Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) has won a legal victory in the US worth about $500 million to the company. By a majority of five to four, the US Supreme Court has ruled that generic drug companies cannot be sued under state law over allegations that they failed to provide adequate label warnings about potential side effects.
In the lawsuit filed against Actavis and Pliva, the Supreme Court ruled that makers of generic drugs did not have to warn of side effects of drugs on their labels, as long as the maker of the original drug did not do so.
The Supreme Court thus overturned an Appeals Court decision allowing the lawsuit to proceed. The latest decision represents a victory for Teva, Mylan Inc. unit UDL Laboratories, and Icelandic company Actavis Inc.
The generic companies argued that federal law did not allow such lawsuits, since the drugs were approved by the US Food and Drug Administration. They said that federal law required that labeling of generic drugs should be the same as for the equivalent ethical drug.
In May 2010, Teva lost in a suit involving the same question in a Nevada court, when it was ruled that it must pay compensation of $256 million. It was also ruled that Baxter Healthcare, which distributed the anaesthetic propofol, produced by Teva, must pay compensation of $144 million to a patient anaesthetized using the injection. The propofol vials were reused at clinics in Nevada, leading to an outbreak of hepatitis C. The court found that the labels on the drug failed to warn against reuse. The current Supreme Court decision overturns the ruling, saving Teva from having to make a huge payout.
Generic drugs account for some 70% of drugs prescribed in the US.
In a statement, Teva said, "Teva is pleased with the High Court’s decision today, which provides great clarity for both the drug industry as well as patients. This ruling reiterates that once the US Food and Drug Administration approves a generic prescription drug as interchangeable to the brand, their labels must also be identical in all material respects. Accordingly, generic companies do not have the ability to influence labeling and related information and should not be held liable for failing to do so. This is also a win for American consumers as they bear the ultimate burden of these lawsuits. The decision of the Supreme Court will help to alleviate unnecessary litigation."
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