On 12 October 2011 the Full Court of the Federal Court of Australia, constituted by Chief Justice Keane and Justices Bennett and Gordon JJ (their Honours) allowed an appeal of the Federal Court decision to award compensation to a claimant who claimed consumption of Vioxx caused him to have a heart attack in 2003.
Vioxx, a "Cox-2" inhibitor, was approved for sale in 1999. Vioxx was an anti-inflammatory drug that was prescribed to patients suffering from the effects of arthritis. At the time the drug was considered revolutionary because, unlike similar medications, the drug did not have any gastrointestinal side-effects.
Merck Sharpe & Dohme Australia (MSDA) withdrew Vioxx on 30 September 2004 after a study showed it doubled the risk of certain cardiovascular adverse events.
The class action
Mr Peterson represented a defined class including all persons who after 30 June 1999 were prescribed Vioxx (in Australia) and who within 30 weeks of consuming Vioxx suffered one or more specific cardiovascular conditions.
Mr Peterson alleged that Vioxx increased the risk of cardiovascular disease and that the distributor MSDA knew or should have known this prior to the drug's voluntary recall in 2004.
The class action was launched against the respondents in 2005 based in negligence and on various alleged breaches of the Trade Practices Act 1974 (Cth) (TPA), now the Competition and Consumer Act 2010 (Cth).
Mr Peterson was awarded $287,000 in 2010 by Justice Christopher Jessup. His Honour found Mr Peterson was entitled to recover damages pursuant to ss 74B and 74D of the TPA, finding (respectively) that:
- Vioxx was not reasonably fit for the purpose implicitly made known to MSDA (i.e. the safe relief of arthritic pain); and
- Vioxx was not of merchantable quality because it was reasonable for a consumer to expect that a medication for the relief of arthritic pain would not involve a doubled risk of heart attack.
This finding was made notwithstanding that Justice Jessup also held that MSDA was entitled to the 'state of the art' defence under s 75AK(1)(c) of the TPA.
Mr Peterson also unsuccessfully alleged breaches of ss 52 and 75AD of the TPA, the former failing due to want of causation and the latter failing due to the operation of the 'state of the art' defence.
Did Vioxx cause Mr Peterson's heart attack?
Justice Jessup's ultimately determined that Vioxx had caused Mr Peterson's heart attack.
Counsel for Mr Peterson submitted that his Honour's findings of ultimate fact were sufficient to sustain the judgment. Counsel for MSDA submitted that his Honour's express refusal to find that Mr Peterson's heart attack would not have happened but for the taking of Vioxx meant that Mr Peterson's case should have been dismissed for want of an essential factual finding that it was more probably than not that the consumption of Vioxx caused or materially contributed to the occurrence of his heart attack1.
Their Honours referred to the 'but for' test for causation in Chappel v Hart2 in which Justice McHugh said: ... if a wrongful act or omission results in an increased risk of injury to the plaintiff and that risk eventuates, the defendant's conduct has materially contributed to the injury that the plaintiff suggests whether or not other factors also contributed to that injury occurring...3, and other cases approving the 'but for' test.
Ultimately, their Honours held that it was not sufficiently proven that Mr Paterson's heart attack would not have occurred 'but for' the ingestion of Vioxx in the primary hearing, and therefore Justice Jessup's ultimate findings of fact on causation were not sufficient4. Further, their Honours through their own examination of the evidence produced in the appeal were not convinced that it was more probable than not that the consumption of Vioxx was a necessary condition of Mr Peterson's heart attack, although this might not be the case for other applicants represented in the proceedings5.
The past consumption cross-appeal
Mr Peterson cross-appealed against Justice Jessup's rejection of the submission that past consumption of Vioxx more or less continuously in the past increased the risk of a person suffering a heart attack, even in cases where Vioxx was not consumed in the weeks immediately preceding the occurrence of the heart attack. It was submitted that such consumption might have contributed to Mr Peterson's heart attack by the absorption of thrombi into endothelial plaque.
The significance of rejecting this alternative mechanism was that it restricted the potential pool of representative parties who might bring an action against MSDA.
This argument was rejected by their Honours, who concluded that a causative link had to be established and was not in the primary hearing. Their Honours confirmed that even if there was a plausible explanation that earlier consumption of Vioxx could result in a Vioxx-induced cardiovascular event, this alone does not support a finding that the cardiovascular event in question was caused by Vioxx6.
Negligence and s 52 of the TPA
Although the claim failed for want of causation, Mr Peterson was successful in the primary hearing in establishing that a failure to notify prescribing doctors and the general public of potentially harmful side effects may be considered misleading and deceptive conduct under s52 of the TPA.
His Honour found that MSDA sales representatives did use the product information for Vioxx in their 'sales pitch' to doctors and this would be a promotion activity in relation to, or for the purposes of, the supply of goods or services to actual or potential users of the product7. His Honour also found that these representations – which did not include a safety warning based on the results of the VIGOR trial – were likely to mislead or deceive.
On appeal, MSDA contended that the finding of a breach was reached unfairly, as the focus ofa breach was reached unfairly, as the focus of Mr Peterson's case was the adequacy of the warning conveyed by the amendment to the Vioxx product information, not the adequacy of the means by which that information was conveyed to medical practitioners. This was accepted by their Honours, who again left open the opportunity for other members of the represented group who might make out this element of their case8.
MSDA also argued that the regulatory regime based on the Therapeutic Goods Act 1989 (Cth) precluded the possibility of common law obligations co-existing with the legislation, but their Honours rejected this submission.
Sections 74B and 74D of the TPA
On appeal, MSDA successfully challenged Justice Jessup's finding that Mr Peterson was entitled to recover damages pursuant to these sections. Their Honours held that Mr Peterson did not establish that he suffered loss or damage by reason of otherwise actionable conduct on the part of MSDA for a breadth of evidentiary reasons9.
In answer to s 74B, their Honours held that the purpose for which Vioxx was acquired did not include: ... as a negative element of that purpose, some quality of absolute safety or complete absence of adverse side effect10. In addition, even if the proposition that Vioxx doubled the risk of Mr Peterson having a heart attack (which it was not), it was not relevant unless that negative element was properly made out.11
In effect, their Honours stated that it could not be presumed in law that Mr Peterson acquired Vioxx for a particular purpose which included the purpose of not exposing himself to other life-threatening conditions.
In answer to s 74D, their Honours held that a consumer must suffer loss or damage by reason that the goods are not of merchantable quality and, as their Honours were not convinced that it was more probable than not that the consumption of Vioxx was a necessary precondition of Mr Peterson's heart attack, liability could not be made out12.
Section 75AD of the TPA
The effect of s75AD is intended to be that any individual who is injured by a defective good13 can recover from the good's manufacturer or importer14.
MSDA appealed against the Justice Jessup's finding that Vioxx was 'defective' within the meaning of s 75AD of the TPA. Mr Peterson cross-appealed Justice Jessup's orders dismissing the s 75AD claim.
Their Honours rejected the appeal and cross-appeal.
Section 75AK(1)(c): state of the art defence
Mr Peterson cross-appealed against Justice Jessup's conclusions in relation to the availability of the defence under s 75AK(1)(c), submitting that the defence cannot apply if, at the time of supply, the defect had already been discovered. Mr Peterson submitted that his Honour should have found that the defect in Vioxx had been discovered by no later than March 2000, when the results of the first study (the VIGOR study) were released.
Their Honours ruled against Mr Peterson, stating that: ... the state of scientific knowledge at the time... was not just the results of the VIGOR study but the conclusions to be drawn from it15. Their Honours held that the state of scientific or technical knowledge at the time the drug was supplied to Mr Peterson was not sufficient to enable MSDA to know of the defects or risks posed, so the defect was not discoverable16.
The significance of the appeal
The 'state of the art defence' under s 75AK of the TPA (now s 142 Australian Consumer Law) operates for an important policy reason: to encourage innovation in the pharmaceutical industry by protecting those innovators from liability for defects that human knowledge, research and foresight could not have prevented.
The effect of Justice Jessup's judgment was that it appeared to allow a manufacturer to escape liability for a defective product under the 'state of the art' defence, only to allow the claim to be revived once more by a finding that there was an implied manufacturers' warranty, which imposed a strict liability on the manufacturer.
The judgment steps away from this interpretation.
1 Merck Sharp & Dohme (Australia) Pty
Ltd v Peterson  FCAFC 128 at 93.
2 (1998) 195 CLR 232.
3 (1998) 195 CLR 232 at .
4Merck Sharp & Dohme (Australia) Pty Ltd v Peterson  FCAFC 128 at 104-105.
5Merck Sharp & Dohme (Australia) Pty Ltd v Peterson  FCAFC 128 at 126.
6Merck Sharp & Dohme (Australia) Pty Ltd v Peterson  FCAFC 128 at 143.
72010 judgmentat 604
8Merck Sharp & Dohme (Australia) Pty Ltd v Peterson  FCAFC 128 at 159.
9Merck Sharp & Dohme (Australia) Pty Ltd v Peterson  FCAFC 128 at 165.
10Merck Sharp & Dohme (Australia) Pty Ltd v Peterson  FCAFC 128 at 172.
11Merck Sharp & Dohme (Australia) Pty Ltd v Peterson  FCAFC 128 at 173.
12Merck Sharp & Dohme (Australia) Pty Ltd v Peterson  FCAFC 128 at 179.
13Defined under s75AC Trade Practices Act 1974 (Cth).
14s75AB Trade Practices Act 1974 (Cth).
15Merck Sharp & Dohme (Australia) Pty Ltd v Peterson  FCAFC 128 at 207.
16Merck Sharp & Dohme (Australia) Pty Ltd v Peterson  FCAFC 128 at 208.
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This report does not comprise legal advice and neither Gadens Lawyers nor the authors accept any responsibility for it.