Drug maker to pay $285 million to settle hepatitis lawsuits

International drug maker Teva Pharmaceuticals will pay more than a quarter billion dollars to settle most of the lawsuits arising from Southern Nevada's hepatitis C outbreak, closing a major chapter in the long legal battle for patients infected with the life-changing disease.

The Israel-based company has earmarked $285 million to settle about 120 lawsuits, which include about 150 former patients at the Endoscopy Center of Southern Nevada and its sister clinics.

County health officials linked nine hepatitis C cases to the facilities run by Dr. Dipak Desai. Seven of the nine cases were genetically linked to the center. Health officials called another 106 cases "possibly linked."

The settlement leaves 15 open lawsuits against Teva.

"Teva is pleased to have put the vast majority of these matters behind us," company spokeswoman Denise Bradley said in an email Tuesday.

The generic drug-making giant had lost the first three trials against it and faced paying nearly $800 million dollars in compensatory and punitive damages.

The fourth trial was under way when settlement talks heated up two weeks ago. Under the direction of Chief District Judge Jennifer Togliatti, Teva reached an agreement with the 41 patients represented by trial lawyers Robert Eglet and Will Kemp.

"It's been resolved," Kemp said Tuesday.

Eglet was unavailable for comment.

Their confidential settlement encompassed the last large group of plaintiffs with active lawsuits.

About six weeks earlier, lawyers Ed Bernstein and Gerald Gillock reached a confidential settlement for their 43 clients. The other plaintiffs reached settlements in principle as far back as the summer.

"Ultimately, there were three different trials with different judges and different lawyers, and all three juries agreed that Teva could have sold, packaged and distributed the propofol a different way," Bernstein said, adding that his clients were happy with the settlement.

The dollar figures were confidential.

Lawyers typically take a third of the money in legal fees, which would drop the $285 million to $191 million. At that amount, the average compensation among 150 people would be $1.27 million.

For comparison, plaintiffs in the
$4.85 billion Vioxx settlement by drug maker Merck received an average of $186,825 if they had heart attacks and $61,165 if they had strokes.

Bernstein said he and Gillock hired a retired judge to review each person's medical file, talk to them about how their lives have been affected and assign each a percentage of the money.

All of their clients had to agree to the settlement to go forward, he said.

His clients, including Michael and Josephine Washington, were happy with the settlement. Michael Washington's case of hepatitis C was one of seven genetically linked to the outbreak at the Endoscopy Center.

The Washingtons went to trial last fall and came away with $14 million in compensatory damages and $90 million in punitive damages.

Bernstein said they had a strong case to uphold the verdicts on appeal.

"It's obvious the drug companies felt something similar because they wanted to settle the case, and the Washingtons wanted to move on with their lives," he said.

WHY MAKE A DEAL

Byron Stier, a professor at Southwestern Law School in Los Angeles who specializes in mass tort cases, said settlements are a common end to massive litigation.

Lawyers for the infected patients had "a very good hand to play" in negotiations thanks to three "eye popping" jury verdicts, he said.

But those large verdicts can, and often are, reduced on appeal, so the trial lawyers and their clients must weigh taking a smaller dollar amount versus risking everything on appeal, he said.

"You just want the sure thing of being rich rather than taking the chance of being super rich," Stier said.

Teva is also weighing its options and deciding whether to pay out a smaller amount or risk having to pay the larger verdicts, he said. The company would also be motivated to settle so it can "put the black cloud of litigation behind them," he said.

One potential ethical hurdle for lawyers working toward a settlement on behalf of many clients involves ensuring that every client is represented equally.

"The plaintiffs' counsel is seeing dollar signs," Stier said. "The concern is there is real pressure by plaintiffs' counsel to get people to take a settlement that might not be in their best interest."

Friday's settlement all but ends four years of litigation against the drug companies that began the day after health officials announced the outbreak in February 2008.

More than 60,000 former clinic patients were potentially exposed to disease because of unsafe injection practices by nurse anesthetists at the clinics, health officials said.

In the wake of the announcement, hundreds of patients filed lawsuits alleging they were infected with hepatitis C or other blood-borne diseases at the clinics. Their lawsuits targeted the clinics with medical malpractice claims and the drug companies with product liability claims.

The medical malpractice claims were settled before the first case went to trial in April. Terms of those settlements weren't disclosed, but Nevada has a $350,000 cap on noneconomic damages in medical malpractice cases.

INITIAL VERDICTS

In the first trial, lawyers for Henry and Lorraine Chanin argued that Teva and drug distributor Baxter Healthcare Corp. made and sold oversized vials of the anesthetic propofol to the outpatient clinics despite knowing that the vials were improperly used on multiple patients and caused blood-borne diseases to spread between patients.

The companies had argued that the vials were clearly marked for single-use only and that the doctors and nurses were to blame for the infections.

The drug companies lost that trial and two others, and in each case the jury levied large punitive damages against them. All together, the drug companies faced paying $752 million in punitive damages, plus $40 million in compensatory damages.

Teva had a legal agreement to pay the damages for Baxter and another distributor, McKesson Medical-Surgical.

The drug companies were appealing and believed they could overturn the large punitive verdicts, according to Wall Street filings.

The Chanin case, which included the record $500 million in punitive damages, was the first to reach the Nevada Supreme Court.

In December the Chanins asked the court to order a global settlement conference. A month later the Supreme Court obliged and ordered Teva to sit with Eglet and Kemp and work toward resolving their more than 40 pending lawsuits.

Togliatti started the negotiations the week of Feb. 6 and held nine days of talks until both sides reached a compromise.

Although the legal battle against the drug companies is over for most infected patients, many of them have pending lawsuits against their health insurance companies.

Their claims center on the companies giving them no choice but to get endoscopies at Desai's clinics.

Those trials could start later this year.

Meanwhile, the criminal case against Desai and two of his nurse anesthetists moves forward.

The three face felony charges including racketeering, insurance fraud and neglect of patients.

After months of dispute over Desai's mental condition because of strokes, a judge this month found him competent to stand trial.

A trial date is set for March 12, but District Judge Donald Mosley's retirement probably will push that date back.

Contact reporter Brian Haynes at bhaynes@reviewjournal.com or 702-383-0281.