Evelyn Pringle August 23, 2006
On August 18, 2006, Bloomberg News reported that Wyeth has faced more than 175,000 claims since fen-phen was removed from the market, and that over the past 9 years, the company has settled many claims without forcing fen-phen users to file a lawsuit.
All total, the company has set aside more than $21 billion to cover legal costs and settlements since the diet drugs were withdrawn, according to Reuters News on May 24, 2006. As for how long Wyeth can stay afloat under the tidal wave of fen-phen lawsuits, financial experts say the answer could boil down to insurance coverage.
If this is true, the future looks bleak for Wyeth shareholders because according to, “The $22 Billion Gold Rush,” by Robert Lenzner & Michael Maiello, on Forbes.com on April 10, 2006:
“Insurance covered only $400 million of the damage costs, forcing Wyeth to fund the rest by selling $8 billion in assets and giving up a merger with Warner-Lambert to get a $2 billion kill fee; it warns it may have to sell more assets to fund still more claims.”
Well then maybe its time for Wyeth to put up signs for a rummage sale because on August 10, 2006, in the most recent fen-phen trial, a jury in a Philadelphia returned a $300,000 verdict in favor of 41-year-old, Jodi Wier, after deliberating only 6 hours. Ms Wier took fen-phen for about three months starting in October 1996, and was diagnosed with primary pulmonary hypertension 5 years later.
“She has an incurable disease and has to be treated for the rest of her life,” her attorney, Edward Freidberg, told the jury in closing arguments.
The lawsuit was filed in 2004 by attorney, Theodore Holt, of the California firm of Hackard & Holt, and was the first fen-phen-related PPH case to go to trial in Philadelphia. In a July 27, 2006, press release at the onset of the trial, Mr Holt, stated that “PPH is a serious incurable disease that can take years to develop.”
“We suspect,” he said, “there are still many undiagnosed victims and that PPH litigation will continue well into the future.”
In the fall of 1997, American Home Products Corporation (renamed Wyeth in 2002), withdrew the diet drugs Pondimin and Redux, which in many cases were being prescribed together with phentermine, in the combination commonly referred to as “fen-phen.”
“Fen” is short for fenfluramine, marketed as Pondimin, since it gained FDA approval in 1973, and its chemical cousin, dexfenfluramine, marketed as Redux, since it was approved in 1996.
“Phen” is short for phentermine, which is marketed under various trade names such as Ionamin and Fastin, as well as several generic forms.
According to the FDA, phentermine and fenfluramine were approved to be used as separate appetite suppressants for short periods of time of a few weeks in the management of obesity.
Nonetheless, doctors prescribed the drugs together and for extended periods of time in what the FDA referred to as “off label” use because there have been no studies submitted to the FDA to demonstrate the effectiveness or safety of the drugs taken together or for longer than a few weeks.
It is estimated that more than 6 million people took fen-phen and Pondimin and Redux became two of the most widely prescribed drugs in the US. In 1996 alone, their sales totaled over 20 million prescriptions.
Things began to head downhill for Wyeth in July 1997, when researchers at the Mayo Clinic reported 24 cases of a rare valvular disease in women who took fen-phen. On July 8, 1997, the FDA issued a Public Health Advisory describing the Mayo findings.
The FDA also revealed that it had received additional reports of the same kind, and requested that all health care professionals report any similar cases through MedWatch or the respective drug makers. Subsequently, the FDA received 66 additional reports.
The findings of the Mayo Clinic were also reported in the August 28, 1997, New England Journal of Medicine, along with an FDA letter to the editor describing additional known cases of valve disease.
At that point, the FDA asked Wyeth to stress the risk to the heart in the drugs’ labeling and package inserts. But on September 15, 1997, citing new evidence about significant side-effects, the FDA asked the company to remove both Pondimin and Redux, from the market. The action, it said, was based on findings by doctors who had evaluated patients taking the drugs with echocardiograms, a procedure that can test the functioning of heart valves.
“These findings,” the FDA stated, “indicate that approximately 30 percent of patients who were evaluated had abnormal echocardiograms, even though they had no symptoms.”
“The data we have obtained indicate that fenfluramine, and the chemically closely related dexfenfluramine,” the agency warned, “present an unacceptable risk at this time to patients who take them.”
These new findings suggest fenfluramine and dexfenfluramine are the likely cause of heart valve problems of the type that prompted FDA’s two earlier warnings concerning fen-phen, the agency advised.
The reports of cases of heart valve disease in patients taking Pondimin or Redux alone prompted the FDA to advise patients using either of the drugs to stop taking them and contact their doctors to discuss treatment.
“These findings call for prompt action,” said Michael Friedman, MD, the Lead Deputy Commissioner of the FDA at the time.
However, internal FDA documents have since surfaced in litigation that shows the FDA could have acted much sooner. As it turns out, a doctor from Fargo, North Dakota sent the FDA reports of valve damage associated with the diet drugs in February and March of 1997, and when he got no response, the doctor called the FDA in May of 1997, and had his assistant fax 25 reports to the official he spoke with.
But the official who received the information, did not alert her superiors and in fact, did nothing about the situation for a month, until she mentioned in a routine report that there was a doctor in Fargo who discovered problems with the drugs that should be tracked.
In describing valvular disease, the FDA’s web site states: “There are four major valves controlling the flow of blood into, out of, and between the four chambers of the heart.”
“Several disease processes,” it explains, “including infection and toxicity, may damage the valves, causing them to malfunction, and may produce severe heart and/or lung disease.”
Symptoms of the condition can include shortness of breath, swelling in the legs, chest pain and heart palpitations.
In some cases, the FDA says, medication can control heart failure associated with valvular damage but in others, surgery may be necessary to replace the valves with artificial valves.
Mass litigation followed the removal of the drugs from the market and continued as more studies confirmed their association with valve damage. By 1999, Wyeth faced nearly 20,000 personal injury lawsuits in state and federal courts, and more than 100 putative class actions, with some moving quickly toward certification.
The injuries alleged by plaintiffs included: heart valve regurgitation, valvular heart disease, or an increased risk of developing these conditions.
The plaintiffs claimed that Wyeth not only failed to do the testing that would have revealed the dangers of the drugs but that the company was fully aware that the fen-phen cocktail was being prescribed and sought to profit from the pairing of the two drugs. One complaint states:
“As a result of Defendants’ promotions, there was an enormous increase in sales revenues and profits for Defendants, their affiliates, and other commercial entities involved in the manufacturing and distribution chains of these anorectic pharmaceuticals.”
The complaint also alleges that Wyeth’s gross sales of Pondimin in the US increased from $3.7 million in 1993 to $150 million in 1996.
The lawsuit charges that the defendants knew that there were at least 41 reports of PPH associated with fenfluramine by the spring of 1994, and knew that the drug’s label describing only four cases of PPH was false and misleading and that they intentionally concealed information, “in order to maximize sales and profits of Pondimin.”
By 1996, the complaint says, defendants knew of at least 71 cases of PPH, including twelve deaths, while the Pondimin PDR entry continued to falsely state that there had been only four PPH cases, and only one case was fatal.
The complaint also alleges that the defendants deliberately decided not to submit proposed labeling changes to the FDA about the risk of PPH with Pondimin, to avoid any negative impact on the New Drug Application for Redux, pending before the FDA in 1995-96.
Defendants knew, it says, that PPH risks associated with Pondimin were relevant to the FDA’s consideration of Redux because both drugs had the same active ingredient.
On December 10, 1997, the Judicial Panel on Multidistrict Litigation transferred all federal fen-phen lawsuits to the US District Court for the Eastern District of Pennsylvania for consolidated pretrial proceedings before the Honorable Louis Bechtle, Chief Judge Emeritus, and upon his retirement, on June 29, 2001, the litigation was reassigned to Judge Harvey Bartle III.
The first two fen-phen cases to go to trial turned out to be a disasters for Wyeth. One settled after several plaintiffs in Mississippi won over $100 million in compensatory damages and a Texas case resulted in a verdict that included high punitive damages.
On August 7, 1999, a Texas jury awarded 36-year-old Debbie Stone Lovett, $23 million. Legal experts said the verdict was significant being Wyeth tried the case believing that the facts were their favor. The case was reportedly settled during an appeal for $2.2 million.
In another 1999 trial in Oregon, Wyeth lost a $29.2 million verdict that eventually was settled for $15.5 million. In this case, Mary Linnen, took fen-phen for just 23 days before developing PPH.
A few months after she was diagnosed, Ms Linnen had to undergo surgery to insert a tube in her heart, so that she could inject a medication into her heart several times a day. Less than 3 months later she died and her family filed the first fen-phen wrongful death lawsuit against the company.
Legal experts say Wyeth was so alarmed over the large punitive damage awards that it was desperate to find a way to set a limit on what fen-phen litigation would cost the company.
Wyeth believed that a class action could alleviate the threat of enormous punitive damage awards providing that only a small number of patients decided to opt out of the class. Under the rules, people who rejected the class action outright could sue for punitive damages, but victims who did not opt out at the first stage, would be barred from seeking punitive damages if they later decided to sue Wyeth.
The company offered the plaintiffs a good reason to remain in the class by conceding causation so that class members who stayed would not have to prove that Pondimin or Redux caused their heart valve damage, only that they had valve damage after taking the drugs.
Wyeth also offered generous compensation to class members. At the high end of the payment schedule, plaintiffs with valve damage so severe that they had strokes, heart transplants or died could receive upwards of $1.3 million.
The low end of the schedule was about $7,500 for claimants whose medical testing showed evidence of significant valve damage but no other indication of serious heart disease.
To cover its end of the deal, Wyeth agreed to ante up $2.55 billion for claimants who qualified for the larger payments, and another $1 billion for the smaller cash benefits and medical services for people with less severe heart damage.
On May 2, 2000, the US District Court in Pennsylvania held a hearing to determine whether the proposed Settlement Agreement was fair, adequate, and reasonable and held another hearing on August 10, 2000, to hear evidence on the fairness of changes contained in the Agreement.
On August 28, 2000, Judge Bechtle issued Memorandum and Pretrial Order approving the Agreement and the four amendments. A Settlement Trust was established on September 1, 2000, to administer the provisions of the Agreement, and to process the claims of class members.
In the end, Wyeth put up $3.75 billion to manage the litigation and was forced to add another $1.3 billion to the pot in 2004.
However, before the ink even had a chance to dry on the class action agreement, a new nightmare began for Wyeth when about 50,000 victims decided to opt out. The prospect of 50,000 punitive damage awards was an extremely frightening thought for Wyeth, given the results of the jury trials in 1999.
Legal experts say this looming threat prompted Wyeth to attempt settle the opt out cases as quickly as possible for whatever amount necessary and when the word got out, the whole mess quickly turned into a feeding frenzy for litigants.
Experts say news about previous large settlements may have prompted many victims to opt out. For instance, on July 22, 1999, the Dallas Morning News reported a case where the company paid more than $3 million to settle a lawsuit with a 70-year-old Texas woman. The agreement, the newspaper said, was at least the 12th settlement involving former fen-phen users, but was the first in a Dallas County court case.
A month before the $3 million settlement was reported, the article said, the company agreed to pay between $6 and $7 million to settle a case in Harris County, Texas that linked a woman’s death to fen-phen.
Adding to the risk of trying cases before a jury, is the fact that more documents keep surfacing that prove useful in court. For instance, an internal FDA e-mail dated about a year before the agency issued the fen-phen advisory, written by former FDA reviewer, Leo Lutwak, to a colleague says the serious side effects linked to fen phen and the drugs’ marginal benefits “should be brought out.”
“The company has gotten away with much manipulation these past 3 years, of the public, of the press, of the FDA,” Mr Lutwak wrote. “I started getting upset about this drug in ’93 or ’94 and was running into a lot of blocks from the FDA and from the drug company,” he said.
Although other injuries associated with fen-phen include PPH and neuropsychological damage, only persons with heart valve damage are allowed to participate in a national class action settlement.
Persons suffering from neuropsychological damage that can include depression, mood swings, memory loss, behavioral changes, and psychotic breakdowns, must sue separately.
According to the FDA, PPH has been reported to occur in about 1 in 25,000 people using the appetite suppressants for more than 3 months. Close to half of all PPH cases result in death. The Pulmonary Hypertension Association defines the condition as:
“Pulmonary hypertension (“PH”) is a rare blood vessel disorder of the lung in which the pressure in the pulmonary artery (the blood vessel that leads from the heart to the lungs) rises above normal levels and may become life threatening.
“Symptoms of pulmonary hypertension include shortness of breath with minimal exertion, fatigue, chest pain, dizzy spells and fainting.
“When pulmonary hypertension occurs in the absence of a known cause, it is referred to as primary pulmonary hypertension (PPH). This term should not be construed to mean that because it has a single name it is a single disease. There are likely many unknown causes of PPH. PPH is extremely rare, occurring in about two persons per million population per year.”
“This disorder,” the FDA web site says, “results in death in about 40% of affected individuals within 4 years.”
Studies released in November 2001 suggest that the occurrence of PPH may be 7 times higher than anticipated in 1997, when the diet drug were removed from the market.
According to the FDA, the disorder can also occur in association with valvular heart disease, but the class action settlement still does not apply even in those cases. However, this ruling may turn out to be the nail in the coffin for Wyeth.
On April 27, 2004, a Texas jury awarded over $1 billion to the family members of a woman who died of PPH after taking fen-phen for about two years. The verdict included $113.4 million in compensatory damages, and $900 million in punitive damages, according to Wyeth’s 2005 Annual Report filed with the SEC. The case was later settled for an undisclosed amount.
As of July 24, 2006, Wyeth told shareholders in its latest SEC filing, the company is listed as a defendant in 103 lawsuits that allege a claim of PPH, alone or with other injuries, and in approximately two additional lawsuits pleaded as valvular regurgitation cases, the plaintiff’s attorneys have advised the company that the plaintiffs will allege a claim of PPH.
Back in February 2006, at the Merrill Lynch health-care conference in New York, Kenneth Martin, chief financial officer of Wyeth, said he was hopeful that the remaining lawsuits may be “wrapped up” within 12 to 24 months.
However, according to Fen-Phen e-Resource, Natexis Bleichroeder analyst, Jon LeCroy, said Wyeth may be able to eliminate “the bulk” of the cases within the next 24 months, but predicted it will take at least 4 more years to eliminate cases involving serious heart-valve damage and cases involving fen-phen users who developed PPH.
“So we are assuming Wyeth will need to take another $4 billion in fen-phen charges through 2010,” Mr LeCroy said.
Jury selection for the next state court trial is set to begin on September 1, 2006, in a PPH case brought by Beverly “Kim” Tilmon of Palestine, Texas, seeking a combined total of $180 million in compensatory and punitive damages, according to the June 15, 2006 Palestine Herald.
Ms Tilmon alleges she developed PPH, after taking fen-phen for four months in 1997. This case ended in a mistrial on January 31, 2006, when Texas Judge, Jim Parsons, ruled that defense attorneys “exceeded the boundaries” during opening statements.