A Swiss pharmaceutical company manufactures an injectable product at a contract facility in Ireland, sources the active ingredient from India, and distributes throughout Europe via a Netherlands-based logistics provider. The product degrades because temperature was not maintained during a transfer between facilities. Patients are harmed.
The question of liability seems straightforward. The answer requires analysis across multiple legal frameworks, regulatory regimes, and contractual relationships, none of which produce the same result.
The European Union adopted Directive (EU) 2024/2853 in October 2024, the most significant revision to product liability rules in forty years.1Directive (EU) 2024/2853 of 23 October 2024 on liability for defective products [2024] OJ L 2024/2853. Member States must transpose these rules by 9 December 2026, the same date the old directive is repealed. Switzerland, meanwhile, maintains its Produktehaftpflichtgesetz based on the 1985 EU framework that the new directive replaces. What happens when a supply chain spans both jurisdictions and a liability event occurs after December 2026?
1. Who Bears Liability in the Supply Chain?
Product liability in pharmaceuticals operates through parallel channels: strict statutory liability, fault-based tort law, and contractual claims. Each creates distinct obligations and affects each participant in the supply chain differently.
Statutory Strict Liability
Both EU Member States and Switzerland impose strict liability (liability without proof of fault) on "manufacturers" of defective products that cause personal injury or certain property damage. Neither framework requires proof of negligence. Without a fault requirement, the dispute moves to defectiveness, causation, and who qualifies as a "manufacturer", questions that are at least as contested as fault.
The term "manufacturer" encompasses far more than the entity that physically produced the finished product. Under both frameworks, the category includes actual manufacturers of finished products or components, quasi-manufacturers who present themselves as manufacturers by affixing their name or trademark, importers who bring products into the relevant market, and suppliers where neither manufacturer nor importer can be identified.
The marketing authorization holder (MAH), the contract manufacturer, the API supplier, and the packager may all face potential liability depending on the nature of the defect and its origin in the production chain. Which parties face claims depends on applicable law. Which parties ultimately bear cost depends on contractual allocation mechanisms that may or may not function when tested.
Joint and Several Liability
Where multiple parties contribute to a defective product (manufacturer, component supplier, CMO, distributor), joint and several liability determines recovery dynamics. Swiss law under Art. 7 PrHG provides for joint and several liability among multiple producers of the same product, with contribution rights under Art. 50–51 OR.2Art. 7 PrHG; Art. 50–51 OR; Art. 12 Directive 2024/2853. The new EU directive maintains this approach. In practice, injured parties typically pursue the most solvent defendant (often the MAH or sponsor), leaving contribution claims for internal settlement. But contribution claims depend on establishing the relative fault or causal contribution of each party, an allocation that quality agreements address imperfectly and courts resolve only after protracted litigation.
The Regulatory Overlay
A pharmaceutical product that complies with all applicable regulatory requirements (GMP certification, marketing authorization, pharmacovigilance obligations) may still be defective for product liability purposes. Regulatory compliance and product liability operate on different standards. The Obergericht (High Court) of the Canton of Bern has held that the requirements of the Heilmittelgesetz were set for the regulation of therapeutic products, not for liability, and that meeting them does not show that a product is free of defects.3Obergericht des Kantons Bern, Urteil vom 26. November 2021, ZK 20 399.
This asymmetry matters. Manufacturers often assume that regulatory approval establishes a liability shield. It does not. The question of what safety expectations are legitimate, and whether the product met them, requires analysis distinct from regulatory compliance.
2. What Changes Under the New EU Directive?
Directive (EU) 2024/2853 represents the first comprehensive reform of EU product liability since the original directive was adopted in 1985. The old directive is repealed effective 9 December 2026. Products placed on the market after that date fall under the new framework.4Art. 21 Directive 2024/2853 (repeal and transitional provision); Art. 22 (transposition deadline).
Expanded Liable Parties
The revised directive maintains manufacturer liability as the primary basis but significantly expands the categories of economic operators who may be held liable when manufacturers are established outside the EU.
Where the manufacturer is established outside the EU, the directive cascades liability through additional categories of economic operators (importers, authorized representatives, and fulfillment service providers (Art. 8 Directive 2024/2853)) in a defined hierarchy that ensures an injured party can always identify a liable entity within EU jurisdiction. The cascade reaches entities whose existing contracts with non-EU manufacturers may not provide for this direct statutory liability.
The contractual arrangements that seemed adequate when both parties were solvent, cooperative, and operating under a single legal framework become untested hypotheses when challenged across jurisdictions and against statutory regimes that cannot be displaced by agreement.
This cascade is a material change for non-EU pharmaceutical manufacturers who previously relied on EU-based distributors without assuming direct liability. Additionally, any economic operator who substantially modifies a product outside the manufacturer's control is treated as a manufacturer for products so modified. For pharmaceuticals, this may capture repackagers, parallel importers altering labeling, and contract organizations making process changes that affect product characteristics.
New Presumptions
The directive introduces presumptions of both defectiveness and causation (Art. 10 Directive 2024/2853) that shift evidentiary burdens toward defendants in circumstances the prior framework did not contemplate, and the specific conditions triggering each presumption interact with disclosure obligations and scientific complexity thresholds in ways that vary by Member State transposition.
For pharmaceutical products, where establishing causation between a drug and an adverse effect often requires epidemiological evidence and expert testimony over years of litigation, these presumptions may substantially alter litigation dynamics. A claimant who can show a product is "likely" defective need not establish defectiveness with certainty; the burden shifts to the defendant.
Extended Limitation Periods
The directive extends the long-stop expiry period from 10 to 25 years (Art. 17 Directive 2024/2853) where the latency of a personal injury prevented the injured person from initiating proceedings within the standard period, a provision directly responsive to pharmaceutical adverse effects that may appear years or decades after exposure. A product placed on the market in December 2026 could generate liability claims into 2051.
The Development Risk Defense
Both the new EU directive and the Swiss PrHG recognize a development risk defense: liability may be excluded where the state of scientific and technical knowledge when the product was placed on the market was not such as to enable discovery of the defect.5Art. 11(1)(e) Directive 2024/2853; Art. 5(1)(e) PrHG. For pharmaceuticals, where adverse effects may emerge only after years of widespread use, this defense creates complex retrospective analysis. Under what circumstances should an adverse reaction pattern have been discoverable? The answer depends on what studies existed, what post-market data was available, and what a reasonable manufacturer should have identified, questions that require expert testimony and contested factual determinations.
3. How Does Swiss Product Liability Diverge?
Switzerland's product liability framework operates independently of EU law. The Bundesgesetz über die Produktehaftpflicht (Produktehaftpflichtgesetz, PrHG) entered into force on 1 January 1994, modeled on the 1985 EU directive that Directive (EU) 2024/2853 replaces.6Bundesgesetz über die Produktehaftpflicht (PrHG) vom 18. Juni 1993 (SR 221.112.944).
Key Differences
The PrHG imposes strict liability on manufacturers for defective products causing death, personal injury, or damage to property intended for private use. Several features distinguish it from the new EU framework:
A CHF 900 threshold (Art. 6(1) PrHG) excludes property damage below that amount from recovery, rendering the smallest claims practically irrelevant. The PrHG covers only property of a kind ordinarily intended for private use and mainly used privately, while the new directive excludes only property used exclusively for professional purposes. Like the new directive, the PrHG does not compensate for damage to the defective product itself. As of September 2025, Switzerland had neither adopted nor announced plans to adopt the presumptions, extended limitation periods, or expanded liable party categories of the new EU directive.
Art. 8 PrHG prohibits contractual exclusion of liability. Clauses purporting to limit PrHG liability are void as against injured parties. This makes contractual risk allocation between supply chain participants important, not to avoid statutory liability, which cannot be excluded, but to determine ultimate cost allocation through indemnification.
Alternative Liability Bases
The PrHG supplements but does not displace other liability regimes. Art. 55 OR (Geschäftsherrenhaftung) is a general presumed-fault employer liability provision, but the Swiss Federal Supreme Court applies it so rigorously to manufacturers that it amounts to strict liability in practice; manufacturers cannot exculpate themselves merely by showing proper selection, instruction, and supervision of employees, but must additionally demonstrate proper work organization and final product inspection.7BGE 110 II 456, 463 (Schachtrahmen). Art. 41 OR provides fault-based tort liability. Contractual claims under sales law may apply where privity exists.
For vaccines specifically, Art. 64 EpG provides state compensation for injuries from vaccinations recommended or ordered by authorities, but only to the extent damage is not covered by third parties such as manufacturers. This creates a subsidiary state mechanism that does not displace manufacturer liability.
The Divergence Problem
After December 2026, the gap between EU and Swiss product liability frameworks widens materially. The EU framework includes presumptions of defectiveness and causation; Swiss law does not. The EU framework extends limitation periods to 25 years for gradual-onset injuries; under the PrHG, the absolute limitation remains 10 years from the date the product was placed on the market (Art. 10 PrHG), though fault-based claims under Art. 60 OR may extend to 20 years for personal injury. The EU framework cascades liability to importers and authorized representatives; Swiss law's treatment is narrower.
For a supply chain spanning both jurisdictions, liability depends on where claims are brought. A supply chain agreement governed by Swiss law does not prevent injured parties in Germany from bringing claims under German law, which will, after December 2026, implement the new directive with expanded presumptions.
Where the injured party can sue is a separate question. For supply chains spanning multiple jurisdictions, the Brussels I bis Regulation governs jurisdiction in civil matters within the EU.8Regulation (EU) 1215/2012 on jurisdiction and recognition of judgments (Brussels I bis). Injured parties may generally sue in the defendant's domicile or, for tort claims, in the place where the harmful event occurred, which for pharmaceutical injuries may mean either where the defective product was manufactured or where the injury manifested. The Lugano Convention extends similar rules between EU states and Switzerland. A claimant injured in France by a product manufactured by a Swiss company using components from an Irish CMO faces strategic choices about where to bring claims, choices that determine which presumptions apply, which limitation periods govern, and which liability framework controls.
4. What Liability Do Contract Manufacturers Face?
Contract manufacturing organizations carry out the manufacturing but typically do not hold marketing authorizations or place products on the market in their own name.
CMO Versus CDMO Liability
Contract development and manufacturing organizations carry different liability risks from pure contract manufacturers. If a CDMO develops or optimizes a manufacturing process, and that process produces a defective product, the development decisions, not just manufacturing execution, become relevant to liability analysis. Process validation decisions made by CDMOs may affect whether manufacturing variations constitute defects. The way a technology transfer agreement allocates intellectual property rights may affect liability for every product made with the licensed technology.
Quality Agreement Limitations
EudraLex Volume 4, Chapter 7 requires written contracts establishing responsibilities between marketing authorization holders and contract manufacturers.9European Commission, EudraLex Volume 4, ch 7: Outsourced Activities (31 January 2013). These quality agreements must address GMP compliance, batch release, deviation handling, change control, and audit rights.
But quality agreements establish regulatory responsibility allocation. They do not necessarily determine civil liability. A quality agreement allocating batch release responsibility to the MAH does not prevent injured parties from pursuing the CMO for manufacturing defects under applicable product liability law. The quality agreement may establish an indemnification right between the parties, but that right depends on the indemnitor's solvency, the indemnification provision's scope, applicable insurance coverage, and enforcement across potentially multiple jurisdictions.
The protective value of quality agreement indemnification provisions often proves more limited than anticipated. Indemnification clauses typically contain exclusions (for gross negligence, willful misconduct, or regulatory violations) that may apply to the largest claims. The indemnitor's insurance may not cover indemnified claims, or its limits may be too low for a large product liability claim.
Contract manufacturers occupy the production phase of the supply chain; once products leave manufacturing facilities, distribution introduces its own liability vectors. Temperature excursions, handling errors, and counterfeiting risks emerge in transit, exposing distributors to claims that manufacturing-focused quality agreements do not address.
5. What Liability Do Distributors Face?
Distributors carry liability of their own, separate from the manufacturer's, and it matters more as supply chains span more jurisdictions and involve more handoffs.
GDP Compliance Is Necessary but Not Sufficient
The EU GDP Guidelines establish requirements for maintaining product quality throughout the distribution chain: temperature monitoring, transportation qualification, traceability, anti-counterfeiting measures, responsible person designation.10EU GDP Guidelines [2013] OJ C343/1. Swiss distributors face parallel requirements under the Arzneimittel-Bewilligungsverordnung.
GDP compliance is necessary for regulatory authorization. It does not immunize distributors from civil liability. A distributor who maintains scrupulous GDP compliance but handles products that were already compromised, or whose GDP-compliant processes fail to detect deterioration that sophisticated testing would have revealed, may still face claims for distributing defective products.
Temperature Excursion Liability
For temperature-sensitive pharmaceuticals (biologics, vaccines, certain small molecules), temperature excursions during distribution represent a significant liability trigger. Liability, however, does not attach neatly to a single point of failure. Custody transitions, overlapping storage responsibilities, contemporaneous documentation gaps, and post-discovery decision-making interact in ways that resist straightforward attribution, and the factual reconstruction required to untangle them often spans multiple entities, jurisdictions, and contractual relationships simultaneously.
"Use anyway" decisions, where products are released despite documented excursions based on stability data or risk assessment, are a particular source of liability. The decision-maker assumes responsibility for product quality that may no longer conform to specification. If harm results, the documented decision to release becomes central to liability analysis.
Anti-Counterfeiting Frameworks
Art. 17a HMG (Therapeutic Products Act) creates the legal basis for unique identifiers and anti-tampering devices on medicinal product packaging. Unlike the EU's Falsified Medicines Directive, which mandates serialization, Switzerland's framework has historically been optional, though the Federal Council has authority to introduce mandatory requirements by ordinance.11Art. 17a(8)(b)–(c) HMG. Following the September 2023 referral of the Ettlin Motion to the Federal Council,12Motion Ettlin 22.3859. the BAG resumed work on an implementing ordinance that would make serialization mandatory for prescription medicines. The Swiss Medicines Verification System connects to the European Medicines Verification System hub, enabling cross-border verification, but operates under Swiss law rather than EU Delegated Regulation 2016/161.13Commission Delegated Regulation (EU) 2016/161 of 2 October 2015 supplementing Directive 2001/83/EC of the European Parliament and of the Council by laying down detailed rules for the safety features appearing on the packaging of medicinal products for human use [2016] OJ L32/1. For distributors handling cross-border supply chains, the legal obligations derive from different sources even where technical infrastructure is interoperable.
6. Why Can't Contracts Fully Protect Pharmaceutical Supply Chain Partners?
Supply chain contracts attempt to allocate liability through indemnification, limitation clauses, and insurance requirements.
Statutory Barriers
Product liability under Swiss PrHG cannot be contractually excluded. EU Member State implementations similarly prohibit exclusion of liability to injured parties. Contracts can shift ultimate cost allocation between supply chain participants, but they cannot prevent injured parties from pursuing any liable party under applicable statute.
Indemnification Failures
Indemnification provisions are only as valuable as the indemnitor's ability and willingness to perform when called upon. These arrangements are weakest when they are most needed: a major product liability event triggers the indemnification obligation and at the same time threatens the indemnitor's ability to honor it. Protections that looked strong at signing may fail under the financial pressure, the counterparty's own incentives, and the timing mismatches typical of pharmaceutical liability disputes. The gap between what the indemnification clause promises and what the indemnification relationship delivers often widens in proportion to the severity of the underlying claim.
Cross-Border Enforcement
A judgment establishing indemnification rights in one jurisdiction may require separate enforcement proceedings in the jurisdiction where the indemnitor has assets. The Lugano Convention governs recognition of Swiss judgments in EU states and vice versa, but enforcement adds cost, delay, and uncertainty.
Insurance Coverage Limitations
Product liability insurance for pharmaceuticals typically operates on a "claims-made" basis, responding to claims made during the policy period regardless of when injury occurred. This creates coverage gaps when policies are not renewed or when insurers refuse renewal following adverse events. Aggregate limits may prove inadequate for mass tort scenarios involving widespread product use. And insurers may dispute coverage based on policy exclusions (for products not specifically scheduled, for claims arising from regulatory violations, or for injuries manifesting outside specified geographic territories). The extended limitation periods under the new EU directive (25 years for gradual-onset injuries) create particular challenges: maintaining continuous coverage over such periods requires renewal decisions that cannot be guaranteed.
The questions that arise in a crisis are not the questions that were asked during contract negotiation: Which jurisdiction's law governs the indemnification obligation? Does that jurisdiction enforce indemnification against the specific claim type? Are the indemnitor's assets reachable? Will insurance actually respond?
Existing contracts may not address the December 2026 transition: products placed on the market before that date fall under one framework, and products placed after it under another. For supply chain agreements negotiated before December 2026, both regimes are in play, and the same liability event may be governed by different rules depending on when, where, and against whom claims are brought.