No this post isn’t about Canadian pharmacies, Chinese counterfeits, or anything dodgy like that. Instead, we’re referring to a preemption topic we’ve never discussed before.
We can almost hear you scoffing. Surely, in over two years of “all preemption, all the time” blogging, that’s the one topic we haven’t missed. Wouldn’t that be like Court TV discovering something new about the OJ trial?
Well, we’re not saying that we know anything new about OJ, but there actually is an aspect of preemption we’ve ignored until now.
Over-the-counter (“OTC”) drugs (which, in our jargon-filled field, are also referred to as “monograph” drugs) are governed by a limited form of express preemption provided by 21 U.S.C. §379r. The general preemption language protecting OTC drugs is similar to, but even stronger than, the language that the Supreme Court held broadly preemptive in Riegel v. Medtronic, Inc., 128 S. Ct. 999 (2008):
Except as provided in subsection . . . (e) . . . of this section, no State or political subdivision of a State may establish or continue in effect any requirement – that relates to the regulation of a drug that is not subject to the requirements of section 353(b)(1) or 353(f)(1)(A) of this title [that means an OTC drug]; and that is different from or in addition to, or that is otherwise not identical with, a requirement under this chapter . . . .
21 U.S.C. §379r(a). In Riegel, “different from or in addition to” was enough to preempt a whole lot of things. The express preemption clause for OTC drugs has all that, and more – “otherwise not identical with.” So the preemption protection provided to OTC drug manufacturers is very, very deep, indeed.
It’s just not very broad.
There are various exceptions, but only one’s of interest to us product liability litigators. That’s subsection (e), which provides:
(e) No effect on product liability law
Nothing in this section shall be construed to modify or otherwise affect any action or the liability of any person under the product liability law of any State.
This preemption exception is (like the UCC) recognized by every state in the union except Louisiana. Green v. BDI Pharmaceuticals, 803 So.2d 68, 74-75 (La. App. 2001) (preempting product liability claim notwithstanding exception). We don’t often say it, but Green is a pro-defense result that we think was just wrong.
So now we’ve drilled all the way down to §378r(e) – subsection e of part r of section 378. Jeez, the FDCA is getting as complicated as the Internal Revenue Code these days.
That means we’ve got really comprehensive preemption, except that it doesn’t apply to “the product liability law of any state.”
But we’re lawyers. We can nitpick anything if it’s likely to help our clients.
And we have.
The question becomes what is “product liability”?
Well, under both the second and third Restatements, liability for product defects requires physical injury to person or property. This requirement was stated in the “physical harm” language of Restatement (Second) of Torts §402A (1965), and in section 21 of the Restatement (Third) of Torts, Products Liability, which allows recovery of “economic loss” only in connection with personal injury or property damage.
Thus, the proposition that OTC drug manufacturers advance is that suits for purely economic loss – primarily, but not exclusively, brought under state consumer protection statutes – are not “product liability” actions saved from preemption by §379r(e).
And we’ve been winning.
It all started, as much product liability law has, in California. For a long time the Golden State had a consumer protection statute that was really bizarre – like you-didn’t-even-have-to-use-the-product-to-sue type bizarre. A few years back, the voters of California cut that statute back to just ordinarily bizarre, something we alluded to here. The upshot of California’s bizarrely expansive consumer protection statute has been that there were lots of economic-loss only class actions filed in the state targeting almost everything, including OTC drugs.
OTC manufacturers subject to these suits responded by first developing the preemption defense. The big win for the good guys (the defense, of course) was Kanter v. Warner-Lambert Co., 122 Cal. Rptr.2d 72 (Cal. App. 2002), involving head lice treatments. Supposedly these products were ineffective because those nasty little buggers had developed resistance to the active ingredient. In other words, the evolution of the organism had overcome the original intelligent design of the product. The defendants argued, and the court agreed, that the claim for purely economic loss, brought (inevitably) as a class action, was preempted because it wasn’t “product liability”:
The savings clause states plainly and unambiguously that the preemption provisions of the section do not affect “the product liability law of any State.” Under the product liability law of California, injury to the plaintiff from a defective product is an essential element of a cause of action. Liability may be imposed either for personal injury or for physical damage to property, but if the damage consists solely of economic losses, recovery on a products liability theory is unavailable.
Plaintiffs acknowledge that their complaint does not allege any personal injury or injury to property as a result of using defendants’ products. They argue, however, that Congress intended “product liability law” within the meaning of section 379r(e) to have a broader meaning, encompassing an expansive category of state common law and statutory actions imposing liability on commercial sellers of products. The argument is inconsistent with the fundamental principle that a savings clause should not be interpreted in such a way as to undercut or dilute an express preemption clause. . . .
[L]egislative history. . .confirms its plain meaning. Commenting on the scope of the savings clause, the Senate committee report. . .states, “Finally, the legislation explicitly provides that it shall not be construed to modify or otherwise affect the traditional product liability law of any State. Tort liability rules and requirements would remain unchanged and unaffected.” Plaintiffs have not alleged a cause of action under the traditional product liability law of this state, and the savings clause does not exempt their claims from preemption.
122 Cal. Rptr.2d at 80-81 (various citations omitted).
The California Supreme Court got its hands on the same question a few years later in Dowhal v. SmithKline Beecham Consumer Healthcare, 88 P.3d 1 (Cal. 2004), involving OTC nicotine gum used to stop smoking. The court acknowledged the extraordinary depth of OTC preemption. A state requirement “may be ‘different from, in addition to, or … not identical’ to an FDA requirement, without actually conflicting with the federal requirement.” Id. at 7 (statutory citation omitted). The court found the claim preempted:
Although there is reason to believe that nicotine can cause reproductive harm, plaintiff has offered no qualitative assessment of this risk. The mere existence of the risk, however, is not necessarily enough to justify a warning; the risk of harm may be so remote that it is outweighed by the greater risk that a warning will scare consumers into foregoing use of a product that in most cases will be to their benefit. The FDA has so determined in this case, and we find no basis to question the FDA’s expert
Id. at 14. Since then, federal courts have also joined the party in California. Carter v. Novartis Consumer Health, Inc., ___ F. Supp.2d ___, 2008 WL 4694585, at *9-10 (C.D. Cal. Aug. 5, 2008) (adopting Riegel preemption in light of similarity of preemption language; consumer fraud claims against manufacturers of OTC cough/cold medicines preempted; although safety issue was alleged, only economic loss was sought); cf. Gaeta v. Perrigo Pharmaceuticals Co., 562 F. Supp.2d 1091, 1095 (N.D. Cal. 2008) (noting issue in personal injury case; finding claims preempted on other grounds).
But it’s not just California anymore – especially after Riegel. In Mills v. Warner-Lambert Co., ___ F. Supp.2d ___, 2008 WL 4488308 (E.D. Tex. Sep. 30, 2008), the same head lice claims that Kanter held preempted resurfaced in Texas. Citing Kanter extensively, the court in Mills held that the claims (again, for purely economic loss) were preempted. First, under Riegel and Kanter there were broadly preemptive federal “requirements”:
The similarities between the approval process for medical devices [in Riegel] and the approval process for drugs make the reasoning of those cases relevant here. Based on that reasoning, the NDA approval process establishes a federal requirement for drug labeling under Section 379r. As the California Court of Appeals wrote in Kanter, “[t]he parallels between the premarket approval process for medical devices and the new drug application process with respect to product labeling are striking.”
2008 WL 4488308. at *11.
Second, state law potentially imposed additional requirements:
[A]part from Riegel, the text of Section 379r also indicates that the term “requirements” includes State law claims. Section 379r(e), the statute’s “saving clause,” exempts “any action. . .under the product liability law of any State.” There would be no reason to exempt only product liability actions, unless Congress intended to encompass State law claims within the term “requirement,” in Section 379r(a). . . . [B]y excluding only product liability actions, Congress made clear that the term “requirement” includes all other State law claims.
2008 WL 4488308. at *14.
Third, the standards were different. Plaintiffs took a position concerning the safety and effectiveness of the product that was “diametrically opposed” to that of the FDA:
[T]he FDA specifically reviewed the safety and effectiveness of [the first product] during the NDA process. The FDA determined that [it] was “effective” for the [indicated use in question]; and, required that such language appear on the [product’s] label. Similarly, during monograph process, the FDA tested the active ingredients in [the other products] and determined that they were “safe and effective” for the [indicated use]. The FDA then issued a final monograph for [this type of product], specifying the terms upon which they may be sold without being misbranded. If Defendants sell [their products] without the FDA-required language on the drug’s label, they are subject to regulatory action. However, if they sell the drugs with the FDA-required label (and Plaintiffs prevail in this suit), Defendants will be subject to liability. The two requirements are clearly different.
2008 WL 4488308. at *15.
Fourth, and finally, plaintiffs’ action for purely economic loss was not a “product liability” action saved from preemption by §379r(e):
[This provision] indicates that Congress did not intend to attribute any particular meaning to “product liability law.” Rather, the statute’s language reflects an intent to defer to each State’s interpretation of “product liability,” and thereby avoid interfering with the State’s product liability regime. Despite Plaintiffs’ attempt to frame the issue differently, the relevant question for this Court is whether Texas considers Plaintiffs’ claims to be product liability actions. . . .
It is beyond dispute that Plaintiffs’ claims in this lawsuit do not “aris[e] out of personal injury, death, or property damage.” Their claims seek only recovery of the purchase price for the [products]. As such, they are not products liability actions, as defined by [Texas statutory law].
2008 WL 4488308. at *16. Since claims for purely economic loss were not “product liability” claims as defined under state law, they were not saved from preemption, and the court granted summary judgment. Id. at *19.
There are a few other cases construing §379r(e). In Warner-Lambert Co. v. Mills, 117 S.W.3d 488, 494 (Tex. App. 2003), the court found economic loss claims so thoroughly preempted by §379r(a) – and not saved by subsection e – that there wasn’t even state court jurisdiction to hear them. The Texas Supreme Court reversed that latter aspect of Mills, holding “[e]ven if the defendants are correct that the FDCA preempts this state-law claim, however, it does not mean that the trial court lacked jurisdiction over the claim.” Mills v. Warner Lambert Co., 157 S.W.3d 424, 427 (Tex. 2005). In Tesauro v. Quigley Corp., 2006 WL 4401695 (Pa. C.P. Philadelphia Co. Nov. 8, 2006), a state trial court, citing Kanter, held that economic loss claims (breach of warranty and unjust enrichment) involving a cold medicine were preempted. In Berenguer v. Warner-Lambert Co., 2003 WL 24299241, at *4 (Fla. Cir. Hillsborough Co. July 31, 2003), another head lice case was held preempted.
We haven’t handled many OTC cases in our careers (we surely would have touched upon this topic sooner, if we had). So we have to fess up to a little jealousy here, that manufacturers of products for which the FDA doesn’t even require a prescription have a nice, clean preemption defense to purely economic loss class actions – something we consider strike suits – whereas our clients’ more heavily regulated products don’t. But then, we’re talking about express preemption, and nobody said Congress has to act rationally in everything it does.
But if we ever do get one of these OTC purely economic loss cases, we certainly won’t question our good fortune, or §379r.