SALEM, Ore. (Legal Newsline) - In a decision with broad implications for the cost of healthcare in Oregon, the state Supreme Court ruled hospitals can be sued for providing drugs plaintiffs consider defective, spreading potential liability beyond drugmakers to include any entity that administers pharmaceuticals to patients.
The American Medical Association urged the Oregon Supreme Court to reverse an appellate decision applying the state’s strict liability statute to hospitals, saying it served “no public policy goal” and inevitably would spread to physician-owned practices and other healthcare providers. But the court unanimously upheld the decision, saying there is no evidence legislators intended to exclude hospitals from the law when they passed it in 1979.
“A hospital that supplies and administers a dangerously defective drug in conjunction with providing a healthcare service can be a `seller’ that is `engaged in the business of selling’ for purposes of liability,” the court ruled in a May 2 opinion by Chief Justice Meagan Flynn.
Thomas Brown and Maria Gomez sued Providence Health System after their child was born with a heart defect they blamed on Zofran, an injectable drug Gomez received to control nausea. A trial court dismissed their case, ruling Oregon statute 30.920, which extends strict liability to anyone “engaged in the business of selling or leasing” a defective product, doesn’t apply to hospitals.
Providence argued it was in the business of providing healthcare, not selling drugs, and Gomez was never specifically billed for the Zofran she received.
An appeals court reversed the dismissal, drawing criticism from the AMA, which said it threatened healthcare throughout the state. About 36% of medical practices are owned by physicians who also often store and administer drugs from their office, the associate noted.
“Penalizing a medical practice (or hospital) for an error of the manufacturer or regulator serves no valid public policy goal,” the AMA said. “On the contrary, it will have significant adverse effect."
The Supreme Court disagreed, saying the plain language of the statute and common law meant it applied to anyone who distributed drugs. Providence argued the word “sells” doesn’t apply to drugs administered in a hospital, since the patient doesn’t take ownership in the traditional sense of being able to use it as they wish or transfer it to someone else. The hospital also cited court decisions limiting strict liability to businesses where the “essence of the transaction” is selling a product.
The Supreme Court rejected those arguments, ruling “seller” means “anyone who transfers the product to another in exchange for money or other valuable consideration.” The court refused to consider the argument Providence wasn’t a seller because it never billed Gomez for the drug, saying Providence failed to bring up that issue in its motion to dismiss at the trial court level.
Plaintiff lawyers are still recruiting clients to sue over Zofran, although a federal appeals court last year dismissed hundreds cases, ruling the label adequately warned physicians about the risk of birth defects.
Providence was represented by David Fine of K&L Gates, while Travis Eiva represented the plaintiffs. The Orgon Association of Hospitals and Health Systems, Oregon Medical Association and American Medical Association, filed briefs, as did the Oregon Association of Defense Counsel, the U.S. Chamber of Commerce and the Oregon Trial Lawyers Association.