In a 6-3 decision, the court rejected Wyeth Pharmaceuticals' claim that federal approval of its Phenergan anti-nausea drug should have shielded the company from lawsuits like the one filed by Diana Levine of Vermont.
Levine, 63, struggled with her emotions when told of the ruling in a phone call from an Associated Press reporter Wednesday: "Oh, my God. I'm so, so happy. I can't believe this phone call," she said.
"I've been waiting for so long, and I had no idea of what the chances were," Levine said. "I'm just ecstatic. I'm going to have to sit down."
The decision is the second this term to reject business groups' arguments that federal regulation effectively pre-empts consumer complaints under state law.
"In the short term, it's likely that the ruling will increase the number of lawsuits against drug companies. Some of these cases will be legitimate. Some will not be. In the longer term, the ruling is likely to push companies like Wyeth into enhancing their labels - into making them safer before litigation - and perhaps as well push FDA regulators as well to be less beholden to the industry they regulate," writes CBS News legal analyst Andrew Cohen.
A Vermont jury agreed with Levine's claim that Wyeth failed to provide a strong and clear warning about the risks of quickly injecting the drug into a vein. Gangrene is likely if the injection accidentally hits an artery - precisely what happened to Levine.
In fact, the injection method, known as IV-push, had been linked to 20 cases of gangrene and amputation before Levine's, reports CBS News correspondent Wyatt Andrews.
The company appealed and, backed by the Bush administration, argued that once a drug's warning label gets approval from the Food and Drug Administration, the label can't be changed without further FDA approval and consumers cannot pursue state law claims that they were harmed.
"The real attempt here was to close the courthouse door to lawsuits and cut off any compensation for people who are harmed by defective or mislabeled drugs," Brian Wolfman of Public Citizen told Andrews.
Justice John Paul Stevens, writing the majority opinion, said Wyeth could "unilaterally strengthen its warning."
Stevens said he was persuaded that until a recent change by the FDA, the agency "traditionally regarded state law as a complementary form of drug regulation" because it monitors 11,000 drugs.
Justice Clarence Thomas agreed with the outcome of the case, but did not join Stevens' opinion.
Justice Samuel Alito wrote a dissent that was joined by Chief Justice John Roberts and Justice Antonin Scalia.
"This case illustrates that tragic facts make bad law," Alito said. "The court holds that a state tort jury, rather than the Food and Drug Administration, is ultimately responsible for regulating warning labels for prescription drugs."
The FDA has approved the use of Phenergan by injection, including the method at issue in Levine's case. The drug has been available for decades to treat nausea and when used properly, both sides agree it is safe and effective.
The Bush administration and business groups aggressively pushed limits on lawsuits through the doctrine of pre-emption - asserting the primacy of federal regulation over rules that might differ from state to state.
The Supreme Court had largely agreed, ruling last term that FDA approval shields medical devices from most lawsuits. That case turned on a provision of federal law prohibiting states from imposing their own requirements on the devices.
The Levine case drew a lot of attention because the administration and Wyeth contended that, although the federal Food, Drug and Cosmetic Act lacks a similar provision, drug manufacturers also are protected from most suits over federally approved drugs.