Hospitals Can Be Strictly Liable For Allegedly Defective Drugs, Appellate Court Finds

December 23, 2022

In Brown v. GlaxoSmithKline, LLC and Providence Health System – Oregon, 323 Or. App. 214 (Ct. App. Or. 2022), the Oregon Court of Appeals recently found that a hospital could be a “seller” of pharmaceutical drugs under Oregon law, subjecting it to strict products liability for alleged drug defects.  This decision contravenes—and thus threatens to upset—the overwhelming consensus among U.S. courts that hospitals are not strictly liable for allegedly defective drugs or medical devices used in the course of providing medical care to patients. 

Most courts presented with this question have found that hospitals are not “sellers” of such products for purposes of products liability claims.  Rather, hospitals are primarily engaged in the business of providing medical services.  While medical services may involve use of a product, such use is only incidental to the services provided.  Courts often apply this same analysis to physicians and, sometimes, even to retail pharmacies.  Perhaps as a result, most drug and medical device product liability plaintiffs do not name healthcare providers as defendants, and when they do, they typically assert claims sounding only in medical negligence.   

The Brown case initially unfolded like many pharmaceutical products liability cases.  Plaintiff was prescribed and administered the drug Zofran by hospital medical staff in the emergency room while she was pregnant.  Alleging that the drug caused heart defects in her then-unborn child, plaintiff brought strict products liability claims against the drug manufacturer.  But somewhat unusually, plaintiff also asserted strict products liability claims against the hospital.  Applying the usual analysis, the trial court granted summary judgment for the hospital, holding that it was not a “seller engaged in the business of selling” Zofran within the meaning of the Oregon products liability statute.  But Oregon’s appellate court reversed, holding that “a seller is ‘engaged in the business of selling’ a product when selling the product comprises some part of the seller’s ongoing commercial activity . . . [and] one can be a ‘seller engaged in the business of selling’ a product subject to strict liability under ORS 30.920 even if the seller also or primarily provides a service and the sale of the product is incidental to that service.”  Brown, 323 Or. App. 214, at *1 (emphasis added).    

Should the Brown court’s analysis become adopted, regularly allowing products liability claims against hospitals and other healthcare providers could mean a seismic shift in liability for these potential defendants and could negatively impact distributor and manufacturer defendants as well.  For example:   

• Healthcare providers could be an attractive target to name in drug and device litigation in which these entities or individuals would otherwise not be a defendant.
• The expansion of the number of defendants named in product liability suits can lead to conflict between defendants, confuse or anger the jury, and drive up overall exposure.
• Unlike statutory medical negligence and malpractice provisions, strict products liability statutes often do not have protections such as caps on damages, pre-suit notice requirements, or other gating mechanisms such as requiring affidavits of a medical expert upon filing.     
• While some states have “innocent seller” statutes that could shield a hospital from liability for “selling” an allegedly defective drug or medical device, not all states do.    
• Because healthcare providers are often located in the same jurisdiction where the plaintiff is located, diversity jurisdiction would likely be defeated, making these cases more likely to proceed in state rather than federal court.   
• Existing sales contracts between manufacturers, distributors, and healthcare providers may not adequately address allocation of responsibility for potential product liability claims against the healthcare provider and may need to be re-negotiated.

While the trickle-down effects of the Brown ruling could be significant, it remains to be seen whether this decision is anything more than an outlier.  Oregon’s statutory language setting forth the elements of a strict liability claim against a “seller” is not particularly unique among product liability statutes.  However, Brown may be distinguishable insofar as the court’s analysis relied heavily on the legislative history of the Oregon products liability statute along with other statute-specific context.  For example, the court relied on the fact that other Oregon statutory provisions expressly exclude certain sellers and products from strict liability and/or exclude certain transactions from being “sales.”  These include, under certain circumstances, physicians using products in the course of medical care, health care facilities that provide breast implants, and transactions involving blood products.  These other carve outs, the court concluded, show that the Oregon legislature could have – but did not – exclude hospitals or pharmacies from strict liability in the same manner.  Our team will continue to follow and report on developments in this space. 

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.