State Preemption, Misconstrued: Michigan Supreme Court Helps Merck, On Vioxx®

Michigan is indeed an unusual state. It has adopted an in-state standard for preemption -- that standard, unique among all the 50 states, prevents individuals from suing pharmaceutical manufacturers for physical injuries from FDA-approved drugs, when taken for an "on-label" indication.

However, it does not, by its terms, prevent a suit for refunds, filed by the state. But that's what the Michigan Supreme Court just held. And held, in error, in my view.

Here's the order (a three page PFD file), entered yesterday and released today -- I'll quote some of the very well thought out dissent, of Justice Kelly:

. . . .I dissent from the Court’s order denying plaintiffs’ application for leave to appeal. Because the Court of Appeals clearly erred in holding that plaintiffs’ suit is a product liability action and thus barred by MCL 600.2946(5), I would reverse its decision and reinstate plaintiffs’ claim. . . .

On appeal to this Court, plaintiffs argue that the Court of Appeals misconstrued their lawsuit. Specifically, they contend that a claim brought under the Medicaid False Claim Act is not a product liability action barred by MCL 600.2946(5)3 because it is not a claim seeking compensation for “damage to property” as used in the act. Rather, it is a claim seeking the return of payments procured through fraudulent conduct. I agree with plaintiffs.

MCL 600.2945(h) defines a “product liability action” as “an action based on a legal or equitable theory of liability brought for the death of a person or for injury to a person or damage to property caused by or resulting from the production of a product.” The Court of Appeals majority held that plaintiffs’ allegations fall within this statutory definition because they assert legal and equitable theories of liability for damage to property resulting from the production of a product. Essentially, the court held that plaintiffs’ alleged financial damages in the form of payments to Medicare patients amount to “damage to property.” This defies common sense and a rational understanding of the statutory phrase “damage to property.”

In interpreting statutes, “[t]he fair and natural import of the provision governs, considering the subject matter of the entire statute.”4 As dissenting Court of Appeals Judge Fitzgerald noted, “[w]hen examined in the proper context of a product liability statute, it is clear that ‘damage to property’ means physical damage to property caused by a defective or unreasonably dangerous product.”5 Here, the damages alleged by plaintiffs arise from an injury to the state’s Medicaid program and represent an amount of money wrongfully paid to defendant. No physical damage is involved. . . .

It sure seems that the majority -- Republicans, all -- got this one wrong.

How can a claim by the state government itself (not a private individual plaintiff), for a return of amounts paid by the state for Vioxx^® be a "claim for physical injuries"? This simply defies the plain English meaning of the statute adopted by the Michicagn legislature, and signed by the Governor.