When can investors sue over side-effect disclosures?

When the U.S. Supreme Court hears a Matrixx Labs appeal in a class-action shareholder suit, it could give drugmakers some real guidance about disclosing drug side effects to investors.

Matrixx recalled two Zicam Cold Remedy products last June after the FDA received complaints that they had caused consumers to lose their sense of smell. But that move came years after a 2004 shareholders' lawsuit that claimed Matrixx hadn't told investors about consumer complaints that linked Cold Remedy gel to loss of smell, the Arizona Republic reports. A federal judge tossed that suit in 2005, but last year the 9th U.S. Circuit reinstated it--and that's the decision Matrixx has appealed to the Supreme Court.

Three appeals courts have weighed in on the issue, saying that drugmakers don't have a duty to disclose a smattering of side-effect reports. The courts decided that, to compel disclosure, "statistically significant" evidence had to show that the drug actually caused the reported side effects. But the 9th Circuit ruled that a jury should be allowed to decide whether side-effect reports from the public are material information for shareholders.

In its request for a hearing at the Supreme Court, Matrixx said that requiring companies to publicly report all complaints about adverse drug events would be too onerous. Plus, the company said, the requirement could create liability for drugmakers. Obviously, the Supremes' decision could affect the way all drugmakers view--and disclose--side-effect complaints. Stay tuned.

- read the Arizona Republic piece