Focus: When the cable snaps – the Vioxx appeal
26 October 2011
In brief: A recent decision of the Full Court of the Federal Court of Australia highlights the difficulties in successfully pursuing claims relating to the manufacture and sale of pharmaceuticals as a class action. Partner Peter O'Donahoo (view CV), Senior Associate Eleanor Fletcher and Law Graduate Daniel Kinsey report.
How does it affect you?
- Representative proceedings may not be effective in pursuing claims relating to the manufacture and sale of pharmaceuticals, given that the issue of causation, even with epidemiological evidence, turns on the plaintiff's particular circumstances.
- A plaintiff will not recover damages merely because the defendant's conduct increased the plaintiff's risk of injury – the plaintiff must establish, as a necessary condition of recovery, that he or she would not have suffered loss 'but for' the defendant's actionable misconduct.
- The strength of any epidemiological evidence in proving causation is likely to be significantly diminished where the plaintiff's personal circumstances are atypical of the epidemiological study's population, as was the case here.
- Where epidemiological evidence is relied upon to establish causation, an increase in relative risk to two alone may not be sufficient in establishing causation.
- Manufacturers should be aware that where there is a duty to warn of a particular risk associated with a product, merely updating product information concerning the risk without effectively communicating this to the relevant audience may not satisfy that duty.
- Compliance with the regulatory regime for prescription drugs under the Therapeutic Goods Act 1989 (Cth) does not displace the common law duty of care.
- In the context of the statutory warranty provisions of the Trade Practices Act 1974 (Cth) (the TPA) (fitness for purpose and merchantable quality) the Full Court observed that prescription medications are rarely risk free and highlighted the role that the learned intermediary (doctor or pharmacist) plays in prescribing or dispensing therapeutic drugs. In this context, the purpose for which a pharmaceutical drug is acquired is not to be understood as including, as a negative element of that purpose, some quality of absolute safety or complete absence of adverse side-effect. A finding that a particular drug increased the relative risk of a particular side-effect does not, of itself, demonstrate a lack of fitness for purpose or merchantable quality; these are complex and contextual questions.
The case concerns a representative proceeding commenced by Graeme Peterson on behalf of patients who used the arthritis drug Vioxx and then suffered a myocardial infarction (MI, or, in lay terms, a heart attack). Mr Peterson sued Vioxx's American manufacturer Merck Inc, and its Australian distributor Merck Sharp & Dohme (Australia) Pty Ltd (MSDA). Following a long trial in the Federal Court of Australia, in March 2010 Justice Jessup found that:
- although MSDA had breached its duty of care in failing to warn Mr Peterson's doctor of the increased risk of MI, in the case of Mr Peterson alone, negligence was not made out, as warning would not have made a difference;
- although MSDA contravened the TPA's prohibition on misleading and deceptive conduct (section 52) by its silence prior to amending Vioxx's product information to reflect early drug trial results and by representations as to Vioxx's safety made by MSDA's sales representatives, the time and circumstances in which Mr Peterson's doctor prescribed Vioxx to Mr Peterson were such that damages could not be recovered;
- MSDA had contravened the statutory warranty provisions of the TPA (ss 74B and 74D), by failing to adequately warn doctors of early drug trial results that suggested Vioxx was associated with an increased risk of MI;
- Vioxx was defective for the purposes of a claim under s75AD of the TPA but MSDA could avail itself of the 'state of the art' defence under s75AK(1)(c); and
- Merck Inc had discharged its duty of care fully by informing MSDA of the biological operation of Vioxx's active ingredient and of the existing state of science with respect to the consequences of consuming that ingredient.
As a result, Mr Peterson was awarded $287,000.
MSDA appealed against Justice Jessup's decision to the Full Court of the Federal Court of Australia, and Mr Peterson cross-appealed against certain findings.
MSDA appealed against:
- the trial judge's conclusions on the issues of causation, negligence and contravention of ss 74B and 74D of the TPA; and
- the trial judge's finding that Vioxx was defective within the meaning of s75AD of the TPA.
Mr Peterson cross-appealed against:
- the trial judge's findings that MSDA was entitled to rely on the 'state of the art' defence in s75AK(1)(c) of the TPA; and
- his Honour's rejection of the alternative mechanism by which Vioxx might have contributed to Mr Peterson's MI, which was relevant to group members who had ceased taking Vioxx some time before suffering injury of which complaint was made.
The appeal was heard by Chief Justice Keane and Justices Bennett and Gordon (the Full Court). In a unanimous judgment,1 the Full Court largely upheld MSDA's appeal, and dismissed Mr Peterson's cross-appeal. The Full Court judgment overturns Mr Peterson's success at first instance, but leaves open the possibility of other group members making out their claims against MSDA.
The primary issue agitated on appeal was whether Mr Peterson had adequately proven (as a matter of law) that consuming Vioxx was a contributory cause of his MI.
At trial, Justice Jessup found that causation was established on the basis of two pieces of circumstantial evidence, namely a theory that might explain the biological mechanism by which Vioxx contributed to an MI, and upon epidemiological (statistical) evidence, which showed that consuming Vioxx approximately doubled the relative risk of MI (implying causation was more probable than not).
For the Full Court, the question of causation turned on the weight that could be attributed to these two pieces of evidence. The Full Court restated the test for causation in the leading judgment of Chief Justice Spigelman's in Seltsam v McGuinness, where his Honour's analogised evidence of causation to 'the strands in the cable', which must be capable of bearing the weight of the ultimate inference of causation.2 Furthermore, the Full Court restated, as a negative criterion, the requirement of 'but for' causation: the claimant's burden is not discharged merely by showing an increased risk in injury by reason of the defendant's conduct, but rather whether the increased risk 'eventuated' in the case of the claimant (ie the claimant must establish as a necessary condition of recovery that he or she would not have suffered loss 'but for' the defendant's actionable misconduct).3
As to the strength of the epidemiological evidence, the Full Court rejected the suggestion that a relative risk of greater than two implies causation is more probable than not as 'it is apt to mandate an award of compensation to applicants who have not, in truth, been injured by the respondent'.4
The Full Court went on to note that 'in any event the strength of that finding as a strand in Mr Peterson's case is problematic because of the other candidates [confounding factors] as causes of his injury'. The Full Court also noted that epidemiological evidence is of limited use where the claimant is not 'a typical member of the population which is the subject of the study', and noted that Mr Peterson was indeed atypical.5
As to the evidence of biological mechanism, the Full Court concluded that 'the strength of this strand of the case did not rise above the possibility that [Vioxx] was "in the mix" of the factors which may have caused Mr Peterson's heart attack',6 and that to attribute the Mr Peterson's heart attack to Vioxx was 'a matter of conjecture rather than a reasonable inference on the balance of probabilities'.7
However, the Full Court observed that their conclusions in respect of Mr Peterson's case did not mean that other claimants, represented in the proceedings, could not succeed in establishing causation in their claims, which would turn on the particular individual's circumstances, and may be limited to circumstances where there is no likely cause of MI other than the effects of their consumption of Vioxx.8
The Full Court also dismissed Mr Peterson's cross-appeal regarding the ongoing effect of Vioxx after patients had ceased taking the drug, upholding the trial judge's factual findings.
The Full Court held that Justice Jessup's finding that MSDA breached its duty to warn by failing to make Mr Peterson's doctor aware of amendments to the Vioxx product information could not stand upon close examination of the evidence. There was evidence that suggested that Mr Peterson's doctor became aware of the amendments to product information and did not rely exclusively upon 'Dear Doctor letters' to alert him to changes.9
The Full Court noted, however, that it did not follow that other claimants, represented in the proceedings, could not make out this element of the negligence claim.10
The Full Court agreed with Justice Jessup's finding that the regulatory regime based on the Therapeutic Goods Act does not preclude the possibility of common law obligations coexisting with that regime.11
The TPA claims
At trial, Mr Peterson succeeded in his claims that MSDA contravened ss 74B and 74D of the TPA, Justice Jessup finding (respectively) that Vioxx was not reasonably fit for the purpose of acquisition, and was not of merchantable quality.
The Full Court reversed these findings on appeal, because individual causation was not made out in Mr Peterson's case, but also made further observations as to why MSDA had not contravened these provisions.
Regarding s74B, the Full Court restated that the identification of purpose for s74B is a subjective matter,12 and rejected the suggestion that the purpose for which Mr Peterson acquired Vioxx included 'as a negative element of that purpose, some quality of absolute safety or complete absence of adverse side effect.'13 Their Honours stated that such a purpose could not be implied by law, and was not evidenced by the facts.14 The Full Court drew attention to the inherent risks of prescription drugs, and the roles of doctors and pharmacists in the supply of such drugs. The Full Court noted that fitness for purpose is 'a question of some complexity that is not answered by mathematical comparison of a relative risk.'15
Regarding s74D, the Full Court stated that the question of merchantability under s74D was an objective test and 'an increase in risk "of about two" does not in this case without more demonstrate unfitness for purpose'.16 The Full Court reiterated the complexity of the question as stated in the context of the s74B claim.
The Full Court upheld Justice Jessup's findings concerning MSDA's liability under s75AD. The Full Court agreed that Vioxx was defective because it increased the risk of MI and (at the relevant time) MSDA provided no information, advice or warning as to this effect, but that MSDA was protected by the 'state of the art' defence under s75AK(1)(c), as 'the state of scientific knowledge at the time Mr Peterson took Vioxx was such that it was not demonstrated that Vioxx caused an increased risk of MI.'17
- Merck Sharp & Dohme (Australia) Pty Ltd v Peterson  FCAFC 128.
- Ibid. -.
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- Ibid. .
- Ibid. -.
- Ibid. .
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- Ibid. -.
- Ibid. .
- Ibid. .
- Ibid. , citing Rasell v Cavalier Marketing (Australia) Pty Ltd  2 Qd R 232, 330.
- Ibid. .
- Ibid. .
- Ibid. .
- Ibid. .
- Ibid. , and see generally -.
- Peter O'DonahooPartner,
Ph: +61 3 9613 8742
- Paul NicolsPartner, Sector Leader, Industrials,
Ph: +61 2 9230 4414
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