A duty to innovate is no duty at all

THE PATIENTS suffered, and Gilead profited. That is the moral core of the tenofovir litigation, a case that has wound its way through California's courts for more than a decade. On August 3rd the state's highest court sided with the drugmaker, ruling 6-1 that manufacturers do not have a legal "duty to innovate". The decision dismisses the negligence claims of an estimated 24,000 HIV patients who took Gilead's drug tenofovir disoproxil fumarate, or TDF, and who allege that Gilead unreasonably delayed bringing a safer alternative to market. The ruling is legally sound. Whether it is morally satisfying is a different matter - one the law was never designed to answer.

To understand the case, a brief detour into pharmaceutical chemistry is unavoidable. Gilead received FDA approval for TDF-based HIV medicines in 2001. The drugs worked - they helped turn HIV from a death sentence into a manageable condition. But they also carried known side effects, including kidney dysfunction and bone problems, which were fully disclosed in labelling. Around the same time, Gilead began testing tenofovir alafenamide, or TAF, a related compound that delivered the active ingredient more efficiently and promised fewer side effects. In 2004, after an early trial involving only 20 patients over 14 days, Gilead stopped developing TAF. The company concluded the evidence was insufficient to show a meaningful improvement over TDF, and focused resources on combination therapies - single once-a-day pills that simplified treatment for millions. Gilead returned to TAF in 2010 and, after five further years of trials, received FDA approval in 2015. TAF-based Biktarvy is now Gilead's flagship product, generating $14.3bn in annual sales.

The plaintiffs' argument is not that TDF was defective. It is that Gilead should have been held liable for failing to bring TAF to market sooner, allegedly to protect the profits from its TDF patent, which expired in 2017. During oral arguments in May, patients' lawyer Holly Boyer told the court that Gilead was "willing to accept the suffering of tens of thousands of patients...forced to endure a drug that was destroying their kidneys and breaking their bones, all so that Gilead could make more money, $27 billion more." It is a compelling story. The question before the court was whether tort law should enforce it.

The lower courts thought it could. In 2024, the California Court of Appeal held that a manufacturer's duty of reasonable care "can extend beyond the duty not to market a defective product". That language effectively created a new theory of liability: negligence without defect. The California Supreme Court has now reversed course. Justice Joshua Groban, writing for the majority, warned that recognising such liability would "create substantial burdens and would risk adverse consequences for pharmaceutical innovation, public health, and patient safety." The majority declined to require companies to spend money developing and commercialising alternative products simply because a plaintiff could argue, in hindsight, that the manufacturer should have done so faster.

The reasoning is structurally correct. Product liability law rests on a simple premise: if a product is defective, the manufacturer is responsible. Removing the defect requirement would transform tort law into a mechanism for auditing corporate R&D strategy. Juries would be asked to second-guess drug-development decisions made decades earlier, under conditions of scientific uncertainty, with the benefit of hindsight. The perverse incentives would be immediate. Companies would face liability for moving too quickly (risking a defective product) and for moving too slowly (risking a duty-to-innovate claim). Some would simply avoid researching alternatives altogether - the very outcome the plaintiffs seek to prevent.

To be sure, the patients' grievance is not imaginary. Internal documents, reported by the New York Times in 2023, suggest Gilead was aware that TAF could cannibalise TDF sales and weighed that concern in its development timeline. The company settled a parallel federal case for $40m in 2024, albeit without admitting liability. The moral discomfort is real: a company with a dominant position in HIV treatment appears to have managed its pipeline in a way that prioritised revenue over patient welfare. The law, however, is not well equipped to punish that kind of behaviour. Tort liability for a non-defective product is the wrong instrument for what is essentially an accusation of rent-seeking.

That is the deeper issue the case reveals. The pharmaceutical industry's innovation model depends on the prospect of temporary monopoly rents - the profits earned during the years before generic competition arrives. Those rents fund the costly, risky process of drug development. They also create an incentive to protect them, sometimes by slow-walking successors that would undercut existing products. The patients' complaint is not that Gilead failed to innovate. It is that it innovated selectively, in a way that maximised the value of its patent portfolio. A duty to innovate would not eliminate that incentive; it would merely make it more expensive to exercise.

The amicus process underscored how broadly the stakes were understood. More than 70 entities - including drug manufacturers, medical device makers, automobile companies, patient-advocacy groups and research institutes - filed amicus briefs, with the listed groups among those urging reversal. Even patient-advocacy groups warned that a duty to innovate would discourage research into rare conditions, where the economic incentive is already marginal. The argument is not that pharmaceutical companies should be immune from criticism. It is that the tort system is the wrong venue for policing pipeline management.

So what is the right venue? The answer lies in the institutions that already regulate pharmaceutical behaviour. The FDA controls the approval process and can mandate post-market studies. Competition authorities can investigate whether companies have abused market dominance to delay alternatives. Congress can reform patent law, which grants exclusivity periods that create the very incentives plaintiffs decry. Patient-advocacy groups can lobby for price regulation or mandatory access provisions. These are policy questions, not tort questions. They require legislative and regulatory solutions, not jury verdicts.

The ruling also clears a legal overhang for the broader biotechnology sector. California is the country's largest market and its most aggressive tort jurisdiction. A duty-to-innovate precedent there would have migrated to other states through copycat litigation and forum shopping. The California Supreme Court's refusal to create it is a structural relief for drugmakers, and implicitly for patients who would otherwise face a more cautious, defensive industry.

For Gilead itself, the decision is a victory that matters more in principle than in the immediate balance-sheet. HIV drugs accounted for 70% of the company's $29.4bn revenue in 2025, according to Reuters. The 24,000 remaining plaintiffs in the state-court cases will be dismissed, sparing Gilead what could have been billions in additional exposure. But the company has already moved on. Biktarvy, the TAF-based successor, now generates $14.3bn a year, up 7% from the prior year. The pipeline that plaintiffs accused Gilead of slow-walking has been commercialised, on Gilead's terms, and is performing well. The market has spoken.

What the case does not do is absolve the structural problem it illuminates. Temporary monopolies will continue to incentivise rent-seeking behaviour. Patients will continue to suffer side effects from drugs whose alternatives could have been available sooner. The law has declined to fix that problem, and for good reason: the cure would have been worse than the disease. The task for policymakers is to find instruments that align the incentives without freezing innovation in its tracks. Tort law was never one of them.

That is not to say nothing should happen. Competition policy, patent reform and regulatory oversight are harder, more political and less theatrically satisfying than a jury verdict. They also offer a better chance of changing the system rather than merely punishing one company for behaving the way its incentives told it to.

Justice Groban was right. Liability for failing to make a different drug is not liability at all. It is a bill for the past, paid in fewer drugs from the future.