When the Las Vegas Review Journal and Bloomberg reported Tuesday that Teva Pharmaceutical Industries had reached settlements worth $285 million to resolve claims by patients who contracted Hepatitis C from injections of the sedative propofol, the news left us scratching our heads.
Here’s why: A propofol case that produced a $505 jury verdict against Teva and Baxter Healthcare had been teed up for April arguments at the Nevada Supreme Court, where, as we’ve reported, Teva appeared to have a very good chance of winning dismissal on preemption grounds under the U.S. Supreme Court’s June 2011 decision in Pliva v. Mensing. The same plaintiffs lawyers that won that verdict, Robert Eglet of Eglet Wall and William Kemp of Kemp, Jones & Coulthard, have (or had) another 40 similar propofol cases pending, including one that resulted in a $182 million jury award. Those cases also seemed vulnerable to Mensing’s holding that federal labeling requirements for generic drugs preempt state law failure-to-warn claims.
Why would Teva shell out a quarter-billion dollars to end the litigation now, just months before arguments that could wipe out massive liabilities? Teva’s lawyers at Goodwin Procter and Kirkland & Ellis didn’t return our calls, but one of the plaintiffs lawyers, a Feb. 17 Teva filing with the Securities and Exchange Commission, and a Teva spokesperson provided some clues.
First of all, it turns out that the $285 million that Teva has paid or set aside doesn’t just cover the 41 Kemp and Eglet cases. The company’s recent SEC filing states that the amount includes settlements already reached in 120 cases, including one brought by Richard Friedman of Seattle’s Friedman Rubin that ended in a $104 million plaintiffs jury verdict last October.
Friedman told us that his firm, working with a “loose association” of Las Vegas plaintiffs lawyers that included Gerald Gilock and Edward Bernstein, had brought a total of 42 propofol cases. He said Teva had already agreed by Jan. 1 to settle all of those cases, which represented the only other large mass of propofol plaintiffs outside the Kemp and Eglet group.
“My impression was that [the $505 million Eglet and Kemp verdict] was unlikely to withstand appeal because of the Mensing issue, which of course nobody anticipated at the time that case was tried,” Friedman said. “We were not pursuing failure-to-warn claims in our cases, because we had the benefit of seeing the Mensing decision before we made the final decision about what claims to present to the jury.” Instead, Friedman said, he brought only product defect claims and claims that the defendants were negligent to sell propofol in 50ml vials that allegedly encouraged reuse. (Friedman declined to comment on the size of his share of the Teva settlements.)
Kemp and Eglet may not have been able to salvage their giant trial win on appeal up against Kirkland & Ellis, which was after all responsible for winning the Mensing ruling last June. But they might have been able to shift the focus away from failure to warn claims in their pending cases in hopes of escaping Mensing. And, of course, the Nevada Supreme Court might have disagreed with Teva that Mensing clearly applied. Either way, Teva apparently decided that the risks of continuing to fight the cases was too great.
“Teva is pleased to have put the vast majority of these matters behind us,” a company spokeswoman said. “In [the Feb. 17 SEC filing] we disclosed that we had $270 M for reserves plus money paid toward settled cases. We have now settled the vast majority of the open cases and accordingly are going to be taking an additional charge of about another $15M for Q1.” The spokeswoman added that 15 propofol cases remain unresolved.
Plaintiffs lawyers Eglet, Kemp, Gilock, and Bernstein didn’t respond to requests for comment. Neither did Mark Tully and U. Gwyn Williams of Goodwin Procter (for Teva), Matthew Papez of Kirkland & Ellis (who was leading Teva’s Nevada Supreme Court Appeal), or Philip Hymanson of Greenberg Traurig (for Baxter and McKesson, whose liabilities in the propofol litigation are covered by an indemnification agreement with Teva).
