1. Distribution of Pharmaceuticals and Medical Devices I am not liable, am I? London – September 4, 2016 Moritz Maurer, LL.M.

2. Overview General Conditions for Liability (EU vs. Switzerland) Case 1: Yasmin (Switzerland; 4A_365/2014, 5.1.2015) Case 2: Pacemaker/Defibrillator (Germany/EU; C-503/13 and C-504/13, 5.3.2015)

3. General Conditions for Liability (EU vs. CH) (1/2) Neither jurisdiction provides for specific legal liability rules for pharmaceuticals and/or medical devices General product liability rules apply:  EU: Council Directive 85/374/EEC amended by Directive 1999/34/EC (CD85/374)  Switzerland: Product Liability Act (PLA) To improve competitiveness in the EU market Switzerland adapted the Council Directive

4. General Conditions for Liability (EU vs. CH) (2/2) EU  Product (art. 2) and producer (art. 3)  Defectiveness of product (art. 6)  Damage (art. 9)  Casual relationship between defect and damage (art. 4) Switzerland  Product (art. 3) and producer (art. 2)  Defectiveness of product (art. 4)  Damage (art. 1)  Casual relationship between defect and damage (art. 1)

5. Case 1: Yasmin – Facts 1/2 Physician prescribes a birth control pill (Yasmin Pill) to a 16 year-old woman After taking the pill for 2 months, the woman broke down due to a pulmonary embolism, which lead to an oxygen deficiency in her brain She suffered severe brain damage and spasticity Assumption that damage was caused by the pill Applicability of Product Liability Act (PLA) since birth control pill is a product according to the act’s terms

6. Case 1: Yasmin – Facts 2/2 Producer of the pill (Bayer) was sued Claimant stated that she was not sufficiently informed by the producer about the risks of the prescribed pharmaceutical Lack of information constitutes a defectiveness as defined by law and therefore, the producer should bear the liability for all damage arising in connection with her spasticity She claimed damages (over CHF 5’500’000)

7. Case 1: Yasmin – Supreme Court Decision 1/3 Product is defective when it does not provide the safety which a person is entitled to expect regarding the presentation of the product to the public Not relevant if the packaging information is suitable to enable the consumer to conduct a clear risk assessment Applicable to all pharmaceuticals available only on prescription

8. Case 1: Yasmin – Supreme Court Decision 2/3 Involvement of a physician (usually; prior to the medication intake by patient) in case of pharmaceuticals available only on prescription (e.g. Yasmin-Pill) Here, the physician’s expert knowledge has to be taken into consideration If the information provided to the physician by the producer enables the physician to conduct a risk assessment, the fact that the patient itself is not able to do this, is not relevant

9. Case 1: Yasmin – Supreme Court Decision 3/3 Producer provided all relevant information to the physician In particular, such information stated that the risk of a vein-related thromboembolism was twice as high compared to the previous version of the Yasmin-Pill Decision: Product was not defective pursuant to the Product Liability Act (PLA) and the producer (Bayer) was therefore not liable for damages

10. Case 1: Yasmin – Assessment Court made a distinction regarding the producer’s information duty as regards pharmaceuticals available only on prescription and other pharmaceuticals Decision makes sense?  Increased risk with respect to pharmaceuticals available only on prescription  Involvement of a physician Breach of duty of care by physician (CHF 5’500’000)?

11. Case 2: Pacemaker/Defibrillator – Facts 1/5 2 similar cases before German Supreme Court One regarding cardiac pacemakers, one regarding implantable cardioverter defibrillators Company A produced and sold certain types of pacemakers and defibrillators

12. Case 2: Pacemaker/Defibrillator – Facts 2/5 Re pacemakers  A informed physicians that its quality control system had established that a component utilized to seal the pacemakers may experience a gradual degradation; that defect could lead to premature battery depletion, resulting in loss of telemetry and/or loss of pacing output without warning  A recommended to consider replacing such pacemakers for patients affected  Following that recommendation, the pacemakers previously implanted in X and Y were replaced

13. Case 2: Pacemaker/Defibrillator – Facts 3/5 Re defibrillators  A informed physicians that its quality control system had established that the functioning of the defibrillators might be affected by a defect in one of its components which could limit the device’s therapeutic efficacy; it was apparent from the analysis carried out that a magnetic switch in those defibrillators might remain stuck in the closed position  A recommended to deactivate the magnetic switch in the defibrillators concerned  As a result hereof, the defibrillator implanted in Z was replaced prematurely

14. Case 2: Pacemaker/Defibrillator – Facts 4/5 Re pacemakers  X and Y’s insurer claimed compensation in respect of the costs incurred in in connection with the operation to replace the pacemakers Re defibrillators  Z’s insurer claimed compensation in respect of the costs incurred in in connection with the operation to replace the defibrillator

15. Case 2: Pacemaker/Defibrillator – Facts 5/5 The court referred to the Court of Justice of the European Union for preliminary ruling the following two questions  Is a product implanted in the body already defective if products in the same product group have a significantly increased risk of failure or if a malfunction has occurred in a significant number of products in the same series (but a defect has not been detected in the device which has been implanted in the specific)?  If YES, do the operation costs to remove the product and to implant another product constitute damage caused by personal injury

16. Case 2: Pacemaker/Defibrillator – Decision 1/6 Regarding question 1 (individual product/product group) [1/2]  A product is defective when it does not provide the safety which a person is entitled to expect  The safety which public is entitled to expect must be assessed by taking into account the intended purpose  With regard to medical devices (such as pacemakers and defibrillators), it is clear that, in the light of their function and the particularly vulnerable situation of patients using such devices, the safety requirements for those devices which such patients are entitled to expect are particularly high

17. Case 2: Pacemaker/Defibrillator – Decision 2/6 Regarding question 1 (individual product/product group) [2/2]  Answer: Directive 85/374 must be interpreted as meaning that, where it is found that products belonging to the same group or forming part of the same production series have a potential defect, such a product may be classified as defective without there being any need to establish that that product has such a defect

18. Case 2: Pacemaker/Defibrillator – Decision 3/6 Regarding question 2 (operation costs constitute damage caused by personal injury) [1/3]  Producer is liable for damage caused by death or personal injuries which are result of product being defective  “Damage caused by death or personal injuries” must, having regard to the objective of protecting consumer health and safety, be given a broad interpretation  Compensation for damage relates to all that is necessary to eliminate harmful consequences and to restore the level of safety which a person is entitled to expect

19. Case 2: Pacemaker/Defibrillator – Decision 4/6 Regarding question 2 (operation costs constitute damage caused by personal injury) [2/3]  As a consequence, compensation for damage must cover the costs relating to the replacement of the defective product  Pacemakers: A recommended replacement  Defibrillators: A recommended deactivation of magnetic switch

20. Case 2: Pacemaker/Defibrillator – Decision 5/6 Regarding question 2 (operation costs constitute damage caused by personal injury) [3/3]  It is for the national court to determine whether, having regard to the particularly vulnerable situation of patients using an defibrillator, the deactivation of the magnetic switch is sufficient for the purpose of overcoming the defect in that product

21. Case 2: Pacemaker/Defibrillator – Decision 6/6 Ruling  Where it is found that products belonging to the same group have a potential defect, such a product may be classified as defective without there being any need to establish that that product has such a defect  Damage caused by an operation for the replacement of a defective product constitutes “damage caused by death or personal injuries” for which producer is liable, if such an operation is necessary to overcome the defect in the product in question

22. Case 2: Pacemaker/Defibrillator – Assessment Defectiveness  Potential defectiveness → defectiveness  Wide interpretation of “defectiveness”  Stringent safety requirements re pacemaker’s and defibrillator‘s function and their vulnerability Compensation for damage  All that is necessary to eliminate harmful consequences and to restore level of safety which a person is entitled to expect (includes replacement)  Recommendation to replace: $, recommendation to deactivate: ? Applicable to other medical devices an/or categories of products?

23. Thank you Moritz Maurer, LL.M. Pestalozzi Attorneys at Law Ltd Zurich, Switzerland moritz.maurer@pestalozzilaw.com +41 44 217 91 11