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Oregon Court of Appeals holds hospitals can be subject to product liability claims based on an alleged defect in administered drugs

By: Heather M. Murray

On December 14, 2022, the Oregon Court of Appeals issued a decision on the question of whether a hospital that charges for a pharmaceutical drug administered to a patient in its emergency department is a “seller * * * engaged in the business of selling” subject to strict product liability under ORS 30.920.  In Brown v. GlaxoSmithkline, LLC, The court found that the hospital can be a “seller” subject to strict product liability under ORS 30.920 “even if the seller also or primarily provides a service and the sale of the product is incidental to that service.”

In March 2006, plaintiff-mother was seven weeks pregnant when she went to the hospital emergency department complaining of nausea and vomiting.  Plaintiff-mother was prescribed and received a 4 mg injection of Zofran.  In October 2006, plaintiff-mother gave birth to a daughter, plaintiff-child, who was born with several heart malformations.

Plaintiff filed a $25 million complaint for Personal Injury, Negligence and Products Liability against the manufacturer of Zofran and the hospital system.

The hospital challenged plaintiffs’ claim of strict product liability by filing a motion for summary judgment.  The motion for summary judgment argued that there was “no genuine issue as to any material fact” on the grounds that defendant hospital is not a seller or distributor for purposes of ORS 30.900 or 30.920.  The lower court granted the motion for summary judgment finding that “under the specific facts of this case,” the hospital was not “engaged in the business of selling Zofran.”  Plaintiffs appealed the lower court’s ruling.  Plaintiffs argued that nothing in the text or context of ORS 30.920 suggests that a hospital that sells pharmaceutical drugs from its in-house pharmacy is exempt from strict product liability.

The Oregon Court of Appeals looked at the text, context, and legislative history of ORS 30.920 to address the question of statutory interpretation central to the appeal.  The court found that “the ordinary meaning of a “seller * * * engaged in the business of selling” a product . . . is one who transfers ownership of the product to another in exchange for valuable consideration and whose ongoing commercial activity consists in some part of selling the product.”  Further, the rule applies “even if the seller also or primarily provides a service, the sale of the product is incidental to that service, and the product is immediately consumed on site.”

The Oregon Court of Appeals then applied the ordinary meaning of ORS 30.920 to the facts in the case at hand.  The court found that when the hospital administered Zofran to Ms. Espindola Gomez, it had transferred the drug for valuable consideration.  Later, the hospital charged plaintiff-mother for the drug as part of the services rendered.  “[Hospital’s] ongoing commercial activity consisted in some part of selling Zofran because it maintained a stock of injectable Zofran to administer to patients in the hospital, and it is reasonable to infer that [hospital] would charge patients for the drug as part of the medical services provided.”

The Court of Appeals decided that because plaintiffs presented sufficient evidence to create a genuine issue of material fact as to whether the hospital was, pursuant to ORS 30.920, a “seller * * * engaged in the business of selling” Zofran, the motion for summary judgment should not have been granted by the lower court.  The court reversed the lower court’s ruling, and the case has been remanded back to the lower court for reconsideration

At the moment, the full application of ORS 30.920 to healthcare providers is uncertain until the lower court hears this case again and any appeals are completed.  It is possible that this theory of strict product liability could extend to non-pharmaceutical products, not just the pharmaceutical drugs dispensed by an in-house pharmacy.

In light of the Court of Appeals’ finding that it is possible for a hospital to be subject to a theory of strict product liability, it is important for healthcare providers to check their insurance policies and confirm that they have products liability coverage.

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