All about product liability in Chile pharma. Prepared in association with Carey, a leading global law firm, this is an extract from The Pharma Legal Handbook: Chile, available to purchase here for USD 99.
1. What types of liability are recognized in your jurisdiction?
In our jurisdiction, the liability system is mainly based on negligence.
Regarding defective products, since there are no special liability rules, general rules of liability will be applicable. General rules are set forth in Chilean Civil Code regarding tort liability and Criminal Code, as well as in Consumer Protection Act (CPA) and the Sanitary Code.
Penalties and sanctions for non-compliance of sanitary laws and regulations may be imposed by the ISP prior carrying out the respective administrative sanctioning procedure (sumario sanitario). The penalties which it may impose upon finding a sanitary infringement include fines ranging from USD 0.1 to USD 70,000. In case or repeated infringements, previously imposed fines can be duplicated.
Additionally, the ISP can shut down the location or building where the infringement is committed, prohibit its operation, revoke the permits or authorizations granted, suspend distribution of products, among other sanctions included in section 174 of the Sanitary Code.
Regarding product liability, the Consumer Protection Act (CPA) recognizes two type of actions in order for the supplier to be held liable: (i) noncompliance and (ii) civil actions. Noncompliance or law infringement usually results in the application of fines and other measures (e.g. recalls, advertisement amendment, etc.); and civil liability is originated from damages caused to consumers.
General rule is set forth in article 23 of the CPA: suppliers are liable when they neglectfully cause damages to consumers in the sale of a product with flaws or deficiencies in its quality, quantity, identity, substance, origin, safety, weight or measure. This infringement has two consequences: (i) as a law infringement, it can be sanctioned with a fine of up to 300 UTM (US$ 21,700 approx.); and (ii) as civil liability, consumers are entitled to pursue damages from the supplier for moral and material damages. The CPA expressly establishes a basic right for consumers to be adequately compensated in a timely manner for all material and moral damages caused by a supplier that breaches its obligations.
In line with product liability, CPA sets forth several rules applicable to hazardous and risk services or products, e.g. obligation to provide specific information to consumers and the general public.
Moreover, if an unforeseen risk or danger in a product arises after it was introduced in the market, the supplier must inform the competent authorities (i.e. the aforementioned health organisms) and adopt the necessary preemptive and/or corrective measures. The breach of this duty can be sanctioned with a fine of up to 50 UTM (US$ 3,600 approx.).
Article 49 of the CPA establishes that any breach of the obligations mentioned in the preceding paragraphs will subject the liable supplier to the noncompliance sanctions, to the respective compensation for all damages caused and the applicable criminal penalties if such events constitute a crime or felony.
Moreover, please bear in mind that Sanitary Code includes an additional set of rules for defective sanitary products in articles 111 H to 111 N:
- Defective sanitary product is the one that is not safe enough, having in mind all the circumstances related to the product and, especially, its presentation and its reasonably foreseeable use. Furthermore, a product is deemed as “defective” if it does not offer the same safety normally found in the rest items of the same series.
- A product cannot be considered defective by the only fact that it was subsequently released to market in an improved manner.
- Every damage caused using a defective sanitary product will result in civil and criminal liability, as applicable.
- Authorizations holders, manufacturers and importers will be responsible for the damages, as applicable. The ones responsible for the damage will be jointly and severally liable to the injured parties. Anyone who responds to the injured party shall have the right to seek for reimbursement from the remaining responsible, pursuant to their participation in the creation of the damage.
- The damaged party who seeks for indemnification will have to prove the defect, the harm caused, and the causal link between both.
- In clinical trials, once proven, the damage will be presumed to have been produced on the investigation.
- The defendant will not be exempted from liability arguing that the damage caused by a defective sanitary product arises from events or circumstances that were not foreseen according to the state of the scientific or technical knowledge existing at the moment of use.
- The statute of limitations is five years counted from the date of appearance of the damage, either due to the defect of the product or the damage caused by such defect. The statute of limitation for damages caused with the occasion of a clinical trial is ten years.
- The manufacturers and importers of sanitary products must take out insurance, an endorsement or equivalent financial guarantee to respond for health damages that arise from safety problems.
2. How do these types of liabilities apply to the manufacturers of medicines and devices?
Regarding sanitary penalties as stated above, under our regulations the owner of an authorized facility shall be jointly responsible together with its technical director for the correct distribution and sale, at any title, of the products imported or commercialized by such facility or for the advertising and information provided for such products. In any case, the responsibilities affecting the Technical Director, Head of Production, Head of Quality Control and Head of Quality Assurance of authorized facilities shall always affect the responsibility of the owner of the facility.
Regarding responsibility under the CPA, and pursuant to its broad definition of supplier, manufacturers are considered as such; hence, their general obligations and liabilities are applicable.
Further, there are specific cases in which CPA expressly sets forth the manufacturer’s liability. In case a hazard or toxicity that risks the health or safety of consumers is determined or established by the competent authority or court, the manufacturer will be jointly liable along with the importer and first distributor. In turn, the supplier will have to proceed at its own expense to change all the products to others that are safe, with equivalent price and utility. If this is not possible, the supplier will have to reimburse consumers with all paid prices.
Please refer to Question 5.1 above, too.
3. Does potential liability extend to the manufacturer only or could claims extend to corporate executives, employees, and representatives?
As previously indicated, sanitary sanctions can also reach specific employees of the manufacturer of a pharmaceutical product. Specifically our regulations set forth personal responsibilities and liability for the Technical Director, Head of Production, Head of Quality Control and Head of Quality Assurance, which will also always reach the owner of the facility.
On the other hand, general liability rules and CPA responsibility described in answers 5.1 and 5.2 are applicable to the vendor, distributor and/or the manufacturer when applicable, and it does not extend to corporate, executives, employees and/or representatives, unless a criminal offence can be established pursuant to the Criminal Code or personal liability be generated under tort regulations.
Please refer to Question 5.1 above, too.
4. How can a liability claim be brought?
Liabilities can be pursued by authorities and affected consumers. The health authorities can officiate and initiate an administrative sanctioning procedure (sumario sanitario) against the manufacturer ex officio or through a complaint filed by an end-user.
From the consumer protection standpoint, the authority in charge is the National Consumer Service (SERNAC). Any affected consumer for a CPA breach can occur before SERNAC, in order to initiate a voluntary individual mediation process. SERNAC can perform collective mediations as well. However, these procedures are not mandatory, and the authority does not have the faculties to impose sanctions directly.
In addition, and in order to ensure compliance with the CPA, SERNAC is entitled to request information and/or inspect suppliers. In case of a law infringement, any affected consumer or the authority may file a judicial complaint based on an individual interest. Class actions can be filed by SERNAC, a Consumer’s Association, or a group of fifty or more consumers.
Finally, a civil or criminal lawsuit regarding damages may also be brought pursuant to the general rules.
5. What defenses are available?
One of the main defenses for suppliers –manufacturers, distributors, importers, vendors–involved in the chain of production of pharmaceutical and medicinal products, is the complete compliance with all the legal and regulatory requirements for the manufacture, import and distribution of said products, and keeping record of such compliance. The aforementioned would be useful in case of a potential trial, in order to argue that the contested products comply with the applicable regulations and sectorial requirements.