Product liability in Brazil – Adequate and sufficient information excluding product liability for drug suppliers

By Sérgio Pinheiro Marçal & Lucas Pinto Simão

Posted: 20th April 2017 08:12

The Brazilian Consumer Protection Code (Law No. 8,078 of 1990) came into force in 1991 and has since been an important instrument in bringing balance to the naturally uneven supplier-consumer relations.
 
Nearly 25 years have gone by since the inception of the Consumer Protection Code, but even today there are still debates and disputes over how best to interpret some of its rules. A major theme that causes great apprehension lies in the product liability imputable to drug manufacturers for injuries caused to consumers, despite the existence of information and warnings on package inserts. This article will briefly address this specific topic.
 
Inherent hazardousness of drugs; adequate and sufficient information excluding product liability for drug suppliers
 
Specifically with regard to liability, the Consumer Protection Code has embraced the strict liability doctrine (by which the supplier is held liable regardless of fault), but has given a somewhat milder approach to it. To that end, the lawmaker expressly set out the legal circumstances in which liability is not imputable to a supplier, and also stipulated the corresponding exoneration events.
 
Article 12 of the Consumer Protection Code expressly identifies three circumstances in which no product liability applies to a supplier for injuries caused to consumers: (i) upon evidence that such supplier has not put the product on the market; (ii) when there is no product defect; or (iii) the consumer or a third party are fully to blame for the injuries.
 
As to the non-existence of product defect, the Consumer Protection Code specifies that “a product is held defective when it does not offer the safety reasonably expected from it vis-à-vis the relevant circumstances involved, among which, (…) the use and risks reasonably expected from the product.” (article 12, paragraph 1, II). Concerning the risks inherent to product, the Consumer Protection Code establishes that suppliers are required “to give necessary and adequate information on the product” (article 8), which arguably leads to the conclusion that a product’s inherent hazardousness, when adequately informed to consumers, cannot be taken as a defect.
 
Drawing on the wording of those legal provisions, legal scholars contend that a product defect is associated with what consumers reasonably expect from a product in terms of safety and risks on use. Once adequate information on product use and potential risks is conveyed to consumers, no product defect can be said to have occurred if and when any such reported risks ever materialise. That being so, the risks expressly warned about should be reasonably expected by consumers, even if they are very unlikely to occur.
 
Courts decisions on this issue
 
However intelligible this rule might seem (leading, by extension, to the nearly inescapable interpretation that no liability is imputable to a drug manufacturer for any effects that are known and have been expressly warned to consumers), the courts have sometimes imposed on manufacturers absolute liability not prescribed by law.
               
In a recent case involving a giant pharmaceutical company and involving a well-known drug, the Court of Appeals of the Federal District and Territories[1] overlooked the mild product liability doctrine adopted by the Consumer Protection Code. The drug manufacturer was sentenced to pay damages to a consumer even though the package insert clearly informed about the possibility of those adverse drug reactions that ultimately affected him.
               
Unlike the courts stance in this case, the Consumer Protection Code does not provide for absolute and unrestricted liability of suppliers for any damage caused to consumers. The rationale of the Appeals Court of the Federal District and Territories, against the Law, is that no product defect was actually in play, but the consequences for the consumer were so severe that the supplier should be required to redress the damage suffered by him as such was part of its business risk. Put it simply: once damage is held to exist, the manufacturer is accountable for it.
 
Nevertheless, the business risk doctrine does not serve as a valid legal argument to impose product liability on a drug manufacturer. As seen, there are legal events in which a supplier is exonerated from product liability. Once these circumstances take place, product liability should necessarily be ruled out – regardless of the alleged business risk or the severity of the injury suffered by consumers.
 
An appeal against this ruling was lodged at the Superior Court of Justice, which is now to adjudicate on the extent of liability imputable to the pharmaceutical industry for known and informed adverse drug reactions.
 
The stance taken by the Appeals Court of the Federal District and Territories is a cause of great concern not only for the pharmaceutical industry but also for all suppliers in general, in that the liability for injuries during consumer relations may be imposed on them other than as expressly prescribed by law.
 
As known, every drug brings certain risks. Every medication may cause unwanted side effects, to a greater or lesser extent. In ruling that the drug suppliers must redress consumers for adverse reactions indiscriminately (even those stated on the package insert), the courts have taken a rather questionable stance that affects Brazilian consumers and pharmaceutical industry alike, with effects on drug prices and trades, as well as on the very development of new products.
 
Should this stance taken by the Appeals Court of the Federal District and Territories prevail, this would be a major obstacle for the pharmaceutical industry as a whole, as its business would shift towards an unrestricted insurer for each and every adverse effect from drug use. This view is evidently incorrect in that it violates the free enterprise doctrine by imposing an illegal hindrance on pharmaceutical industry activity.
                               
Conclusion
 
A systematic approach to the Consumer Protection Code suggests that no product defect may be said to occur when a product offers the safety conditions reasonably expected from it and the manufacturer has provided adequate and sufficient information on its potential adverse effects.
 
This general rule is valid for all product liability cases in Brazil, the more so when involving the pharmaceutical industry. Any drug use brings certain risks that, on materialising, cannot entail any product liability for the supplier if the package insert had adequate and sufficient information on them.
 
Sérgio Pinheiro Marçal
Pinheiro Neto Advogados
Email: smarcal@pn.com.br
 
Partner in the Litigation Department at the law firm Pinheiro Neto Advogados since 1996.
Education:Bachelor of law from the Paulista College of Law at Pontifice Catholic University (Faculdade Paulista de Direito da Pontifícia Universidade Católica - PUC); credits toward a Master’s degree at PUC. Admitted to the Brazilian Bar Association (OAB) in 1986.
Languages:Portuguese and English.
Areas of expertise:Class actions, consumer law, product liability, civil litigation, and life sciences.
He is a former Chairman of the São Paulo Lawyers Association (AASP).
His name is highly recommended as a product liability law practitioner by Chambers and Partners (Band 1), Who’s Who Legal, Best Lawyer and Euromoney World Leading Lawyers. For a long time he has been representing big companies in the most relevant product liability cases in Brazil, as such tobacco litigation, drugs and medical devices, cars and electronics issues. He has several articles published.
 
Lucas Pinto Simão
Pinheiro Neto Advogados
Email: lsimao@pn.com.br
 
Senior Associate in the Litigation Department at the law firm Pinheiro Neto Advogados.
Education:Bachelor of law from the Paulista College of Law at Pontifice Catholic University (Faculdade Paulista de Direito da Pontifícia Universidade Católica - PUC); LL.M on Contracts from Insper – São Paulo; Master’s degree at PUC. Admitted to the Brazilian Bar Association (OAB) in 2007.
Languages:Portuguese and English.
Areas of expertise:Class actions, consumer law, product liability, civil litigation, and life sciences.


[1]   Appeal No. 2009.07.1.008824-8 – Suit for moral and property damages – Second Civil Panel of the Appeals Court of the Federal District and Territories.
 

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