Do Canadian manufacturers owe a duty to develop safer alternatives?

Do manufacturers of a regulated product that is approved for sale and appropriately labelled nevertheless owe consumers a duty of care to pursue the earlier development of a safer and economically viable alternative? According to the British Columbia Court of Appeal in Gilead Sciences, Inc. v. I.F., maybe¹.

In Gilead, the defendants, Gilead Sciences Inc. and Gilead Sciences Canada Inc. (collectively, Gilead) are alleged to be liable in negligent design by delaying, for the sake of profit, the development of a medicine they knew to be safer than Gilead’s existing medicine on the market. The plaintiffs’ claim is only brought in negligent design, not in breach of the duty to warn: there is no allegation that Gilead failed to provide adequate warning of the risks associated with their existing medicine. Rather, the claim is that Gilead breached a duty owed to persons taking an approved and appropriately marketed medicine by not advancing the development of an economically feasible alternative medicine that it knew to be safer.

The Court’s decision has the potential to significantly reshape product liability claims in Canada, leaving the door open to the possibility that negligent design could include a manufacturer’s failure to pursue safer alternatives earlier—even if the existing product is not so wholly defective that it should be off the market.

In a parallel claim in the United States, the majority of the California Supreme Court recently rejected the “novel duty to innovate” theory of negligence². It held that drug manufacturers in California do not owe a duty of care to users of a non-defective drug when deciding whether and when to develop and market a potentially safer alternative.

Gilead signals the possibility that the Canadian courts may go a different way.

What you need to know

• The answer remains unresolved for now. The question before the British Columbia Court of Appeal was whether the matter was suitable for summary judgment, meaning the Court was assessing the adequacy of the pleadings rather than determining the scope of any duty. The Court of Appeal agreed with the lower court that the plaintiffs’ pleadings were sufficient and that the claim was not bound to fail. While the Court did not definitively recognize a duty to develop safer alternatives per se, the effect of its decision to sustain the plaintiffs’ claim is arguably the same. Gilead may seek leave to appeal the Court of Appeal’s decision to the Supreme Court of Canada. If leave is granted, there could be opportunities for interested parties to intervene.
• An existing product does not need to be wholly defective to ground a claim in negligent design. The Court of Appeal rejected the argument that a pleading in negligent design requires an assertion that the product is wholly defective: manufacturers could still be liable in negligent design for products that have received regulatory approvals, are on the market, and contain appropriate warnings. The key questions are whether the product suffered from a design defect, whether the defect created a substantial risk of harm, whether a safer alternative design was feasible, and—if so—why the defendant chose not to pursue that alternative.
• There are strong policy considerations against finding a duty. Given the compelling policy considerations bearing on the issue, plaintiffs will still face significant challenges in successfully advancing a negligent design claim based on an alleged failure to develop a safer alternative.
• Manufacturers may be deemed to “know” an alternative is safer before it receives regulatory approval. The Court of Appeal rejected Gilead’s argument that the lengthy Health Canada regulatory approval process meant that they did not truly know the alternative design was safer until it had received full regulatory approval. Accordingly, a key focus in any claim will be on manufacturers’ own studies and the circumstances that may lead them to conclude that an alternative design is safer before Health Canada has completed its review.
• Application beyond pharmaceuticals is questionable. The Court of Appeal’s analysis was very specific to the pharmaceutical industry. If not revisited by the Supreme Court of Canada, it remains to be seen whether other manufacturers are potentially subject to a duty to develop safer alternatives.
• Manufacturers should adhere to best practices to manage risk. Until we have more clarity from the courts, manufacturers should ensure the rationale for development decisions is well documented. As internal communications can be particularly relevant to understanding decision-making motive, manufacturers should ensure that internal communications are consistent with development rationales.

Background

Gilead manufactures medicines used in the treatment of HIV/AIDS.

Gilead produced a drug called tenofovir disoproxil fumarate (TDF), which was approved for use in Canada in 2003. Gilead’s patent gave it exclusivity over TDF until 2017.

The plaintiffs claim Gilead was aware of an alternative compound for use in antiretroviral drugs—tenofovir alafenamide fumerate (TAF)—that would have been safer than TDF. They claim Gilead knowingly and intentionally delayed development of TAF to coincide with the expiry of the TDF patent, in order to avoid cannibalizing sales and maximize profits. The plaintiffs claim TDF users were consequently deprived of a safer alternative and suffered harm.

Policy considerations

The policy considerations relevant to whether manufacturers owe a duty to develop safer alternatives are particularly compelling. Recognizing such a duty in Canadian tort law could:

• Create perverse incentives for manufacturers to prioritize incremental improvements over breakthrough treatments and avoid early-stage research. The cumulative effect of these incentives would stifle innovation.  
• Strip the value of patent exclusivity if circumstances dictate a manufacturer is legally obligated to develop and market safer alternative products.

More broadly, there are other issues with this theory of negligence that call into question the viability of any claim. For example:

• How can a manufacturer reliably “know” a nascent alternative is safer?
• What is the benchmark for “economically viable”?
• How can causation be established where the development and marketing of a product depends on external factors like the outcome of clinical trials and independent regulatory approval?

In the US context, these kinds of policy considerations weighed heavily in the California Supreme Court’s refusal to recognize the duty to develop safer alternatives. In contrast, the British Columbia Court of Appeal did not grapple with these strong policy considerations: it agreed with the lower court that they were irrelevant to the immediate question before the Court.

That is not to say, however, that these policy considerations have no place in the law in Canada. Any court deciding the merits of a claim in negligent design based on a failure to develop safer alternatives would need to grapple with these policy considerations, meaning that plaintiffs would still face significant challenges in succeeding with any claim.

Broader significance to the pharmaceutical industry in Canada

More broadly, recognizing a duty to develop safer alternatives in Canada could have huge implications for pharmaceutical companies looking to develop in Canadian markets where, some argue, patent protections are already weaker than their US counterparts. More stringent legal obligations on manufacturers could deter innovators from entering Canadian markets.

Manufacturers of medicines marketed in Canada should closely monitor this litigation’s development.