An Introduction to Innovator Liability: Brand-Name Responsibility for Generic Drug Failure to Warn Injuries

Innovator liability is a legal theory under which a consumer seeks to hold the brand-name manufacturer of a drug (the “innovator”) responsible for an injury that was caused by the generic version of that drug. This novel approach to injury culpability has gained modest ground in recent years, despite its departure from long-standing product liability principles and case precedent. The following feature offers a general overview of the concept of innovator liability, its origins and legal status in the U.S., arguments for and against its use and success, and its potential impacts on drug manufacturers and the pharmaceutical industry.

Changing the Rules of the Liability Game

Product liability law generally requires a plaintiff to prove the defendant manufactured, sold, or otherwise supplied the specific product that caused the plaintiff's injury. It also generally prohibits a defendant from being held liable for failing to warn about risks created by a competitor’s product. Under the theory of innovator liability, however, the rules of the game are flipped. Instead of looking to the product that directly caused the injury, innovator liability points to a competitor product. In other words, a plaintiff injured by a generic drug attempts to shift the focus onto the brand-name drug that the generic manufacturer copied, or more specifically the brand-name drug warning label.

Innovator liability emerged in the wake of the U.S. Supreme Court's 2011 decision in PLIVA, Inc. v. Mensing, 564 U.S. 604, 624 (2011), which held that state law failure-to-warn claims against generic drug manufacturers are preempted by federal law, namely FDA regulations. Generic drug manufacturers are required by federal law to use the identical warning label as the brand-name drug. This is known as the “duty of sameness.” Generic drug manufacturers cannot unilaterally change the label themselves. They may submit proposals for label updates to the FDA based on new information, but such proposals can be subject to lengthy periods of FDA review and approval (which is not guaranteed), brand-name manufacturer collaboration, and label creation. 

Mensing and the current FDA framework effectively left consumers without a practical legal remedy against generic drug manufacturers. For that reason, plaintiffs' lawyers started to pursue innovator liability claims against brand-name companies to circumvent preemption. Plaintiffs’ attorneys argue that if the warning label is inadequate, and the brand-name company controls the drug labeling that all generic versions must follow, then the brand-name manufacturer owes a duty to consumers of all versions of the drug, both brand-name and generics alike, to ensure that the label adequately warns of the drug’s risks. 

The FDA and Congress Decline to Close the Door on Innovator Liability Claims

FDA regulations on generic drug labeling clearly play a key role in innovator liability cases. The FDA’s "sameness" requirement was central to the Supreme Court's decision in Mensing.  If the FDA allowed generic manufacturers to independently update labels, the foundation of the innovator liability theory would crumble. 

The FDA considered this issue, but ultimately rejected its own proposed rule change that would have allowed generic manufacturers to independently update their labels. In late 2018, the FDA concluded the proposed rule's negative impacts, including increased costs and consumer confusion from differing labels, outweighed the benefits. This left the current framework intact. 

In rejecting its proposed rule, the FDA stated it was evaluating alternative ways to facilitate updating of generic drug labeling, particularly for drugs where the brand-name has been discontinued. That effort materialized into the MODERN Labeling Act of 2020, which ultimately became law as part of the Consolidated Appropriations Act of 2021. While the new law created a path for a generic drug maker to update a drug label after the brand-name drug has left the market, it did not completely dismantle the foundation of innovator liability due to its significantly limited applications.

Current Legal Status of Innovator Liability

Most state courts have rejected innovator liability theories outright when asked to consider the issue. The long list includes Colorado, Delaware, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Louisiana, Minnesota, Missouri, New Jersey, New York, Oregon, Pennsylvania, Texas, Utah, and West Virginia. The above list is even longer if you also consider the dozens of federal court decisions interpreting the laws of states that have not yet had the issue brought before them. 

To date, only two state high courts stand out as having affirmatively accepted innovator liability:

• California: In 2017, the California Supreme Court issued a landmark ruling in T.H. v. Novartis, 407 P.3d 18 (Cal. 2017), broadly allowing innovator liability claims to proceed against a brand-name manufacturer, even though the plaintiff only took the generic version and the defendant no longer even owned the rights to the drug. For additional summary and analysis of the decision, we recommend this article from the Food & Drug Law Institute.

• Massachusetts: The Massachusetts Supreme Judicial Court recognized innovator liability in 2018 in Rafferty v. Merck & Co., 92 N.E. 3d 1205 (Mass. 2018). However, the court applied a more limited approach than California and restricted liability to “a brand-name manufacturer that intentionally fails to update the label on its drug to warn of an unreasonable risk of death or grave bodily injury, where the manufacturer knows of this risks or knows of facts that would disclose this risk to any reasonable person,” For additional summary and analysis of the decision, we recommend this article from the Drug & Device Law Blog.

In addition to these state court decisions,  a federal district court interpreted Vermont law as being favorable to the theory of innovator liability in Kellogg v. Wyeth, 762 F. Supp. 2d 694 (D. Vt. 2010). However, that case has since received significant negative treatment by other courts, being expressly disagreed with in three other judicial decisions, declined to be followed in nine, and distinguished by another. It is yet unclear whether the state courts of Vermont would indeed adopt the reasoning applied by in the Kellogg decision.

Notably, the Supreme Court of Alabama also adopted innovator liability in  Wyeth, inc. v. Weeks, 159 So.3d 649 (Ala. 2014), but the outcome was quickly overturned by the state legislature via Ala. Act No. 2015-106.

Although the high court decisions from California and Massachusetts remain outliers, they continue to be cited by plaintiffs’ attorneys in support of innovator liability theories. To date, no additional state or federal courts appear poised to enthusiastically follow suit. For a comprehensive overview of over 100 cases rejecting innovator liability with updates as recent as 2022, we recommend this article from the Drug & Device Law Blog.

Arguments For and Against Innovator Liability

As long as there remain courts that recognize innovator liability and a population of injured consumers that lack recourse against generic drug manufacturers, the theory will likely continue to be tested and refined by arguments both in favor and against its utility. 

Arguments in favor of innovator liability generally fall under four themes:

1. Plaintiffs injured by a generic drug have few or no alternative avenues for recovery;
2. Brand-name manufacturers have the exclusive ability to make label changes—a power the generic manufacturer does not legally have; 
3. It is reasonably foreseeable to brand-name manufacturers that deficiencies in their labels could mislead physicians about the safety of generic versions; and
4. If more states would adopt innovator liability theories of recovery, perhaps the FDA or Congress might be spurred to update the legal framework to better balance providing more complete legal recourse to generic drug consumers while still achieving FDA policy goals.

On the other hand, arguments against innovator liability include:

1. The theory is an improper circumvention of U.S. Supreme Court precedent (i.e. Mensing) and federal preemption law;
2. The theory is inconsistent with fundamental product liability tort law and long-standing legal principles (e.g. duty, causation, etc.); 
3. Brand-name companies lack control over competitor companies and the manufacture and sale of generic competitor drugs; it is inequitable to hold defendants liable for losses caused by companies and products they do not control;
4. Brand-name drug companies do not owe an existing legal duty of care to the consumer of the generic drug;
5. There is a lack of causal connection between the injury suffered and the brand-name drug; and
6. Due to the lack of causal connection, Brand-name companies could be unjustly forced to face liability long after transferring rights to another company (as in Novartis above)

Further Implications for Drug Companies Insurance Providers

In addition to the legal argument listed above, the pharmaceutical industry and insurance professionals may face plausible economic consequences if courts were to increasingly accept innovator liability. Innovation itself could become simultaneously disincentivized and excessively expensive as brand-name companies are pressed to incur massive amounts of additional costs, both in preventative measures and legal expenses, such as: 

1. Costs of heightened national monitoring of issues, injuries, and disputes warranting additions or amendments to warnings labels;
2. Administrative fees for submitting frequent updates to labels; and 
3. Legal and administrative expenses associated with both the increased regulatory load and the defense of large volumes of generic consumer complaints. 

This inflated overhead may be compounded by the fact that brand-name manufacturers would become de-facto insurers of their generic competitors, subjecting them to liability risk several times the size of their actual market share. This would, in turn, be reflected in increased insurance coverage needs, followed by larger limits, rates, and premiums. The most likely output is a higher price of product innovation, which could lead to a higher price for consumer drugs and a smaller market for new medications. 

The Road Ahead

Innovator liability is a contentious and evolving legal theory, born out of understandable frustration with existing legal frameworks. Nevertheless, it remains a minority view precisely because it deviates so greatly from traditional product liability principles and judicial precedent. Its relatively recent adoption by only a couple of states and speculation by federal courts has raised concerns for brand-name drug companies and insurance professionals, begging questions about potential future expansions into other states. 

As plaintiffs counsel continue to assert this novel theory, drug manufacturers will need to remain informed of effective legal defenses, policy arguments, and economic implications. Courts and policymakers should be encouraged to carefully consider the likely ramifications of innovator liability for pharmaceutical innovation and consumer drug costs. The continued potential and evolution of this legal concept could yet have major impacts for the drug industry and consumers alike, that is until the FDA or Congress are inspired to innovate.

Authored by: Phillip Skaggs, JD, CPCU, ARC, Berkley Life Sciences, VP, Chief Legal & Regulatory Affairs Officer