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$4.83 Billion Offered to Settle Fen-Phen Claims

TIMES STAFF WRITERS

The maker of key ingredients in the diet-drug cocktail known as fen-phen has agreed to pay up to $4.83 billion to settle thousands of claims from patients who may have suffered heart damage from taking the once-popular weight-loss treatment.

American Home Products, maker of fenfluramine, the potent portion of the mixture, and dexfenfluramine, a chemical cousin sometimes used instead, said Thursday it had signed a letter of intent with lawyers representing 8,000 patients to pay for medical monitoring, health care and some compensatory damages to those who took the drugs before they were pulled off the market in 1997.

“It has achieved what we lawyers seldom see, and that is a full measure of justice for these people,” said attorney Michael Fishbein, one of the lead plaintiffs’ attorneys in the deal.

The settlement, which must be approved by a federal judge in Philadelphia, would be open to all 6 million people who took either of the AHP drugs, marketed under the names Pondimin and Redux. Those with the most serious heart damage could receive as much as $1.5 million under the terms of the deal.

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But payments to some patients with minimal heart damage could be as low as $6,000, and not all conditions believed to be caused by fen-phen are included. For example, many doctors believe that the pills also caused a form of heart failure called primary pulmonary hypertension, but that is not part of the deal.

The settlement does include as much as $429 million for plaintiffs’ legal fees.

“People have to take a very careful look and make sure that this money will provide them enough protection,” said Sharon Arkin, a Newport Beach attorney whose office represents 110 fen-phen plaintiffs. “Because by signing on to the settlement, they are releasing all their rights [to sue].”

Arkin estimated that as few as 20% of her clients would be induced to settle.

Under an unusual provision of the settlement, patients accepting the settlement can opt out later if their conditions become significantly worse and they wish to sue instead. But company officials expressed confidence that most affected consumers would sign on rather than risk the expense and uncertainty of proving in court that the diet cocktail caused their disease.

Here’s how the deal would work:

* Patients who used fen-phen for less than 60 days and are not ill would be reimbursed for the cost of the drug cocktail as well as the cost of a heart test called an echocardiogram. Those who test positive for heart-valve damage would receive $3,000 in cash or $5,000 in medical services.

* Those who used fen-phen for more than 60 days will be offered the heart test and a follow-up visit with a physician. Those who show signs of disease will be reimbursed with an amount between $6,000 and $1.5 million, depending on the severity of the condition.

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* Patients who accept a small settlement and then become sicker will be allowed to request greater compensation or opt out of the settlement in order to sue. There will be no statute of limitations on the decision to sue.

The fen-phen cases are the latest in a string of personal-injury cases that have cost businesses whose products were believed to cause medical injuries hundreds of millions of dollars. American Home Products itself has been the subject of numerous lawsuits over its Norplant contraceptive implant, and it took over the company that manufactured the Dalkon Shield, another birth-control device that was linked to a number of deaths and was the subject of lawsuits.

The company expects to pay out no more than $4.83 billion over the next 16 years under terms of the settlement. That works out to $3.75 billion in current dollars. The company said it will charge $3.29 billion after taxes against earnings this quarter, or $2.51 per share.

Despite the high cost, the settlement is “in the best interest of those who use the drugs as well as the company,” said AHP Chairman and Chief Executive John R. Stafford. “It offers peace of mind to those who used the drugs and permits the company to move beyond the uncertainty and distractions of litigation.”

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The ability to at last put a price tag on the cost of liability reassured the company’s investors, who pushed the stock up 8%, to $48.75, on news of the deal.

The market reacted enthusiastically in part because the settlement amounted to half of what some observers had expected, said Steven B. Gerber, an analyst with CIBC World Markets.

“There was some speculation that the judgments could total $10 billion or more, very big numbers,” Gerber said. “Markets abhor open-endedness and uncertainty in product-liability cases.”

The settlement, Gerber said, “can only help the stock,” which despite the gain Thursday was trading far below its 12-month high of $70.25.

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Fen-phen became wildly popular in the mid-1990s, after doctors discovered that combining fenfluramine with phentermine, a stimulant, helped people lose weight. It was widely prescribed in California and other states, and for a time the pills were almost ubiquitous among everyone from stay-at-home mothers to busy executives.

All told, 5.8 to 6 million people took fen-phen, according to the company.

While both drugs in the fen-phen cocktail were legal and had been approved individually by federal regulators, they were not tested or approved for use in combination.

In 1997, doctors at the Mayo Clinic reported a disturbing number of cases of heart-valve problems among women patients using the drugs. In these women, the doctors found, the valves that push blood forward as it is pumped out of the heart had lesions on them and did not work well. As a result, blood that was supposed to have been pumped out to the patient’s body in fact was dribbling back into the heart.

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The leakage, doctors feared, could cause the heart to deteriorate or make it easy for bacteria to lodge there.

A much more serious heart disorder, in which the heart beats uncontrollably fast, also appeared among users of the drugs. That rare condition, called primary pulmonary hypertension, was noted in the required warning labels for the products, alerting physicians to the possibility of heart failure.

Although new studies appear to suggest that the problem is not as widespread as initially believed, the number of cases mounted. The Food and Drug Administration asked Wyeth-Ayerst, American Home Products’ pharmaceutical subsidiary, to withdraw both Pondimin and Redux from the market, which it did voluntarily. The “phen” in the fen-phen combination--short for phentermine--was not implicated in the problem and remains on the market.

In the aftermath, 6,500 lawsuits were filed, 700 of them in California, representing 11,000 fen-phen users.

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The company has quietly settled a number of the cases. A jury awarded a Texas manicurist $23.3 million in the first case to go to trial, but the plaintiff agreed to an undisclosed reduced amount after the company said it would appeal the monetary award.


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