California Supreme Court Grants Review on “Duty to Innovate”

The California Supreme Court has granted review in Gilead Life Sciences v. Superior Court, the case in which the California Court of Appeal ruled that the defendant could be liable to users of one drug for alleged negligence in connection with a different drug, even while admitting that the drug they actually used was not defective.  As we explained here and here, the plaintiffs in Gilead used HIV drugs known as “TDF.”  But rather than allege that TDF drugs were defective, the plaintiffs asserted that that the defendant was negligent in failing to bring a different, but allegedly safer HIV drug (“TAF”) to market sooner. 

It is an unprecedented theory of liability.  Product liability law in California (and most everywhere else) has always required proof of a product defect.  The Gilead Sciences opinion did away with that; and in its place, the Court of Appeal imposed a free-floating duty to innovate—a duty of reasonable care when a manufacturer has invented “what it knows is a safer, and at least equally effective, alternative to a prescription drug that it is currently selling and that is not shown to be defective.”  Gilead Sciences, Inc. v. Superior Court, No. A165558, 2024 Cal. App. LEXIS 14, at *14 (Cal. Ct. App. Jan. 9, 2024) (review granted). 

The grant of review is obviously a good development.  Although the Court of Appeal attempted to portray its newly created duty as “narrow,” we always had our doubts. 

Apparently, the California Supreme Court has its doubts too, and while the ultimate outcome remains to be seen, arguments in favor of rejecting the new duty and restoring the law are strong.  In our defense-biased view, the defendant’s Petition for Review was exceptionally persuasive. 

Equally telling was the extraordinary response by amici urging the California Supreme Court to grant review —twelve amicus letters that we know of, speaking for approximately 50 companies, non-profits, individuals, and trade groups.  Here are some snippets, the first from about 15 other drug and medical device manufacturers: 

Contrary to the Court of Appeal’s intent, its decision will likely harm innovation—and ultimately patients and consumers—by encouraging companies not to invest in research and development for fear of being liable for not more quickly bringing to market what may turn out to be an incremental improvement to an existing product. . . . [L]itigants will surely seek to extend the decision’s reasoning to other products; and regardless, the mere possibility that it might apply to other industries will immediately chill socially desirable, innovative behavior.

And this from multiple trade associations, such as PhRMA:

No jury, even with the benefit of hindsight, could reasonably discern when a manufacturer ‘knew’ its invention was ‘safer and at least equally as effective,’ triggering a duty. . . . [L]ife sciences companies often develop multiple medications in parallel, and companies must make complicated strategic decisions about where to devote resources based on limited information. . . .  A company does not know with any measure of clarity during early stages of the development process . . . that a medicine is ‘safer’ and ‘at least as equally effective,’ and thus cannot be fairly subject to liability for decisions made at that time.

Of course, the new duty could easily be extended beyond prescription drugs, as explained by the National Association of Manufacturers, the Alliance for Automotive Innovation, and other sellers of consumer products:    

Nothing in the decision below applies exclusively to the pharmaceutical context, nor would it be difficult for other plaintiffs to copy the theory . . . .  Innovation is a necessity in every business.  But now, discarded ideas and prototypes, rather than being stepping stones on the path to success, could become the basis of lawsuits.

One tech startup in the autonomous automobile space chimed in:    

The ruling will discourage continuous product improvement, deter bringing new products to market, and disrupt the ecosystem in which innovation in the technology sector develops.

Economists have a view on this, and it is not favorable, according to the International Center for Law & Economics:

If upheld, this new duty of care would significantly disincentivize pharmaceutical innovation by allowing juries to second-guess complex scientific and business decisions about which potential drugs to prioritize and when to bring them to market. . . .  Perversely, this would deprive the public of lifesaving and less costly new medicines.  And the prospective harm . . . is not limited only to the pharmaceutical industry. . . .  Although conventional wisdom has often held otherwise, economists generally dispute the notion that companies have an incentive to unilaterally suppress innovation for economic gain.

There was too much material in the amicus letters to share here.  We will finish, however, with the view of multiple advocates (other than contingency-fee plaintiffs’ lawyers) for patients and underserved communities, such as ALLvanza, the Global Coalition on Aging, and the HIV and Hepatitis Policy Institute.  These organizations and their co-amici bemoaned the opinion’s chilling effect on drug development and resulting harm to health:

This unprecedented legal theory stands to chill the development of a future generation of drugs, including much-needed potential treatments and cures for a wide range of diseases. . . .  In unprecedented fashion, this new litigation risk attaches to drugs that are concededly safe and effective.  In the vein of no good deed goes unpunished, a manufacturer could face potential liability for undertaking rigorous scientific research and pursuing expensive clinical trials aimed at developing the next generation of therapeutic treatments.

The plaintiffs’ response was that amici were bought and paid for by the industry and that the Court of Appeal’s new duty was nothing more than an ordinary duty to exercise reasonable care.  Again, we are not so sure.  We understand the breadth of tort duties, but there are limits. 

The appeal will now proceed to full-blown briefing.  We will keep you posted.