
The brand-name drug manufacturer is the only entity with the unilateral ability to strengthen the warning label. So a duty of care on behalf of all those who consume the brand-name drug or its bioequivalent ensures that the brand-name manufacturer has sufficient incentive to prevent a known or reasonably knowable harm. In O'Neil , by contrast, we found "no reason" to believe that the defendant valve and pump manufacturers would have any control over the safety of other companies' replacement parts or companion products (or even the Navy's purchasing choices or specifications). ( O'Neil , supra , 53 Cal.4th at p. 365, 135 Cal.Rptr.3d 288, 266 P.3d 987.) Our no-duty conclusion also rested explicitly on the fact that the replacement parts' "dangerous feature"—i.e., the asbestos—"was not integral to the product's design." ( Id . at p. 343, 135 Cal.Rptr.3d 288, 266 P.3d 987.) Here, on the other hand, the brand-name drug manufacturer exercised complete control over the contents of the generic drug label at the time of its alleged negligence, and the generic drug was legally required to be the brand-name drug's bioequivalent. We therefore conclude that warning label liability is likely to be effective in reducing the risk of harm to those who are prescribed (or are exposed to) the brand-name drug or its generic bioequivalent.
Strictly speaking, then, the burden on brand-name drug manufacturers of satisfying a common law duty of care to those who are prescribed the generic version of the drug is zero. Brand-name manufacturers already have a continuing duty to warn of potential risks "as soon as there is reasonable evidence of an association of a serious hazard with a drug; a causal relationship need not have been proved." ( 21 C.F.R. § 201.80(e).) A brand-name manufacturer's burden to maintain an adequate warning label persists without regard to the happenstance that a given prescription for a brand-name drug may—because of insurance company cost-savings rules ( Meijer, Inc. v. Warner Chilcott Holdings Co. III Ltd. (D.D.C. 2007) 246 F.R.D. 293, 297 ), or a pharmacist's discretion ( Bus. & Prof. Code, § 4073, subd. (c) )—be filled with a generic bioequivalent. And where the brand-name manufacturer provides an adequate label, then it necessarily has also fulfilled its duty with respect to the generic bioequivalent.
Although we declared in O'Neil that "little moral blame can attach to a failure to warn about dangerous aspects of other manufacturers' products and replacement parts" ( O'Neil , supra , 53 Cal.4th at p. 365, 135 Cal.Rptr.3d 288, 266 P.3d 987 ), the context of that statement was a situation in which the valve and pump manufacturers had no control or influence over the design, manufacturing, or safety of those parts; the warning attached to them; or the consumer's decision whether to purchase such products. ( Ibid . ) Here, by contrast, the brand-name manufacturer legally controlled the label on the generic bioequivalent drug, and thus had significant influence on the decision whether to prescribe it.
Novartis (and its amici curiae) rely in substantial part on what they call the "overwhelming" majority of courts that have declined to recognize warning label liability owed to those who were prescribed a generic version of the drug in reliance on the brand-name drug label. Although the decisions of our sister states and the lower federal courts may be instructive to the extent we find their analysis persuasive, they are neither binding nor controlling on matters of state law. ( People v. Gonzales and Soliz (2011) 52 Cal.4th 254, 296, 128 Cal.Rptr.3d 417, 256 P.3d 543.) We have respectfully considered the authorities cited by Novartis. We do not find them persuasive in analyzing California law.
There is a sad coda to Foster. The Fourth Circuit's ruling relieved the brand-name manufacturer of any duty to warn of known or knowable risks of the drug when a plaintiff had been given the generic equivalent—and (contrary to Foster's key assumption) the generic manufacturer had no ability to deviate from the brand-name manufacturer's label. As a result, it took until 2000—six years after Foster was decided—for the FDA to modify the warning to recommend that promethazine not be given to children younger than two years old. (Starke et al., Boxed Warning Added to Promethazine Labeling for Pediatric Use(2005) 352 New Eng. J. Med. 2653, 2653.) Four years thereafter, following further review of all adverse events that had been reported, the FDA added a boxed warning—the strongest type of warning (21 C.F.R. § 201.57(c)(1) )—stating that the drug should not be given to children younger than two years old because of the potential for fatal respiratory depression. (Starke et al., supra, at p. 2653; Rostron, Prescription for Fairness: A New Approach to Tort Liability of Brand-name and Generic Drug Manufacturers(2011) 60 Duke L.J. 1123, 1146–1147.) This example underscores the reality that the FDA depends heavily on the brand-name drug manufacturer exercising its own unilateral ability to strengthen its warning label. (Wyeth, supra, 555 U.S. at p. 579, 129 S.Ct. 1187 ; see generally Weeks, supra, 159 So.3d at p. 676 ["The FDA has limited resources to monitor the approximately 11,000 drugs on the market"].) Yet Foster's rule seriously undermines the brand-name manufacturer's incentive to do so.
O'Neil did not erase the distinction between strict liability and negligence, either. Far from conflating the two theories, we said simply that "[t]he same policy considerations that militate against imposing strict liability in this situation apply with equal force in the context of negligence." (O'Neil, supra, 53 Cal.4th at p. 366, 135 Cal.Rptr.3d 288, 266 P.3d 987, italics added.) As we have demonstrated above, O'Neil is soundly distinguishable from the situation here.
Second, California law places greater weight on the element of foreseeability in the duty analysis than does Maryland law. Indeed, this state treats foreseeability as "[t]he most important factor" ( Kesner , supra , 1 Cal.5th at p. 1145, 210 Cal.Rptr.3d 283, 384 P.3d 283 ), and we do not narrowly circumscribe the kinds of relationships that must exist between the plaintiff and the defendant as a predicate to imposing a duty on the defendant to prevent injuries arising from its own conduct. ( Id . at p. 1163, 210 Cal.Rptr.3d 283, 384 P.3d 283 ; see Randi W. , supra , 14 Cal.4th at p. 1077, 60 Cal.Rptr.2d 263, 929 P.2d 582 [one who negligently provides false information to another can owe a duty of care to a third person "who did not receive the information and who has no special relationship with the provider"].) By contrast, Foster found that a "duty ... arises" under Maryland law only "when there is ‘such a relation that one party has the right to rely for information upon the other, and the other giving the information owes a duty to give it with care.’ " ( Foster , supra , 29 F.3d at p. 171, quoting Weisman v. Connors (1988) 312 Md. 428, 540 A.2d 783, 790.) Foster then summarily concluded that "[t]here is no such relationship between the parties to this case, as Brandy Foster was injured by a product that [defendant] did not manufacture." ( Foster , at p. 171.) Even this explanation, though, seems to overlook the fact that there is never a direct relationship between a prescription drug manufacturer and the ultimate consumer. A consumer may obtain a prescription medication only through the physician as a learned intermediary. (See Carlin , supra , 13 Cal.4th at pp. 1116, 1126, 56 Cal.Rptr.2d 162, 920 P.2d 1347.) A physician, in turn, typically relies on the drug's warning label, the contents of which (regardless of whether the medication ultimately dispensed is the brand-name or generic bioequivalent) are controlled by the brand-name manufacturer. It is difficult to understand why the relationship between the brand-name manufacturer and the physician must be deemed to evaporate simply because an insurance company or pharmacist subsequently decides to dispense a generic version of the drug that bears the warning label crafted by the brand-name manufacturer.
We therefore do not find persuasive those out-of-state cases discounting the role of foreseeability (see, e.g., Huck v. Wyeth, Inc., supra, 850 N.W.2d at p. 376 (plur. opn. of Waterman, J.) [" ‘foreseeability should not enter into the duty calculus' "] ) or requiring the existence of a specific type of relationship between the plaintiff and the defendant (see, e.g., Moretti v. Wyeth, Inc.(9th Cir. 2014) 579 Fed.Appx. 563, 564 [construing negligent misrepresentation, under Nevada law, to " ‘require[ ], at a minimum, some form of relationship between the parties' "]; Schrock v. Wyeth, Inc.(10th Cir. 2013) 727 F.3d 1273, 1282 ["Oklahoma courts have also required a relationship between the defendant company and the product at issue for other theories of liability, including negligence"] ).
Third, in one crucial respect, Foster is like the vast majority of the out-of-state cases on which Novartis relies: it arose in federal court under diversity jurisdiction. Federal courts sitting in diversity are "extremely cautious" about recognizing innovative theories under state law ( Combs v. Int'l Ins. Co. (6th Cir. 2004) 354 F.3d 568, 578 ) and are bound to "apply the applicable state law as it now exists." ( Foster , supra , 29 F.3d at p. 171 ; see generally Gluck, Intersystemic Statutory Interpretation: Methodology as "Law" and the Erie Doctrine (2011) 120 Yale L.J. 1898, 1939 [federal courts "pick the narrowest possible answer, usually the one that does the least to change the status quo, regardless of its predictions of what the state court would do"].) Because only a handful of jurisdictions have adopted the duty recognized in Conte , supra , and followed by the Court of Appeal here, it is not surprising that federal courts have been reluctant to interpret the law of various states to embrace it. But the task of this court is not to " ‘opt for the interpretation that restricts liability, rather than expands it’ " until someone else tells us otherwise. ( Travelers Indem. Co. v. Dammann & Co., Inc. (3d Cir. 2010) 594 F.3d 238, 253 ; see also Germain v. Teva Pharmaceuticals, USA, Inc. (In re Darvocet, Darvon, & Propoxyphene Products Litigation) (6th Cir. 2014) 756 F.3d 917, 937 ["federal courts must be cautious"].) It is instead emphatically the province of this court to declare what the law is . By contrast, Novartis's collection of federal decisions merely attempt to predict the law of other states, while operating under a presumption against expanding liability. (See Schrock v. Wyeth, Inc. , supra , 727 F.3d at p. 1290 ["As a federal court ... we have limited authority to correct this potential injustice. It is for the state courts, rather than this panel, to engage in the delicate policy considerations predicate to the expansion of the scope of state tort law"].) They are of little use in discharging our task.
We likewise discount decisions from those jurisdictions that differ from California by categorically excluding from liability certain defendants (see, e.g., Huck v. Wyeth, Inc. , supra , 850 N.W.2d at p. 371 (plur. opn. of Waterman, J.) ["the tort of negligent misrepresentation does not apply to sellers of products but rather is limited to those in the business or profession of supplying information for the guidance of others"] ) or certain injuries (see, e.g., Flynn v. American Home Products Corp. (Minn.Ct.App. 2001) 627 N.W.2d 342, 351 ["the Minnesota Supreme Court has recognized negligent misrepresentation involving damages only for pecuniary loss, and has expressly declined to recognize the tort of negligent misrepresentation involving the risk of physical harm"] ) from the tort of negligent misrepresentation. And we find unhelpful the views of those jurisdictions that (federal courts predict) will recharacterize under their product liability act or similar rule all claims against a product manufacturer, no matter the theory, as product liability actions, which can be asserted only against the manufacturer of the product. (See, e.g., Germain , supra , 756 F.3d at pp. 941–954 [construing the laws of Arkansas, Connecticut, Florida, Georgia, Illinois, Kentucky, Louisiana, Maryland, Mississippi, Nebraska, New York, North Carolina, Ohio, Texas, Washington, and West Virginia]; Phelps v. Wyeth, Inc. (D.Or. 2012) 857 F.Supp.2d 1114, 1121 [Oregon law] ; Stanley v. Wyeth, Inc. (La.Ct.App. 2008) 991 So.2d 31, 33–34 [noting the "numerous cases where the negligent misrepresentation claims were ... preempted by ... a state's enactment of products liability law"].)At core, what Novartis seems to want is more than just an exception to the general duty of care applicable in California—an exception constructed to avoid liability where a biologically equivalent product is sold and the warning label used is required by federal law to be the label that the brand-name manufacturer controls. Perhaps because there is no logical basis to justify such an exception, Novartis instead seeks a more categorical result, though one no easier to justify—i.e., an unequivocal declaration that California law relieves a manufacturer of any failure-to-warn liability relating to another manufacturer's products. True: An exception to California's general duty of care is ordinarily applicable to relieve a manufacturer of the duty to warn consumers about a product's risks where the product is that of another manufacturer. ( O'Neil , supra , 53 Cal.4th at pp. 364–366, 135 Cal.Rptr.3d 288, 266 P.3d 987.) For good reason: A product manufacturer ordinarily will have no control over the design or safety of another manufacturer's product, the other manufacturer's use of dangerous materials, or any warnings the other manufacturer might place on the product. ( Id . at pp. 350, 365, 135 Cal.Rptr.3d 288, 266 P.3d 987.) Nor would there be any reason to think that a manufacturer has the ability to influence a customer's decision to buy another manufacturer's product. ( Id . at p. 365, 135 Cal.Rptr.3d 288, 266 P.3d 987.) Without such predicate connections between one manufacturer and another, it would be difficult, if not impossible, for a manufacturer to foresee the dangers lurking in the seemingly limitless number of other products that might be used with or in its product. ( Ibid . ) But prescription drug markets are different. They present the unusual situation where one entity's misrepresentations about its own product foreseeably and legally "contributed substantially to the harm" caused by another entity's product (i.e., the generic drug bearing the warning label drafted by the brand-name manufacturer). ( O'Neil , at p. 362, 135 Cal.Rptr.3d 288, 266 P.3d 987.) That key circumstance distinguishes the situation here from those involving the general run of products.
We have determined that Novartis owed a duty of care to those who were prescribed Brethine or its generic bioequivalent in reliance on Novartis's warning label. Novartis claims that the demurrer should nonetheless be sustained without leave to amend on the ground that it sold the Brethine NDA to aaiPharma in 2001 and no longer had control over its warning label in 2007, when plaintiffs' mother was prescribed terbutaline. So we now consider whether Novartis should be relieved of all liability for its allegedly negligent failure to update the label as a matter of law, despite the fact that aaiPharma continued using the label Novartis had crafted.
Plaintiffs fault Novartis. But they do not claim the company was responsible for any negligent acts or omissions after the transfer of ownership. After all, under FDA regulations, only the current NDA holder has the authority to unilaterally modify the drug's warning label. Plaintiffs claim instead that they were harmed by Novartis's failure to update the label prior to transferring the NDA to aaiPharma, in that aaiPharma continued to use the same warning label until at least 2007, when their mother was prescribed terbutaline. In effect, plaintiffs claim that the Brethine warning label was deficient at the time Novartis transferred the NDA—and it was reasonably foreseeable that it would remain deficient, given the incentives facing any successor manufacturer.
We explained above why it was foreseeable that Novartis's failure to update the Brethine warning label could affect fetuses exposed to the generic version of the drug in utero. And there is no dispute that plaintiffs have alleged injury. Although Novartis was no longer responsible for updating the warning label at the time plaintiffs' mother was prescribed the drug, aaiPharma was using the same label it had inherited from Novartis. According to plaintiffs, neither NDA holder had sufficient financial incentive to update the label: Nearly half of all prescriptions for Brethine or its generic equivalent were to slow preterm labor. Under the circumstances, it was certainly foreseeable that aaiPharma would be no more conscientious about updating the warning label than Novartis allegedly had been.
Novartis contends the connection between its alleged negligence and plaintiffs' injury was extremely remote, as it had ceased producing the drug six years before the injury. But it is not clear why liability should turn on Novartis's role in the manufacturing process. What warning label liability stems from is Novartis's failure to warn about a drug's risks, not its production of a defective drug. The complaint alleges that Novartis and aaiPharma were concurrent tortfeasors whose liability stemmed from failure to warn, because each negligently failed to update the warning label.
Novartis highlights the six years that elapsed between its surrender of the NDA for the drug at issue in this case and the decision to prescribe terbutaline to plaintiffs' mother. Yet the gap between the transfer of this particular NDA and the time at which plaintiffs' mother was prescribed terbutaline does not bear on the question of duty, "which must be addressed at a higher level of generality." ( Kesner , supra , 1 Cal.5th at p. 1158, 210 Cal.Rptr.3d 283, 384 P.3d 283.) In determining whether to create an exception to a brand-name drug manufacturer's duty of care, we do not evaluate " ‘whether a particular plaintiff's injury was reasonably foreseeable in light of a particular defendant's conduct,’ " but " ‘whether the category of negligent conduct at issue is sufficiently likely to result in the kind of harm experienced that liability may appropriately be imposed ....’ " ( Cabral , supra , 51 Cal.4th at p. 772, 122 Cal.Rptr.3d 313, 248 P.3d 1170.) So the relevant inquiry is whether a successor drug manufacturer is sufficiently likely to continue using the warning label it inherited from the prior brand-name manufacturer, even when that label was deficient at the time the NDA was transferred.
It is true enough that a successor drug manufacturer has an obligation, under state as well as federal law, to ensure adequacy of the warning label. But the scenario at issue here implicates whether a successor drug manufacturer is sufficiently likely—as a matter of law—to modify the warning label when the brand-name manufacturer, which labored under an identical obligation, negligently failed to do so. In such circumstances, it is at least plausible that a successor manufacturer may choose to undertake only a cursory investigation of the medical literature, on the assumption that the prior manufacturer must have done a more thorough inquiry during the period that it was responsible for maintaining the warning label. This option will seem especially attractive when the prior manufacturer has greater resources or expertise than its successor. A successor manufacturer may also undertake an adequate inquiry but make no changes to the label in close cases, partially or entirely trusting the judgment of the prior manufacturer. Or a successor manufacturer, like the prior manufacturer, may fear an adequate warning would damage the market share for the drug and balance its lost revenue and potential exposure in the same way as the prior manufacturer. Indeed, plaintiffs claim that neither NDA holder wanted to jeopardize Brethine's use as a tocolytic, which accounted for almost half of the drug's market share. Any or all of these factors could explain why a drug's warning label may prove "stickier" than what is optimal to protect public safety at a reasonable cost, and why a successor drug manufacturer would not be categorically distinguishable from the prior manufacturer in its likelihood of being conscientious about its obligations to disclose relevant risks.
Under the "general" rule, " ‘ "every person has a right to presume that every other person will perform his duty and obey the law." ’ " ( Webb v. Special Electric Co., Inc. , supra , 63 Cal.4th at p. 191, 202 Cal.Rptr.3d 460, 370 P.3d 1022.) But we have never allowed a defendant to excuse its own negligence as a matter of law simply by asserting that someone else should have picked up the slack and discharged the duty at issue. (See Stewart v. Cox (1961) 55 Cal.2d 857, 864, 13 Cal.Rptr. 521, 362 P.2d 345 ["The fact that a third person does not perform his duty to protect the plaintiff from harm, either because he makes no effort or through his negligence does not succeed, is not a superseding cause"].) Nor have we permitted a negligent actor to evade liability simply because another party may also be liable for a similar tort. (See, e.g., Beacon Residential Community Assn. v. Skidmore, Owings & Merrill LLP (2014) 59 Cal.4th 568, 583, 173 Cal.Rptr.3d 752, 327 P.3d 850 ( Beacon ); accord, Humble Oil & Refining Co. v. Martin (1949) 148 Tex. 175, 222 S.W.2d 995, 1001 ["there is a distinction between the general axiom that a person is not bound to anticipate the negligence of others and the idea that one may always discharge a duty of due care to the public by relying on performance by another of the same duty owed by the latter"].) So while " ‘[a] person who, himself , is exercising ordinary care, has a right to assume that others, too, will perform their duty under the law’ "—and thus may not be negligent in failing to anticipate injury that results " ‘ only from a violation of law or duty by another’ "—the general rule does not apply when " ‘it is reasonably apparent to one, or in the exercise of ordinary care would be apparent to him, that another is not going to perform his duty.’ " ( Stickel v. San Diego Elec. Ry. Co. (1948) 32 Cal.2d 157, 166, 195 P.2d 416, first and second italics added; see id . at pp. 166–167, 195 P.2d 416 ["It is but a statement as to that common type of negligence, the unreasonable failure to observe what is going on about one, including the negligence of others. ‘One may not continue to assume that the law is being observed after knowing or having an opportunity, by the use of reasonable care, to know that it is not being observed’ "]; Harris v. Johnson (1916) 174 Cal. 55, 58, 161 P. 1155 [" ‘The general rule ... that every person has a right to presume that every person will perform his duty’ " applies only " ‘in the absence of reasonable ground to think otherwise’ "].) Few if any entities would be in a position to know better that the law " ‘is not being observed’ " ( Stickel , at p. 167, 195 P.2d 416 ) than a brand-name drug manufacturer that itself had negligently failed to update the label. So the assumption underlying the brand-name drug manufacturer's duty is not at all "that successor corporations will routinely ignore th[eir] duty." (Conc. & dis. opn., post , at 226 Cal.Rptr.3d at p. 373, 407 P.3d at p. 50, italics added.) It's that when a brand-name drug manufacturer has ignored its own duty, there is a risk that the successor manufacturer will adopt the same strategy. Under these circumstances, categorically justifying a manufacturer's neglect of that risk requires heroic, and ultimately unreasonable, assumptions distinguishing an original brand-name manufacturer's behavior from that of its successors. For these reasons, we find it reasonably foreseeable that a successor drug manufacturer could continue to use the same label it inherited, even when the label was deficient.
According to Novartis, the policy of preventing future harm would not be advanced by subjecting the brand-name drug manufacturer to liability after it has already divested itself of the drug and no longer has control over the warning label. But in examining the prevention of future harm, we undertake the duty analysis "look[ing] to the time when the duty was assertedly owed." ( Kesner , supra , 1 Cal.5th at p. 1150, 210 Cal.Rptr.3d 283, 384 P.3d 283.) It is during the time Novartis owned the drug that both its legal duty and its power to discharge that duty converge. At that point, Novartis did have control over the warning label and could have modified it, without waiting for FDA approval, to warn of the risks to fetal brain development. Recognizing a brand-name drug manufacturer's potential responsibility for injuries proximately caused by deficiencies in its warning label—regardless of whether the injury occurred before or after divestment—provides a further incentive to the brand-name manufacturer to update the label as soon as it knows (or should have known) of the unwarned risks. Consider, on the other hand, the implications of allowing the brand-name manufacturer to shield itself from liability as soon as it transfers ownership to another manufacturer, as Novartis proposes. What such a rule would do is encourage an economically rational brand-name manufacturer to transfer the NDA, rather than add a warning to the label, since an updated label would diminish the utility (and thus the value) of the drug. Such a scenario obviously poses greater risks to consumer safety relative to the alternative.Novartis counters with a different scenario. It claims that under plaintiffs' regime, a successor brand-name drug manufacturer would have an incentive to maintain the identical label without change so that the former brand-name manufacturer would be forced to share in any liability. We are skeptical. When it is economically rational for the manufacturer to update the label, it will update the label—regardless of the prospect that a prior manufacturer might share in the liability for its own negligent failure to update the label. Even in a marginal case, though, it does not seem especially likely that a successor drug manufacturer which knows or should know of an unwarned risk would choose to leave a warning label unchanged simply to preserve the possibility that—if the label remained the same as under the former manufacturer—the former manufacturer could be a codefendant in a future tort action. It seems implausible that a successor manufacturer would take that gamble if its proportional share of fault would be ever increasing as medical research became more confident about the link between the drug and some adverse effect. After all, the successor manufacturer could avoid liability altogether by updating the label to warn about the risk.
The more substantial danger is that neither manufacturer will have sufficient incentive to update the label. Unless there is warning label liability, it will be economically rational in some circumstances for a brand-name manufacturer to offload the drug to a successor rather than update the warning label. And if the brand-name manufacturer fails to update the label to disclose a known or knowable risk, economic interests and simple inertia may lead the successor manufacturer to the same strategy. (See ante , at 226 Cal.Rptr.3d at pp. 363–364, 407 P.3d at pp. 42–43.) The better rule is to provide appropriate incentives for the brand-name manufacturer to update the warning label at the earliest possible time, given that the successor manufacturer cannot remove any aspect of the warning without FDA approval.
Indeed, approximately half of the studies cited in the first amended complaint to demonstrate a link between terbutaline exposure in pregnancy and fetal brain development postdated Novartis's sale to aaiPharma. To avoid the distortion caused by hindsight bias, trial courts should be careful to protect the jury from needlessly being exposed to or considering scientific studies connecting a drug to some harm where those studies postdate transfer of the NDA.
The concurring and dissenting opinion finds "perhaps most troubling" the court's unwillingness to "predict" when the gap between transfer of the NDA and exposure to the drug will be so remote as to preclude a finding of proximate cause. (Conc. & dis. opn., post, at 226 Cal.Rptr.3d.at p. 375, 407 P.3d at p. 52.) But neither party has briefed the issue of proximate cause, nor is proximate cause fairly encompassed within the issue presented—indeed, the issue presented involves exclusively the tort law element of duty. Novartis remains free to contest the existence of proximate cause—as well as any of the other elements of negligence and negligent misrepresentation.
Novartis renews its claim that warning label liability would severely chill both the innovation and marketing of new drugs if imposed after the brand-name manufacturer exits the market. Yet once again, it offers neither evidence nor a persuasive rationale to support its contention—and no reason for us to prefer some unknown increment of drug development over the urgent need to compensate a victim whose injury was foreseeably and proximately caused by a brand-name manufacturer's negligence. (See Carlin , supra , 13 Cal.4th at p. 1117, 56 Cal.Rptr.2d 162, 920 P.2d 1347 ["Upjohn offers no clear or sufficient basis for concluding that research and development will inevitably decrease" because of failure-to-warn claims]; id . at p. 1116, 56 Cal.Rptr.2d 162, 920 P.2d 1347, fn. 6 [discounting the risk of overwarning because of the lack of evidence]; cf. Kesner , supra , 1 Cal.5th at p. 1156, 210 Cal.Rptr.3d 283, 384 P.3d 283 [noting the defendants "cite no evidence to suggest such [preventive] measures would have been unreasonably costly"].) After all, the duty imposed here merely reinforces the brand-name drug manufacturer's existing duty to update and maintain the warning label. It does not require a brand-name drug manufacturer to do anything new.
We explained earlier why significant moral blame attaches to the failure to warn about a drug's risks when the brand-name drug manufacturer knew or should have known about those risks. The fact that the brand-name manufacturer has since exited the market does not alter the calculus. Under plaintiffs' theory, the actionable conduct occurred while the manufacturer still had control over the warning label. Had Novartis updated the warning label before surrendering the NDA, the federal regulations make it very likely that the warning would have remained on the label in 2007. (See Wyeth , supra , 555 U.S. at p. 568, 129 S.Ct. 1187.) Although it can be difficult to assess the full extent of moral blame before a factual record has been developed ( Kesner , supra , 1 Cal.5th at p. 1151, 210 Cal.Rptr.3d 283, 384 P.3d 283 ), concealment of a drug's effects on the fetal brain for the purpose of preserving the drug's share of the premature labor drug market and thus inflating the sales price of the NDA would be especially objectionable. So Novartis fails to show how " ‘clear considerations of policy’ " justify a categorical exception to the duty of care. ( Kesner , supra , 1 Cal.5th at p. 1144, 210 Cal.Rptr.3d 283, 384 P.3d 283.) What the Rowland factors support instead is the conclusion that Novartis had a duty to warn about the potential risks of its drug, regardless of whether the consumer received the brand-name or generic bioequivalent, and that liability for the asserted breach of that duty did not end as a matter of law at the moment Novartis sold its rights to aaiPharma, an allegedly concurrent tortfeasor. A contrary rule would convey to Novartis and to similarly situated drug manufacturers the unjustified benefit of an exception to the general duty of care, incentivizing brand-name drug manufacturers that know or should know of unwarned risks to unload a problematic drug on another entity instead of modifying the drug's warning label to include those hazards.
The concurring and dissenting opinion makes much of the fact that no other jurisdiction has yet recognized a brand-name drug manufacturer's duty to maintain a warning label in these circumstances. The legal landscape was just as bare when the Court of Appeal recognized a brand-name drug manufacturer's duty to consumers of the generic bioequivalent drug (see Conte , supra , 168 Cal.App.4th at p. 101, 85 Cal.Rptr.3d 299 )—a duty we unanimously affirm here. Rarely, if ever, do jurisdictions face precisely the same jurisprudential questions at the same time, nor is our system premised on the idea that law congeals across jurisdictions. To the contrary, the common law incorporates the possibility of change as a foundational premise: "[t]he law of torts is anything but static, and the limits of its development are never set. When it becomes clear that the plaintiff's interests are entitled to legal protection against the conduct of the defendant, the mere fact that the claim is novel will not of itself operate as a bar to the remedy." (Prosser & Keeton, Torts (5th ed. 1984) § 1, p. 4.) Indeed, even if we acknowledge the value of reducing uncertainty where possible, what is critical in common law adjudication is not that all jurisdictions rapidly converge on a particular understanding of tort liability. Instead a court must carefully weigh whether an existing rule should apply in a particular context under current conditions. Applying the Rowland factors to address that context, we conclude that brand-name drug manufacturers owe a duty to those whose injuries are foreseeably and proximately caused by the manufacturer's deficient warning label.
We do not doubt the wisdom of crowds in some settings. But the value of an idea conveyed by or through a crowd depends not on how loudly it is proclaimed or how often it is repeated, but on its underlying merit relative to the specific issue at hand. Despite the impressive case authority Novartis has collected on its behalf, none of it purports to interpret California law. Yet it is California law that we must construe and apply in this case.
In doing so, we find that brand-name drug manufacturers have a duty to use ordinary care in warning about the safety risks of their drugs, regardless of whether the injured party (in reliance on the brand-name manufacturer's warning) was dispensed the brand-name or generic version of the drug. We also conclude that a brand-name manufacturer's sale of the rights to a drug does not, as a matter of law, terminate its liability for injuries foreseeably and proximately caused by deficiencies present in the warning label prior to the sale. We therefore affirm the Court of Appeal.
Associate Justice of the Court of Appeal, Third Appellate District, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
I accept the majority's holding that a brand-name drug manufacturer's duty to warn extends to consumers of a generic bioequivalent, but only because federal regulations currently require that generic drugs carry the same warning label as appears on the brand-name product. (See 21 C.F.R. § 314.94(a)(8)(iv) ; PLIVA, Inc. v. Mensing (2011) 564 U.S. 604, 613, 131 S.Ct. 2567, 180 L.Ed.2d 580 ( PLIVA ).) This special feature of pharmaceutical law, which gives the brand-name manufacturer sole and complete control over the warning label, justifies making generic drugs an exception to our observation in O'Neil v. Crane Co. (2012) 53 Cal.4th 335, 342, 135 Cal.Rptr.3d 288, 266 P.3d 987 ( O'Neil ) that a manufacturer is generally not liable for injuries caused by another manufacturer's product. The majority's second holding, however, would extend indefinitely a drug manufacturer's duty to warn the customers of its successor, even after sale of the product line. No special feature of FDA law or practice warrants this rule. Plaintiffs' theory of "predecessor liability" represents a substantial and unprecedented expansion of tort duties. The majority cites no case holding a predecessor manufacturer liable for failing to warn about injuries caused by its successor's product. Indeed, it appears that predecessor liability for failure to warn has never before been recognized by any court, in any jurisdiction. To the extent the theory has been raised, courts across the country have universally rejected it.
Rowland v. Christian(1968) 69 Cal.2d 108, 70 Cal.Rptr. 97, 443 P.2d 561.
When a drug manufacturer acquires a new product line, it assumes the responsibility to update the warning label if and when reasonable evidence demonstrates a link to a serious health hazard. ( 21 C.F.R. § 201.80(e).) Predecessor manufacturers have a right to presume successors will perform their duty and follow the law. (See Webb v. Special Electric Co., Inc. (2016) 63 Cal.4th 167, 191, 202 Cal.Rptr.3d 460, 370 P.3d 1022 ; Harris v. Johnson (1916) 174 Cal. 55, 58, 161 P. 1155.) The majority's foreseeability analysis glosses over this important legal obligation, noting that the successor would have no financial incentive to make a labeling change. (See maj. opn. ante , at 226 Cal.Rptr.3d at pp. 363–364, 407 P.3d at pp. 41–43.) However, the prospect of negative publicity, fines, and tort liability gives all manufacturers substantial reason to disclose the adverse effects of a drug they sell. Updating the warning label to disclose risks as they become known , and ensuring warnings remain adequate, is a drug manufacturer's legal duty. ( Wyeth v. Levine (2009) 555 U.S. 555, 570–571, 129 S.Ct. 1187, 173 L.Ed.2d 51.) The majority's assumption that successor corporations will routinely ignore this duty, simply because their predecessors may have done so, is unfounded.
Moreover, the accumulation of scientific studies will often make the correlation with a health risk more clear over time. The majority's analysis elides this important feature of pharmaceutical practice. Adverse effects from a drug typically appear first in anecdotal case reports. It can take several years for epidemiological studies, the gold standard for establishing causation, to be conducted and published. Indeed, a 2013 FDA study found that the "most critical safety-related label changes, boxed warnings and contraindications, occurred a median 10 and 13 years after drug approval (and the range spanned from 2 to 63 years after approval)." (Lester et al., Evaluation of FDA Safety-related Drug Label Changes in 2010 (2013) 22 Pharmacoepidemiology & Drug Safety 302, 304.) A connection to adverse effects that appears reasonably clear when a successor produces a drug may well have been more tenuous, perhaps not even rising to the FDA's "reasonable evidence" standard, when it was the predecessor's product. Scientific evidence may not demonstrate the link to a health risk until after divestiture. Yet, at that point there is little to nothing a predecessor manufacturer can do to warn about the harm.
I discuss these developments not to express a view on the merits of plaintiffs' suit, but simply to point out that the scientific investigation of an alleged harmful effect takes time. Anecdotal case reports, in vivo studies, or animal studies that initially suggest an association are sometimes discredited by later epidemiological studies, which are more authoritative but take longer to conduct. Yet the majority's new duty rule makes it nearly imperative for manufacturers to issue warnings in advance of the science if they are selling a drug's NDA. In the normal course, a responsible drug manufacturer can monitor scientific developments and work with the FDA to determine when additional warnings are warranted. It loses this ability after transferring the NDA to another company. By holding that such a manufacturer owes a duty to warn its successor's customers even many years later, the majority creates an incentive for manufacturers to warn about every conceivable harm before transferring an NDA, lest their successors fail to include appropriate warnings when a risk is later validated.It is certainly possible to foresee that a successor manufacturer will shirk its legal obligation to warn. That a harm is foreseeable does not necessarily mean we should recognize a duty of care, however. On "clear judicial days ... a court can foresee forever." ( Thing v. La Chusa (1989) 48 Cal.3d 644, 668, 257 Cal.Rptr. 865, 771 P.2d 814.) As the majority opinion recognizes, an analysis of the Rowland factors requires us to balance foreseeability against considerations of public policy. Several policy reasons strongly counsel against imposing a duty of care on predecessor companies to warn about risks in products manufactured and sold by their successors.
First, as noted, a predecessor manufacturer has no control over the successor's product warnings. Only the current NDA holder has the power to change a drug's warning label. ( 21 C.F.R. §§ 314.71(a), 314.72(a)(2).) The majority therefore imposes a duty of care that is impossible for predecessor companies to discharge. Although this result might increase compensation for claims of drug-related injury, it disserves the tort policy of deterring negligent behavior. As this court recently observed, the "goal of products liability law is not merely to spread risk but also ‘to "induce conduct that is capable of being performed." ’ " ( Webb v. Special Electric Co., Inc. , supra , 63 Cal.4th at p. 187, 202 Cal.Rptr.3d 460, 370 P.3d 1022.) Until today, a defendant's ability to control product warnings has been understood, even taken for granted, as an essential prerequisite to imposing liability for failure to warn. Indeed, this very same logic underlies the Supreme Court's preemption holding in PLIVA : It is unfair to subject generic manufacturers to failure-to-warn liability under state law when federal law gives them no ability to alter a drug's warning label. (See PLIVA , supra , 564 U.S. at p. 624, 131 S.Ct. 2567.) It is no answer to say that a predecessor need only ensure that its own warnings are complete and accurate. The immediate and efficient cause of plaintiffs' alleged injury here was their mother's ingestion of (a generic version of) aaiPharma's drug. The warnings Novartis gave for the product it sold six years earlier are extremely remote from this event.
Second, the majority's holding will likely encourage over-warning by drug manufacturers. Drug manufacturers are already under a duty to update their warning labels, and they already face the risk of suit from their own customers if they fail to comply with that duty. The knowledge that they will still be subject to liability years in the future, even after divesting a product line, might well cause companies to seek the FDA's permission to add warnings about potential adverse effects that have only the barest support in evolving scientific literature. We have noted before that overabundant product warnings breed consumer disregard. (See, e.g., O'Neil , supra , 53 Cal.4th at p. 365, 135 Cal.Rptr.3d 288, 266 P.3d 987.) Such a problem seems especially acute in the pharmaceutical drug context, where product inserts and advertising frequently include mind-numbing lists of potential side effects.
Third, the majority's rule could conceivably have the perverse effect of diminishing successor corporations' incentive to update labels as scientific evidence develops. Current product manufacturers already have a disincentive to add warnings that may lower their profits. By holding that predecessor companies must potentially share liability for injuries caused by a successor's product, the court effectively reduces successor companies' exposure to tort liability. Aware that the cost of tort suits can be shared with their predecessors, some successor companies may decide to delay or perhaps even forgo additional warnings.
Fourth, and perhaps most troubling, creating a broad duty of care to consumers of a successor's product will expose pharmaceutical companies to liability in perpetuity. There is no logical stopping point for such a duty. The majority asserts that injuries will eventually become too remote for proximate causation to be established. It, however, declines to predict when that time might be reached and ventures no opinion about whether the six-year gap in this case is long enough. (But cf. Lyman v. Pfizer, Inc. , supra , 2012 WL 2970627 at p. *17 [finding any negligence of predecessor company too remote as a matter of law for a drug ingested less than two years after transfer of the NDA].) Without any limiting principles to guide the proximate cause analysis, the majority's reassurance fails to reassure.
Absent some such limiting principle, a proximate cause inquiry cannot reliably prevent excessive liability because proximate cause is ordinarily a question of fact for the jury. ( Lacy v. Pacific Gas & Electric Co. (1934) 220 Cal. 97, 101, 29 P.2d 781.) The issue cannot be decided as a matter of law unless the only reasonable conclusion from the facts is an absence of causation. ( State Dept. of State Hospitals v. Superior Court (2015) 61 Cal.4th 339, 353, 188 Cal.Rptr.3d 309, 349 P.3d 1013.) Thus, in all but the most extreme cases, predecessor liability claims are likely to reach a jury, with costly and unpredictable results. Duty, by contrast, is a question of law for the court to decide. ( Cabral v. Ralphs Grocery Co. (2011) 51 Cal.4th 764, 770, 122 Cal.Rptr.3d 313, 248 P.3d 1170 ( Cabral ).) This court has traditionally relied on duty rules to limit liability, even for foreseeable injuries. (E.g., Kesner , supra , 1 Cal.5th at pp. 1154–1155 ; O'Neil , supra , 53 Cal.4th at pp. 364–366, 135 Cal.Rptr.3d 288, 266 P.3d 987 ; Parsons v. Crown Disposal Co. (1997) 15 Cal.4th 456, 476–478, 63 Cal.Rptr.2d 291, 936 P.2d 70.) In Kesner , for example, we limited the duty to prevent take-home asbestos exposure to members of the worker's household, even though this limit excluded other individuals in close contact with the worker who would be foreseeably harmed. ( Kesner , at pp. 1154–1155, ) This court has acknowledged the importance of limits to avoid potentially infinite expansions of tort duty. The majority's opinion here proposes none.
Exposing drug manufacturers to broad liability with no predictable end point has the clear potential to destabilize the pharmaceutical industry and chill innovation. Although the majority contends no evidence has been presented to support this prediction (maj. opn. ante , at 226 Cal.Rptr.3d at p. 369, 407 P.3d at p. 46), we do not typically demand evidence on the Rowland factors. The Rowland analysis is inherently predictive, not evidence-based. (Cf. Cabral , supra , 51 Cal.4th at p. 772, 122 Cal.Rptr.3d 313, 248 P.3d 1170 [ Rowland factors are evaluated at a broad level of generality and not tied to facts of a particular case].) It stands to reason that expanding a drug manufacturer's exposure to tort liability will likely increase the drug's price. It may also delay the release of new drugs or even keep some beneficial drugs off the market. "Public policy favors the development and marketing of beneficial new drugs, even though some risks, perhaps serious ones, might accompany their introduction, because drugs can save lives and reduce pain and suffering." ( Brown v. Superior Court (1988) 44 Cal.3d 1049, 1063, 245 Cal.Rptr. 412, 751 P.2d 470.) We have previously proceeded with caution in this area, recognizing this broad public interest in the availability of affordable drugs. (See, e.g., id . at pp. 1065–1066, 1069, 245 Cal.Rptr. 412, 751 P.2d 470 [rejecting strict liability for injuries caused by prescription drugs].) The majority reverses this course. It imposes a more expansive, enduring liability on drug manufacturers than has been recognized elsewhere in tort law.
Fifth, there is no reason to think the majority's predecessor liability holding will be limited to the pharmaceutical industry, or even to immediate predecessors. Despite its suggestion that pharmaceutical drugs are somehow different, the majority opinion identifies no specific feature of drug regulation that makes an extension of duty especially desirable or necessary in this context. What is now to stop users of any product from suing a former manufacturer, arguing it was foreseeable the successor would fail to update the product's warnings? The path of least resistance for all successor companies is to continue the product warnings used by their predecessors. It will generally be against a successor's financial interest to add warnings, no matter what the product. The majority's rule thus opens the door to predecessor liability for all products. It is also unclear exactly how far back this liability would extend. Some amicus briefs advised that product line acquisitions are common in the pharmaceutical industry. If a product line has changed hands two or three times, do all of these manufacturers have a duty of care toward the eventual plaintiff? Apparently they do, given the majority's remarks on joint and several liability. (See maj. opn. ante , at 226 Cal.Rptr.3d at p. 367, 407 P.3d at p. 44.) Again, however, this reasoning suggests no logical stopping point.Sixth, it is not clear that an expanded duty of care is needed to prevent drug manufacturers from concealing risks when their product line is acquired. These transactions involve highly sophisticated parties, and acquiring companies can be expected to discover a drug's known risks when conducting due diligence. Plaintiffs here never alleged that Novartis hid risks from aaiPharma. Moreover, the appropriate remedy for this wrong is not an overbroad duty rule, but a fraud or breach of contract lawsuit from the acquiring company. A lawsuit related to the acquisition offers a more immediate and effective deterrent than the prospect of future tort claims by the acquirer's customers. Such an approach would make clear the duties of full disclosure and due diligence. It would also encourage successor companies to remain attentive to the evolving science relating to their acquisitions.
In discussing Centinela Freeman Emergency Medical Associates v. Health Net of California, Inc. (2016) 1 Cal.5th 994, 209 Cal.Rptr.3d 280, 382 P.3d 1116 ( Centinela Freeman ), a completely distinguishable case, the majority implicitly assumes that drug companies commonly sell off product lines to undercapitalized entities in order to "unload" (maj. opn. ante , at p. 54) products found to be dangerous. It cites no evidence or authority for these assumptions. In contrast, we do know it is common for brand-name manufacturers to stop selling a drug after their exclusivity period ends and generic competitors are allowed to enter the market. (See Supplemental Applications, supra , 78 Fed.Reg. at p. 67988 ; PLIVA , supra , 564 U.S. at p. 644, 131 S.Ct. 2567 (dis. opn. of Sotomayor, J.).) Because the brand-name drug's market share inevitably declines with the entry of generic equivalents, these transactions may make good business sense and have nothing to do with the risks or benefits of the product itself. With respect to this case in particular, plaintiffs did not allege that Novartis hid health risks of terbutaline from aaiPharma or committed any wrongdoing in connection with the transfer of Brethine's NDA. Nor is there a basis for speculating that Novartis deliberately sold Brethine to an undercapitalized company, or that such transactions are typical. Plaintiffs' complaint includes no allegations to this effect, and aaiPharma's bankruptcy did not occur until four years after the NDA transfer. The majority also suggests that an extended duty of care is needed because successor manufacturers may simply rely on their predecessor's review of the medical literature or may trust their predecessor's judgment of whether a warning is required. (Maj. opn. ante , at 226 Cal.Rptr.3d at p. 363, 407 P.3d at p. 41.) This speculation rests on the mistaken assumption that due diligence is a static event, occurring only when an NDA is transferred. But, with the transfer, the new manufacturer assumes the sole and continuing responsibility to monitor the drug's safety and labeling. ( 21 C.F.R. § 314.72(b).) To fulfill this duty, the successor manufacturer must regularly monitor research developments as well as consumer feedback related to the drug. If the successor fails to update the drug's warnings to include newly documented risks, it may face products liability suits from its customers. Predecessor liability is not necessary to give these injured customers a remedy. The majority's holding is a solution in search of a problem.
Moreover, the court's holding in Centinela Freeman included a scienter requirement, specifying that health care plans may be liable for negligent delegation of financial responsibility if they "knew or should have known" the transferee would not be able to pay. (Centinela Freeman, supra, 1 Cal.5th at pp. 1001–1002, 209 Cal.Rptr.3d 280, 382 P.3d 1116.) Yet the majority's analysis here accords no such significance to details surrounding the transfer of an NDA. Novartis would be equally responsible under the majority's duty rule if it had sold Brethine's NDA to another multinational, highly capitalized company.
Seventh, with respect to moral blame, the majority focuses too narrowly on the facts of this specific case. The broader question is what moral blame attaches to a manufacturer's failure to warn its successor's customers about a product defect. A predecessor manufacturer's share of moral blame may well be lower than that of a successor company that fails to update warnings, especially if scientific knowledge has advanced over time to provide stronger evidence of the product's link to an adverse effect.
Eighth, and finally, despite the majority's blithe assurance that drug manufacturers can "entirely avoid" perpetual liability through insurance or indemnity agreements (maj. opn. ante , at 226 Cal.Rptr.3d at p. 367, 407 P.3d at p. 44), there is no precedent for coverage against claims arising from another company 's product. None of the cases cited in the majority opinion addressed this unusual scenario. While insurance might be available in theory, the policy would have to cover a potentially enormous future risk that the insured would have no ability to mitigate. At the very least, the coverage would be difficult to manage and extremely costly. Defining the covered events could also be difficult, given that the potential plaintiffs would have no relationship with the insured. Even if appropriate insurance does become available, the majority's holding will require that pharmaceutical companies maintain it on all drugs for several years after they have stopped selling the products and realizing a profit. The high cost of insuring against the majority's extension of the liability will almost certainly drive up the prices for prescription drugs.
Nor are indemnity agreements a satisfactory answer. After today's holding, drug companies subject to suit in California will undoubtedly include indemnity provisions in all NDA transfer contracts. Such provisions could effectively put the burden of liability back where it rightfully belongs, i.e., on the actual manufacturer of the product used by the plaintiff. But they would not necessarily relieve the predecessor of all costs related to future claims. Indemnification rights may be capped or may exclude costs in defending the underlying lawsuits. There may also be costs if the predecessor must sue to enforce the indemnity agreement.
For all these reasons, although I join the majority's decision to affirm Conte v. Wyeth, Inc. (2008) 168 Cal.App.4th 89, 85 Cal.Rptr.3d 299, I dissent from its holding that predecessor manufacturers have a duty to warn their successors' customers about risks of a product they no longer make or sell.

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