Crikey, what a headache – pharmaceutical litigation, compensation and causation in Australia
Academic at the Queensland University of Technology, Brisbane
In October 2011, the Full Court of the Federal Court of Australia handed down their judgment in the case Merck Sharp Dohme (Australia) Pty Ltd v Peterson1. This case was appealed from the Federal Court of Australia and was concerned with a potential class action against Merck and its Australian branch (MSD), seeking damages for suffering adverse effects as a result of use of their anti-inflammatory medication Vioxx2. In this article, I will discuss the progress of the Merck litigation in Australia so far and how it highlights the need for tort law reform in Australia when it comes to pharmaceutical product litigation.
The Merck Litigation
The case started in April 2006, when the applicant / plaintiff Graham Robert Peterson commenced class representation proceedings in the Supreme Court of Victoria3. Mr Peterson had been prescribed Vioxx to treat his back pain and after two years of taking Vioxx, suffered a heart attack in 2003. The recall of Vioxx in 2004 triggered his suspicion that the heart attack may have been linked to his use of Vioxx and he eventually led a representative proceeding seeking compensation against MSD-Australia as well as the United States based Merck and Co. While Mr Peterson was initially successful at first instance, MSD appealed to the Full Federal Court of Australia and on 12 October 2011, the Full Court overturned the original findings in favour of MSD only in respect of Mr Peterson’s claim for compensation.
“With regards to the three statutory grounds, the only finding in favour of the applicant was that Vioxx was not fit for the purpose.”
The legal grounds and the judgments
The applicant had brought his claim on a number of grounds, namely the common law action of negligence as well as invoking three statutory grounds under the now repealed Trade Practices Act 1974 (Cth)4 : fitness for purpose and merchantable quality5 , misleading or deceptive conduct6 and injury suffered as a result of the medication being a defective good7. With regards to the three statutory grounds, the only finding in favour of the applicant was that Vioxx was not fit for the purpose8. The applicant had also been successful in establishing Vioxx was defective, however the respondents were able to invoke the statutory development risk defence.
As for the negligence ground, the tripping point for Mr Peterson was the required element of “causation.” While the judge found9 that MDA had failed to discharge their duty of care as well as failed to warn, there was no evidence that if MDA had acted differently or with care, the applicant’s doctor would have withheld from prescribing Vioxx, or that the applicant would have declined taking Vioxx.
“…the courts are reluctant to impose fault on the manufacturer where fault may not exist.”
Merck’s appeal was upheld in the Full Court. The primary difficulty which the Court continually alluded to was the lack of evidence which established the causation link, or to use the legal terminology – “Peterson would not have suffered heart attacks but for his consumption of Vioxx.” A possibility was not sufficient – the Full Federal Court required that consumption of Vioxx was a necessary condition for the occurrence of the heart attacks10. When applied to the applicant, epidemiological evidence was seriously diminished11 by the existence of other factors, which the trial judge had identified – in particular the patient’s medical history: hypertension, obesity and evidence of previously existing coronary difficulties and a former smoker12. This theme was then applied to the statutory grounds and not surprisingly, the Full Court allowed the appeal. In November 2011, Mr Peterson filed an application seeking special leave to appeal to the High Court Australia.
Causation and pharmaceuticals
A review of the amount of case law over the years and from various countries is enough to give any reader an idea of how difficult the legal element of causation is. The makeup and complexity of medicines however, just makes it that much harder. Peterson highlights how a colourful combination of pre-existing personal characteristics and risk factors of the patient can break the chain of causation – because the courts are reluctant to impose fault on the manufacturer where fault may not exist. Academic writings also highlight the equally confusing characteristics of pharmaceuticals – unpredictable long-term or delayed effects13, drug interactions with other drugs or foods that the patient may have consumed14 as well as allergies of the patient15. The difficulty not only results in the courts having to carry out a balancing exercise and analysis which is less based on scientific evidence and more based on guess work as well as policy consideration, but may also have social implications as well for both the consumer and the industry. Too difficult a test may result in plaintiffs who have a legitimate case reluctant to bring an action for fear of costs, time, resources and no guarantee of success. However, too much emphasis on consumer protection and compensation may discourage innovation on the part of pharmaceutical companies or early recall of a product based on legal rather than scientific advice – thus reducing16 (or eliminating) the range of treatment for the patient.
“…too much emphasis on consumer protection and compensation may discourage innovation on the part of pharmaceutical companies or early recall of a product based on legal rather than scientific advice…”
The need for reform
While the Peterson saga has not ended, it has already raised a number of significant issues with regards to the future of product liability law in Australia and especially the question of pharmaceutical litigation. Regardless of how the High Court of Australia decides, the case will have further implications for Mr Peterson’s fellow class plaintiffs as well as future plaintiffs with similar potential actions. The recent introduction of a new consumer protection regime in the form of the Australian Consumer Law as well as this case gives impetus to consider the legal framework which should apply to cases like Peterson where the question of causation relies on more than specific and certain actions. The increasing globalisation of the pharmaceutical trade and reliance upon imports and exports may only further complex such issues as laws and legal systems from other jurisdictions also become involved, thus emphasising the need to clarify the domestic situation of Australian law first.
1.  FCAFC 128, full text of the judgment available at http://www.austlii.edu.au/au/cases/cth/FCAFC/2011/128.html
2. Merck recalled the drug in 2004.
3. The Supreme Court of Victoria made an order transferring the proceedings to the Federal Court of Australia in 2006.
4. As the case had commenced before the Trade Practices Act 1974 (Cth) had been repealed and replaced by the Australian Consumer Law, the relevant sections were those from the TPA.
5. Trade Practices Act 1974 (Cth), section 74B.
6. Trade Practices Act 1974 (Cth), section 52.
7. Trade Practices Act 1974 (Cth), s75AD.
8. See para 968.
9. See para 873.
10. See para 104.
11. See para 113.
12. See paras 78 and 86.
13. Harvey Teff, Chapter 18 Products Liability in Principles of Medical Law (3rd ed) by Grubb, Laing and McHale – pg 969
14. Harvey Teff, Chapter 18 Products Liability in Principles of Medical Law (3rd ed) by Grubb, Laing and McHale – pg 969
15. Richard Goldberg, Causation and Risk in the Law of Tort: Scientific Evidence and Medicinal Product Liability, pg 5.
16. Serge Galitsky, “Manufacturers’ Liability: An Examination of the Policy and Social Cost of a New Regime” (1979-1980) 3 UNSW Law Journal 145, 154.
About the author:
Mabel Tsui is an academic at the Queensland University of Technology Faculty of Law. Her research interests are in pharmaceutical regulation and consumer protection.
Is there a need for tort law reform in Australia when it comes to pharmaceutical product litigation?