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September 9, 2013

Journal Blasts

The Alabama Supreme Court is revisiting its “innovator liability” decision that holds companies liable for products they didn’t manufacture.  A Wall Street Journal editorial blasts the decision, saying these “nitwit lawsuits” would have a devastating effect on innovation:

Since the Alabama Supreme Court’s January decision, 11 courts have refused to hold brand names accountable for complaints derived from generics. Altogether, 86 courts have rejected this innovator liability theory including the Fourth, Fifth, Sixth, Eighth, Tenth, and Eleventh Circuits.

Plaintiffs lawyers need no invitation to launch creative lawsuits, but to the extent that liability is genuine it belongs to the maker of the product. In Alabama’s bizarre regime, brand-name manufacturers would make all the investment in a drug. Then when it goes generic they’d lose the profit from the reduced sales and be open to liability suits for products they no longer control.

The effect would be to make brand-name companies the de facto insurers of the entire industry, depleting their profitability and reducing the incentive to invest in new products. The FDA should write a new rule, and we’re glad the Alabama justices are giving the case a second look.

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