It seems like a rather basic 1-L contract law proposition, but it bears repeating.  If you want a particular term in your contract, get it in writing.  A recent drug bulk supplier case bears this
out – and some unknown contract lawyer out there is probably feeling some heat because of it. The situation in

We’ve been thinking lately about the bulk supplier doctrine in the context of prescription drugs.  We haven’t discussed this topic at any length, although we did touch upon aspects of it some time ago here and here.  It’s due for another, more detailed, look.  Also, thanks to Reed Smith’s Melissa Wojtylak for research assistance in the preparation of this post.

The doctrine generally comes into play when the manufacturer of an allegedly defective prescription drug or medical device is out of the picture – judgment-proof, protected by preemption, etc. – and the enterprising plaintiff in search of a deep pocket has instead sued a company that supplied an active ingredient or component part to the manufacturer.  Section 5 of the Restatement (Third) of Torts addresses the liability of bulk suppliers and suppliers of component parts, and provides:

One engaged in the business of selling or otherwise distributing product components who sells or distributes a component is subject to liability for harm to persons or property caused by a product into which the component is integrated if:

(a) the component is defective in itself . . . and the defect causes the harm; or

(b)(1) the seller or distributor of the component substantially participates in the integration of the component into the design of the product; and

(b)(2) the integration of the component causes the product to be defective . . .; and

(b)(3) the defect in the product causes the harm.

In the context of prescription drugs, FDA regulations exempt bulk suppliers from liability for failure to warn claims if the packaging for the bulk product contains certain language indicating that the contents are for use in manufacturing, processing, or repacking, and/or is for prescription use only.

A drug in a bulk package, except tablets, capsules, or other dosage unit forms, intended for processing, repacking, or use in the manufacture of another drug shall be exempt from section 502(f)(1) of the act [involving requirements for labeling] if its label bears the statement “Caution: For manufacturing, processing, or repacking”; and if in substantially all dosage forms in which it may be dispensed it is subject to [the prescription drug provisions] of the act, the statement “Rx only”. . . .

21 C.F.R. §201.122.  There follow several involved exceptions (§201.122(a-c)) for “new drugs” (those not yet FDA approved)), but this language is the generally applicable bulk drug FDA regulation.


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