Spring training is in full swing, and the Supreme Court umpire has left the pharmaceutical industry stuck between the bases. Yesterday's ruling must have drugmakers like Pfizer (NYSE:PFE) and Eli Lilly (NYSE:LLY) scratching their heads in disbelief.
Diana Levine sued Wyeth (NYSE:WYE), claiming that the drugmaker should have put a stronger warning on the label of its drug that resulted in her arm needing to be amputated, but the drugmaker argued that it couldn't change its label because the Food and Drug Administration regulates the approval.
Unfortunately for Wyeth and the rest of the drug industry, the Supreme Court disagreed. The court basically said that the FDA's actions on drugs could supersede state law, but Congress would need to write that into law like it did for medical devices.
Good luck with that. Medical device makers like Boston Scientific (NYSE:BSX) and Intuitive Surgical (NASDAQ:ISRG) currently have protection from lawsuits bestowed on them by the FDA after the Supreme Court ruled in favor of Medtronic (NYSE:MDT) last year, citing the 1976 Medical Device Amendments.
However, it looks like Congress might take that away -- Congressmen Henry Waxman and others want a law to overturn the Supreme Court ruling. Given that, it looks like it would be an uphill battle to get Congress to protect the pharmaceutical companies in a similar manner.
So, drug companies are stuck with no place to hide. I doubt they'll take action to unilaterally change their labels and risk the FDA pulling rank, so they'll basically be left to potentially be sued for any warning not on their label.
And investors will be left footing the bill. Thanks a lot, Supreme Court.
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Intuitive Surgical is a Rule Breakers selection. Pfizer is a former Income Investor selection and a current pick of the Inside Value newsletter. Try any of our Foolish newsletters today, free for 30 days.
Fool contributor Brian Orelli, Ph.D., likes baseball and bashing government entities. He doesn't own shares of any company mentioned in this article. If you read the Fool's disclosure policy while cross eyed standing on your head, it might give you a headache. Consider yourself warned.
