California Supreme Court to Review Newly Created Duty to Market a “Safer” Product Even in the Absence of a Defect

This decision stems from personal injury litigation filed by HIV patients who have alleged that Gilead chose profits over the patients’ safety when it continued manufacturing and marketing its HIV/AIDS drug, tenofovir disoproxil fumarate (TDF), instead of a safer alternative, tenofovir alafenamide fumarate (TAF). Particularly, although TDF suppressed the effects of HIV, its use carried a risk of skeletal and kidney damage. The plaintiffs alleged that the safer alternative, TAF, could be as effective as TDF at treating HIV/AIDS, while carrying a lower risk of adverse effects.

According to the plaintiffs, TDF has been on the market since 2001. However, prior to market placement, Gilead was allegedly aware that TAF was a safer alternative to TDF. In 2004, Gilead discontinued the development of TAF, publicly explaining that the reason for discontinuing the development was because the differences between TDF and TAS were insufficient to justify further investment in TAF’s development. Gilead did not resume development of TAF until years later and obtained US Food and Drug Administration (FDA) approval for its sale in 2015.

The plaintiffs filed suit against Gilead, which was consolidated into a Judicial Council Coordination Proceeding (JCCP) in San Francisco, California. Notably, although the plaintiffs sought compensation for their injuries allegedly caused by their use of TDF, they did not try to prove that TDF was defective. Instead, plaintiffs pursued an ordinary negligence claim, arguing that Gilead deferred development of TAF to enlarge its profits stemming from TDF because they alleged that if TAF was developed immediately after TDF, it would have replaced TDF as the superior drug for suppressing the effects of HIV/AIDS. They claim while Gilead maximized its sales of TDF, the later release of TAF was used to extend the patent coverage of tenofovir-related medications. The plaintiffs argued that the decision to postpone development breached Gilead’s duty of reasonable care to the users of TDF. They also asserted a claim for fraudulent concealment, arguing that Gilead had a duty to disclose information about TAF to the users of TDF.[1]

Gilead filed a motion for summary judgment in the trial court, arguing that a plaintiff seeking to recover on a products liability claim for negligence must prove that the product was defective, and given that plaintiffs are choosing not to prove a defect, their claim should fail. As to the fraudulent concealment claim, Gilead argued that it had no duty to disclose facts relating to TAF when it had not yet been approved as an alternative to TDF for the treatment of HIV/AIDS.

The trial court denied Gilead’s motion entirely, and the California Court of Appeal took the decision under review. On January 9, the California Court of Appeal issued an opinion dismissing the fraudulent concealment claim and holding that Gilead did not owe a duty to disclose information about TAF to TDF users. However, it affirmed the trial court’s denial of Gilead’s motion as to the negligence claim, finding that a manufacturer has a duty of reasonable care when it invents what it knows to be a safer, and at least equally effective, alternative to a prescription drug that it is currently selling and that is not shown to be defective. In its decision, the court said that public policy factors ruled in favor of imposing this duty, holding that the manufacturer bears some “moral blame” when it makes a decision that “deprives people of a safer drug and leaves them reliant on a more dangerous drug.”

Gilead quickly filed an appeal in late February, requesting that the California justices review the appellate court decision. Various organizations filed amici briefs in support of Gilead, including but not limited to, the Washington Legal Foundation, the International Center for Law & Economics, the Biotechnology Innovation Organization, the National Association of Manufacturers, the Alliance for Automotive Innovation, the American Tort Reform Association, the Personal Care Products Council, the American Coatings Association, the American Chemistry Counsel, and the Atlantic Legal Foundation. On May 1, the California Supreme Court granted Gilead’s request to review the decision.

Implications of the New Duty

The appellate court’s decision, if it remains good law, will have several implications on the drug industry, and potentially on the broader consumer products industry as well. The decision could chill innovation; companies may not want to risk exploring new products or design lest they be forced to bring to market a product they might otherwise have not. In this way, the court’s ruling could have the counterintuitive effect of preventing potentially life-saving drugs or safer products from being developed.

Similarly, this decision threatens the autonomy of drug and potentially other product manufacturers inasmuch as it gives the courts a seat at the boardroom table and allows them to weigh in on a company’s decisions to research, develop, and market a new drug or product. This is particularly concerning when the alternative drug or product is not even alleged to be unsafe, and the court is thus tasked with making what amounts to a purely business decision on behalf of companies.

Moreover, the holding seems to contradict or, at minimum, undermine the public policy underlying the evidentiary rule prohibiting the admission of subsequent remedial measures to prove defect. This new duty to market a “better” drug would effectively discourage subsequent remedial measures; exactly what the evidentiary rule aims to avoid.

Finally, the decision could open the floodgates on claims against drug and potentially all product manufacturers. The new duty effectively lowers the negligence standard for product liability such that a plaintiff need only show the existence of a safer product, whereas historically that same plaintiff would also need to show that the less safe alternative was defective. While there is a good argument that this new rule should be narrowly circumscribed to drugs, it’s a safe bet the plaintiffs’ bar will try to expand it to all consumer products, leading to potential class actions not to mention countless individual lawsuits.

It’s Not Over Yet

The fact that the California Supreme Court granted this review is significant; the court receives thousands of petitions for review each year and grants fewer than 5% of them. Indeed, the court issues only approximately 60 written opinions per year. Based on the overwhelming number of amici briefs submitted in support of dismissal in the court below, a majority of trade association groups analyzing the decision and law believe that the California Supreme Court should and will overturn the decision. Oral argument is expected in 2025.