Snapshot of drug injury claims in Australia: how the Australian regime works against policy objectives

Mabel Tsui

Academic at the Queensland University of Technology, Brisbane

(Continued from “Crikey, what a headache – pharmaceutical litigation, compensation and causation in Australia”)

While my previous piece provided an introduction into the Vioxx litigation in Australian courts and considered the specific legal element of causation, this article will briefly analyse the effectiveness of Australia’s current statutory regime as a vehicle for drug injury claims, with two policy objectives acting as the framework.

In 1992, following a period of law reform, review, submissions and political disagreements, the Australian legislature passed the Trade Practices Amendment Act 1992, which inserted Part VA 1 into the Trade Practices Act. The operation of Part VA may be of interest to Australia as well as the United Kingdom and their Consumer Protection Act of 1987. Both statutory regimes were based on the European Directive on Product Liability, passed by the EC in 1985 2 . In considering whether to implement this Directive domestically, Australian lawmakers and reformers raised the following two vital policy objectives, among others. in order for a product liability regime to be considered effective:

-Consistency and certainty in the law was important as businesses and consumers wanted to know “in advance and precisely as possible what the law required them to do”. 3

-In addition, the fact that the law did not impede on technological and innovative development in the business industry was also important. 4

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“…this article will briefly analyse the effectiveness of Australia’s current statutory regime as a vehicle for drug injury claims…”

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Part VA was enacted and intended to be strict liability in nature. However, during the reform process, submissions from the pharmaceutical industry indicated significant concerns over the adverse impact strict liability would have on the development of drugs, most notably on research and innovation. In addition, something was required to act as a medium between balancing the risks of a drug which had high therapeutic value (and therefore was associated with high risk of injury) against risk of suffering and death of a patient if a drug was withheld from the market for too long 5 . The final form of Part VA provided that liability would be established where a product could be proven to be defective 6 , however, strict liability was buffered by the availability of a series of defences, one of which is known as the development risk defence. 7

Despite at least 20 years of being in effect, in both jurisdictions, there has been very little case law considering Part VA and virtually no case law that considered the operation of this regime in a drug injury context. Thus, in 1992, when a Senate Committee was faced with the opportunity to question the inclusion of this defence, they decided to keep the defence on two (rather unsatisfactory) grounds – there was no reason to depart from the contents of the European Product Liability Directive, and there was no case law on Part VA which could provide further guidance on this point. 8

In the UK, the most significant case so far was that of A v National Blood Authority 9 , which was concerned with infected blood, while in Australia, until the Peterson saga, ACCC v Glendale Chemical Products Pty Ltd 10 and Ryan v Great Lakes Council 11 had been the two cases that considered the definition of “defect.” While two cases spanning a period of 20 years is hardly significant, both Ryan and Peterson have played a central role in highlighting what has been described as a paradox 12 of the statutory regime.

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“Despite at least 20 years of being in effect, in both jurisdictions, there has been very little case law considering Part VA…”

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In the 1999 case of Ryan v Great Lakes Council 13 , the defendant supplier of contaminated oysters was sued on multiple statutory grounds, one being Part VA. The defendant was able to argue the development risk defence successfully, only to then be found liable under provisions in another part of the Trade Practices Act, which the development risk defence did not extend to. Then, in 2010 Peterson came before the Federal Court when Merck’s anti-inflammatory drug Vioxx came under scrutiny, due to its side effects of increasing the risk of heart attacks and strokes in consumers. Under the Trade Practices Act, multiple grounds of action were again referred to, including Vioxx being a defective good 14 . In an almost scripted repeat of the Ryan saga, Jessup J found Part VA to be satisfactory, only to then accept evidence that established the development risk defence and then found Merck liable for damages on the remaining statutory grounds as pleaded by the plaintiff.

Although Merck was successful on appeal 15 , Peterson further highlights the paradox as being contrary to the objectives intended by parliament and appearing to ignore the concerns raised by the pharmaceutical industry. While the inclusion of the defence was a step in the right direction in the objective of encouraging businesses to innovate and develop, the nature of Part VA as an additional ground to other grounds (e.g. consumer guarantees 16 ) as well as the partial operation nature of the defence appears to then defeat this objective. Finally, the undeniable social utility offered by pharmaceuticals (as opposed to oysters 17 ) further increases the doubt about how appropriate the current regime is in the context of drug injury cases.

If the legislature was concerned about consistency and certainty of the law to ensure the business industry knew of their legal obligations, the application of the defence only to Part VA defective goods claims does not appear to achieve this objective. This has been demonstrated by both Ryan and Peterson. With the potential increase of drug injury litigation in Australia it is submitted that the operation of this ground of liability must be re-examined in order to determine its appropriateness in the context of drug injury claims. This is especially the case where this ground is, in fact, only one of multiple, independent grounds upon which an action can be brought against a pharmaceutical company. Compared against the objectives the Australian legislature had in mind when implementing what became Part VA of the Trade Practices Act, it seems that the end result is not only inconsistent with the objectives, but in fact acts against them.

References:

1. It should be noted with the Australian Consumer Law superseding the Trade Practices Act in 2010, the current part is Part 3-5, however the provisions are substantially the same.

2. Council Directive 85/374/EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products [1985] OJ L 210 /29.

3. John Goldring, “Reforming Product Liability Laws” (1989) Bond Law Review 193.

4. Australian Law Reform Commission (ALRC), Product Liability Report No 51 (1989) citing J Simpson, Industry Commission Report, Product Liability (1990).

5. Australian Law Reform Commission (ALRC), Product Liability Report No 51 (1989) citing Commonwealth Serum Laboratories Commission.

6. Defined in S75AC Trade Practices Act, s9 Australian Consumer Law.

7. S75AK(1)(c) Trade Practices Act, s142(c) Australian Consumer Law.

8. Senate Standing Committee on Legal and Constitutional Affairs, Parliament of the Commonwealth of Australia, Product Liability – Where Should the Loss Fall? (1992).

9. [2001] 3 All ER 289

10. (1998) ATPR 41-632

11. Ryan v Great Lakes Council (1999) ATPR (Digest) 46-191.

12. Claudia Newman-Martin, “Manufacturer’s liability for undiscoverable design flaws in prescription drugs: A Merck-y area of the law” (2011) 19 Torts Law Journal 26

13. Ryan v Great Lakes Council (1999) ATPR (Digest) 46-191.

14. S75AD Trade Practices Act, s54 Australian Consumer Law.

15. Peterson had applied to the High Court of Australia for special leave to appeal the Full Federal Court’s decision to allow Merck’s appeal. On 11 May 2012, the High Court refused to grant leave so that the Full Federal Court decision stands.

16. Australian Consumer Law, Ch 3, Part 3-1, Division 1.

17. Claudia Newman-Martin, “Manufacturer’s liability for undiscoverable design flaws in prescription drugs: A Merck-y area of the law” (2011) 19 Torts Law Journal 26

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About the author:

Mabel Tsui is currently completing a PhD in law at the Queensland University of Technology Faculty of Law, researching the Australian product liability regime in the context of drug injury claims. Her research interests are in pharmaceutical product liability, rationing of resources and public health law.

How can the current Australian statutory regime be improved?