Pharmaceutical Industries and Business Tort Liability

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Pharmaceutical makers have been forced to either produce drugs and vaccines selectively or stop production altogether due to the unpredictable risk of tort liability in the pharmaceutical industry. The final consequence is a drug shortage, which prompts another economic crisis. Lawsuits brought against pharmaceutical companies for the adverse effects of their medicines or vaccines on patients are an example of tort liability. The sales of pharmaceutical goods have been impacted by company tort liability in addition to production. The product liability of pharmaceutical products has led to a drop in sales of those products. “The threat of tort liability, deters pharmaceutical companies and device makers from developing much-needed new technologies

. Even if those innovations are merely delayed rather than abandoned altogether due to FDA regulations, the cost is felt not merely in financial terms but also in the suffering of people whose illnesses could have been treated with the new drug or device.” (FDA and the Tort System)

Tort liability in pharmaceutical companies generally arise when a pharmaceutical product contains a defect that causes damage to a purchaser, user or a bystander. As it pertains to pharmaceutical industry, tort liability is based on two legal principles under which the manufacturer of pharmaceutical product can be liable to damages arising from use of the product. They are the strict liability, warranty and negligence. Strict liability is most common.

“Strict liability, provides that a seller of a product is liable without fault for damage caused by that product if it is sold in a defective condition that is unreasonably dangerous to the user or consumer. Thus, strict liability would mean that pharmaceutical companies would have to pay damages in some cases, even when they had impeccably researched their drugs “(Hunter, 1993). Strict liability is not applicable for products that are “unavoidably unsafe” if the benefits outweigh the dangers. The manufacture is also liable for “failure to warn” known and knowable dangers of the product at the time of manufacture.

The lengthy expensive and sensitive pharmaceutical litigation and their adverse outcome on the pharmaceutical industry has necessitated the lobby for pharmaceutical reforms. The FDA is the body that regulates pharmaceutical manufacturers together with the state’s tort system. FDA is charged with the responsibility of testing the product and a risk-benefit analysis conducted before the product is approved to be marketed. The big problem is despite the FDA’s approval, the manufacturer can incur liability if the product is later discovered to be defective. This gives an impression that detailed FDA scrutiny of a product, the briefs contended, should preempt litigation challenging the product's safety (unless the defendant has violated FDA requirements). This is one of the areas that need reforms. It is evident that FDA possess expertise on products safety than the juries in court. The FDA views on the product safety should play a role in assessing product liability.

The other reform to be considered is that the “failure to warn” clause should be removed for manufactures of pharmaceutical products. Failure to warn is a marketing defect where there are flaws in the way a product is marketed which include; insufficient labelling, improper instructions and lack of adequate safety warnings. This is due to the complexity of determination of the contributory negligence clause which should limit the manufacture’s liability.

The Judiciary act of 1789 in the US constitution allowed an alien to commence litigation in a US court. The statute, Alien Tort Claims Act (ATCA) provides the multinational corporations to be sued by plaintiff outside the US soil for violation of right or in this case for injury caused to product users. The impact of this can be seen in the negative economic impact, punitive damages and international relations consequences.

Risk management methods can be extremely useful in conquering the dangers of product risk. Winning the item obligation amusement implies few cases, unassuming installments, winning cases prosecuted, utilizing the best terms on item risk protection scope and concentrating energies on maintaining a productive business. Winning pharmaceutical makers fabricate solid item chance administration frameworks. A decent risk administration program comprise of risk administration abilities like controlling, risk retention and contractual transfer.

Risk retention happens when a pharmaceutical firm supports its own particular risk as opposed to paying them through protection or different means. For some reasons, pharmaceutical firms might need to hold or self-protect their product risk liability. One key factor is that pharmaceutical firms going down this way ensure they have adequate resources to finance risks. This could mean putting aside money reserves to support expected (and unexpected) risks. It could likewise include acquiring credit extensions adequate for paying cases.

Risk control means to reduce both the recurrence and seriousness of risks. With regards to pharmaceutical product liability, risk control can be accomplished through safe outline of medications, great assembling hones, viable warnings and labelling and FDA administrative consistence. On the off chance that pharmaceutical firms have these segments secured down, they have a decent shot of either anticipating item risk claims or effectively shielding any cases and claims that surface. Contractual transfer is the best known risk management technique. One variation is to move the monetary expenses of liabilities to an expert risk carrier, i.e., an insurance agency.

Business tort liability to some extent can become criminal liability. In the pharmaceutical industry, this happens when the farm does not meet legal requirement in making their product, for example, in making pharmaceutical products, the farm is supposed to provide a risk/benefit analysis as well as proper testing of the product before being approved for market by FDA. If the farm skew the findings about the product to get it approved, it shall be considered a criminal liability if discovered later. This can lead to great fines or the closure of business.

In conclusion, the scope of business tort liability has a great impact on pharmaceutical industries. The various legal regulation surrounding the pharmaceutical industries has adversely affected the production and practice of pharmacy in general. Tort reforms on the area of pharmaceutical products will greatly contribute to the success of pharmaceutical industries by reduction of tort liability on the side of the farm. Proper risk management techniques and a well-structured risk management plan will help pharmaceutical industries to reduce the risk of tort liability.


Braithwaite, J. (2013). Corporate Crime in the Pharmaceutical Industry (Routledge Revivals). routledge.

Manning, R. L. (1997). Products liability and prescription drug prices in Canada and the United States. The Journal of Law and Economics, 40(1), 203-244.

Viscusi, W. K. (1991). Reforming products liability. Harvard University Press.

e FDA and the Tort System: Postmarketing Surveillance, Compensation, and the Role of Litigation. (n.d.). Retrieved December 05, 2017, from

July 15, 2023
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