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Because the same warning label must appear on the brand-name drug as well as its generic bioequivalent, a brand-name drug manufacturer owes a duty of reasonable care in ensuring that the label includes appropriate warnings, regardless of whether the end user has been dispensed the brand-name drug or its generic bioequivalent. If the person exposed to the generic drug can reasonably allege that the brand-name drug manufacturer's failure to update its warning label foreseeably and proximately caused physical injury, then the brand-name manufacturer's liability for its own negligence does not automatically terminate merely because the brand-name manufacturer transferred its rights in the brand-name drug to a successor manufacturer.
Plaintiffs' mother, J.H., was prescribed terbutaline, a generic form of the brand-name drug Brethine, to suppress premature labor during her pregnancy. Plaintiffs T.H. and C.H. were born full term, but were diagnosed with developmental delays at three years of age and autism by the time they turned five. Plaintiffs brought suit against defendant Novartis Pharmaceuticals Corporation (Novartis), which manufactured Brethine until December 2001, and aaiPharma Inc. (aaiPharma), which purchased the rights to and manufactured Brethine thereafter—using the same label Novartis had used—when plaintiffs' mother was prescribed the generic bioequivalent in 2007. Plaintiffs claimed that Novartis knew or should have known that its warning label failed to alert pregnant women or their physicians to the risk Brethine posed to fetal brain development; that manufacturers of terbutaline were compelled by federal law to include Brethine's deficient label on their own products; that it was foreseeable Novartis's successor (aaiPharma) would not change or update Brethine's deficient label; and that in reliance on the deficient warning label, plaintiffs' mother was prescribed terbutaline, which adversely affected plaintiffs' developing brains in utero. In its demurrer, Novartis claimed that its duty to provide a safe and adequate warning label for Brethine did not encompass those who were prescribed terbutaline in reliance on the Brethine label. The trial court sustained the demurrer without leave to amend, concluding that Novartis owed plaintiffs no duty as a matter of law relating to claims arising from terbutaline exposure in 2007. The Court of Appeal reversed directed that the order sustaining the demurrer be modified to grant plaintiffs leave to amend their causes of action for negligence and negligent misrepresentation. Novartis challenged the decision.
The Court held that Novartis had a duty to use ordinary care in warning about the safety risks of their drugs, regardless of whether the injured party (in reliance on the brand-name manufacturer's warning) was dispensed the brand-name or generic version of the drug. According to the Court, a brand-name manufacturer's sale of the rights to a drug did not, as a matter of law, terminate its liability for injuries foreseeably and proximately caused by deficiencies present in the warning label prior to the sale. The Court averred that warning label liability was likely to be effective in reducing the risk of harm to those who are prescribed (or are exposed to) the brand-name drug or its generic bioequivalent. In this case, plaintiffs showed that they could allege a cause of action against the manufacturer for warning label liability; and thus, the Court affirmed the judgment of the appellate court.