Welcome To The Impossibility Paradox

It's a question as old as America itself: When state and federal laws conflict, which one controls? For companies, that question is becoming essential.

Johnson & Johnson had a problem in the early 2000s when physicians started prescribing its anti-psychotic drug Risperdal to children as a treatment for emotional disturbances and antisocial behavior. 

The Food and Drug Administration had approved Risperdal for use in adult schizophrenics, with a warning against side effects, including gynecomastia, or abnormal swelling of the breasts. But while J&J knew from clinical studies that Risperdal stimulated even more pronounced gynecomastia in boys, it couldn’t say so on the label because the drug wasn’t yet approved for use in children. The FDA strictly controls the wording on drug labels, and anything suggesting an unapproved or off-label use could violate federal law. 

Soon, young boys started complaining about embarrassing breast growth, and their parents turned to that all-purpose American solution: They sued. Presented with an embarrassed kid, angry parents and a giant corporation that knew about a side effect but didn’t warn doctors, juries handed down spectacular verdicts. In October 2019, Philadelphia jury ordered J&J to pay $8 billion in punitive damages in a Risperdal case (the judge later slashed it to $6.8 million). 

Those verdicts pose a question as old as the Republic itself: When state and federal laws conflict, which one controls?

In theory, the answer is simple. Article VI of the U.S. Constitution states that federal law is “the supreme law of the land.” To companies like J&J, that means lawsuits like the Risperdal cases should be preempted since they can’t obey state tort law by adding language to the warning label that is prohibited under federal law. Lawyers call this “impossibility preemption,” for obvious reasons. Courts have also tossed lawsuits where state-law claims conflict with federal policy, as with climate litigation against big international oil companies over global warming, a quintessential question of federal policy. 

Preemption is a powerful doctrine that flips the normal positions occupied by corporations and trial lawyers. Instead of arguing against federal regulation, when it comes to preemption, corporations love it. And whenever a corporation cries, “Preemption!” plaintiff lawyers find themselves arguing strenuously against federal regulators in favor of vague concepts of state tort law enforced by fickle juries. 

The U.S. Supreme Court’s record in this area is less than clear. In the 2009 decision Wyeth v. Levine, the court’s liberals, joined by conservative Justice Clarence Thomas, rejected a drugmaker’s claim of impossibility preemption to uphold a Vermont jury verdict of liability for failing to change an FDA-approved label. In that case, the court cited a provision of federal law known as “changes-being-effected,” or CBE, that allows the makers of brand-name pharmaceuticals to update their labels when they receive new information about side effects.

The court followed that up in 2011 with PLIVA v. Mensing, this time with Justice Thomas joining the conservatives to rule that generic drug makers were protected against state-law claims because they cannot utilize the CBE process. 

The Supreme Court famously tends to decide important questions in triads, and J&J had high hopes that would be the case with impossibility preemption. It appealed another $70 million Philadelphia Risperdal verdict to the high court this year with the support of the pharmaceutical industry and tort-reform groups but in May, the justices declined review. 

So, as things stand, the Supreme Court has decided that state-law claims over on-label prescriptions of brand-name drugs aren’t preempted, but claims over on-label, generic drugs are. Perhaps another case will come along to finally decide whether off-label uses of brand-name drugs deserve the awesome protection of the Supremacy Clause. 


  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events