Once, an HIV/AIDS diagnosis meant virtually certain death. [1] That was before Gilead Pharmaceuticals developed the drug tenofovir in two “prodrug” forms [2], tenofovir disoproxil fumarate (TDF) and tenofovir alafenamide (TAF). The prodrug TDF received FDA approval after passing all three required phases of clinical testing and was marketed in 2001. Gilead also began conducting Phase I and II trials for TAF but chose not to proceed to the lengthy, expensive, but required Phase III clinical trials necessary for FDA approval, instead focusing on TDF development and marketing.
Can a Drug Company Be Liable for the Drug It Didn’t Make?
In February of 2024, I wrote about a judge who allowed a plaintiff to sue Gilead, not for any harm accruing from consuming TDF, which the plaintiffs admit was not a defective product, but for failing to develop TAF. While Gilead marketed the FDA-approved TDF, the plaintiffs claimed that TAF was a less hazardous form and that Gilead withheld development solely for profit. They claim that TAF was developed and marketed only after TDF was about to lose its patent protection and face competition from generic manufacturers, and that this profit-hunting is enough to indicate Gilead’s financial lasciviousness.
TDF is a good, useful drug and remains on the market. In many cases, it is the drug doctors favor. The plaintiffs claim that was not so for them and that they were deprived of the yet-to-be-fully-developed TAF, which would have spared them the injuries they allegedly suffered from using TDF. However, because TDF is per se “not defective,” there can be no liability under products liability theory.
Instead, the plaintiffs sued for negligence, focusing on Gilead’s required general duty of reasonable care and its fraudulent concealment of known dangers. They claimed that TAF was safer and that they were denied access to it solely because Gilead prioritized profits over safety.
Gilead claimed that it later resumed development of TAF since, with the availability of TDF,
“People were living longer with HIV than anyone dared to hope, and with age comes bone-density loss and reduced kidney function, the same rare side effects associated with TDF.”
As patients were living longer, some began experiencing bone density loss or reduced renal function. In those rare cases, based on preliminary data, TAF appeared to be a safer drug for some people. Gilead explained that it was only then that they decided to further explore TAF “on the chance that it might prove to be a lower-dose alternative for that aging population.”
From the Lower Courts to the California Supreme Court
A lower court ruled in the plaintiffs’ favor, allowing them to seek damages for negligence (violating its duty of care) and fraudulent concealment. On appeal, the Appellate Court rejected the fraudulent concealment claim but allowed the negligence claim to proceed. The case then went to the Supreme Court of California, which dismissed it outright, holding that the case could not proceed under a theory of negligence, and disallowing the plaintiffs’ claim that Gilead violated its “general duty” to do no harm. [3] It raised several considerations in support of its decision
Easily dismissing the plaintiffs’ foreseeability arguments (i.e., that Gilead violated its general duty of safety because the harm they suffered was foreseeable), the Supreme Court explained that at the time of the decision, the drug’s safety was mere speculation. Because the safety and efficacy phase (Phase III) had not been performed, there was no evidence at the time of the decision to abandon further development of TAF that it was safer. Further, the concurring opinion explained that the determination must be made at the time of the alleged negligence, not in hindsight or retroactively based on evolving scientific data. It noted Gilead’s assertion that “of medicines entering clinical trials, fewer than one in eight will obtain FDA approval,” and concluded that TAF’s future could not be assured.
The Policy of Morality
The more interesting aspects of the decision focus on the courts’ views of a profit motive based on patent protection as a basis for manufacturers’ liability. They use the concepts of public policy and morality to assure drug manufacturers that pursuing profits from patent protection, absent other grossly immoral factors, is perfectly legitimate.
The policy and moral arguments are somewhat commingled, with the court noting that the first policy factor is the “moral blame attached to the defendant’s conduct.” According to the court, moral blame does not automatically follow from a manufacturer’s decision to delay commercialization of a potentially safer drug. Such a delay may have morally neutral or even socially valuable reasons, such as prioritizing the development of a treatment for a disease for which no alternative therapy exists.
Profit motive, the court emphasized, is only one of many considerations. In fact, the court did not even bother to address Gilead’s explanation for the delay. Because there was no evidence that the company concealed a known danger, the court ruled that it acted both reasonably and morally. Given what was known at the time, the court was unwilling to second-guess Gilead’s development decisions with the benefit of hindsight. Since there was no evidence that Gilead concealed a known danger, the court categorically ruled that it acted both reasonably and morally and was unwilling to second-guess Gilead’s development decisions with the benefit of hindsight.
The court explained that moral blameworthiness generally arises only when the defendant does more than act unreasonably—for example, when it has actual knowledge of a known but hidden danger and fails to take reasonable steps to prevent harm or reaps a financial benefit from risks it created. In other words, the court categorically ruled that profit-maximizing decisions are not necessarily morally blameworthy.
When Profit Becomes a Policy Question
The court went further, broadly rejecting the idea that the profit incentives associated with patent rights can, in themselves, provide a basis for negligence, assuring drug manufacturers that seeking patent protection, even when that strategy affects the timing of drug development, is not, by itself, sufficient to impose tort liability.
Finally, the court recognized the broader consequences of imposing liability in circumstances like these. Such a rule could make liability unpredictable, increase insurance costs, and, perhaps most importantly, discourage pharmaceutical companies from pursuing drug development in the first place, essentially saying that negligence law should not become a vehicle for retrospectively judging drug-development business decisions simply because a different decision might later appear preferable.
God bless the profit motive.
The court’s message is ultimately straightforward: drug companies do not surrender their right to profit from patent protection simply because their decisions involve human health. Profit may be part of the calculus, but it is not, by itself, evidence of wrongdoing. Holding manufacturers liable whenever a potentially better drug might have been developed sooner could punish ordinary commercial judgment—and, worse, discourage the very innovation patients depend on.
[1] HIV, which progressed to AIDS, had a nearly 100% fatality rate until the late 1990s.
[2] Prodrugs are converted in the body to the active form of the medication.
[3] General duty includes, among other components, a foreseeability of harm, undue expense or burden to the defendant, and consequences to the community, as well as an ethical duty of care,
Disclaimer: A member of our Board has worked for Gilead. They, the Board, and our administration were not involved in developing this article or its contents. It is the sole work of the author, who has no ties to Gilead or any other drug manufacturer.
