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$1.013 Billion Award In Wyeth 'Fen-Phen' Case

Apr 28, 2004 | Philadelphia Inquirer

The family of a Texas woman was awarded $1.013 billion yesterday by a jury in Beaumont, Texas, which found drugmaker Wyeth was responsible for the woman's death several years after she took one of the company's "fen-phen" diet drugs.

Cynthia Cappel-Coffey, 41, took the drug Pondimin between November 1996 and June 1997. In December 2001, she developed a fatal lung condition called primary pulmonary hypertension. She died last year.

Yesterday's verdict, which Wyeth said it would appeal and which financial analysts predicted would not stand, adds to the legal costs stemming from the diet drugs that the Madison, N.J., company pulled from the market in 1997 after some users developed heart-valve damage.

Wyeth has set aside $16.6 billion to resolve lawsuits by former fen-phen users. It reached a class-action settlement in 2000 for $3.75 billion with more than 125,000 former users of the diet drugs. An additional 70,000 fen-phen users opted out of the settlement to take their cases to trial.

Most of the remaining cases allege heart-valve damage as a result of the drugs. The PPH cases represent only a fraction of 1 percent of the cases in its diet-drug litigation, Wyeth said.

The verdict yesterday was the first PPH case to go to trial. The company has settled all other PPH cases out of court. Wyeth warned investors in its first-quarter earnings call last week that it had been unable to settle the Texas case - and that it might have to take future charges to settle costly litigation.

Jurors deliberated six days before awarding Cappel-Coffey's family $113 million in compensatory damages and $900 million in punitive damages. The family had asked for $1.1 billion in total damages.

Wyeth officials expressed optimism that the verdict would be reversed.

"The case is full of legal and factual errors," said Tim Atkeson, one of Wyeth's trial attorneys in Texas. "We are quite confident that the verdict is going to get reversed."

Elizabeth Bernstein, an analyst with Morningstar Inc., in Chicago, who covers Wyeth, called the $900 million punitive-damages award "absurd. I don't see how this would not be lowered, either by the trial judge or on appeal. I don't think it will stand."

Bernstein said that of the 70,000 fen-phen users who opted out of the class-action settlement, only about 3 percent have had their claims approved, with an average settlement of $125,000 each. "Wyeth can withstand a considerable amount of litigation charges," she said. "While I don't think it will stand at this level of $900 million, if it were to stand, and other cases were to appear, it would cause liquidity problems for Wyeth."

Bernstein said she expected Wyeth to take an additional $2 billion charge this year to cover ongoing litigation expenses related to fen-phen.

Wyeth's attorneys argued during the trial that Cappel-Coffey stopped taking the drug in June 1997, and did not get sick until 41/2 years later, in 2001, and that if Pondimin had caused her death, she would have become ill within the first year.

Wyeth, which employs 4,700 people in the Philadelphia area, said yesterday that the court had prevented the company from submitting evidence about three other diet drugs the woman took after Pondimin, including two that carried label warnings of possible PPH damage.

Texas law limits punitive damages at two times lost wages, medical expenses, and lost services. In Cappel-Coffey's case, those losses amounted to $1.5 million, which when doubled would have been $3 million, Atkeson said.

But the Texas district judge let the case go to the jury without a limit on punitive damages after the woman's family attorney argued that a felony was committed because documents had been destroyed in the case.

"We are quite confident that a court of appeals will find this was not a felony and that the jury applied the wrong law and that the evidence did not back up the finding," Atkeson said.

Hemant Shah, an independent pharmaceutical analyst in Warren, N.J., said the verdict was a "significant negative" for Wyeth and would make it "very difficult for future PPH cases to be settled. Wyeth has not made public how many PPH cases are pending, but if any large judgment is sustained on appeal, it's going to make it very difficult for Wyeth to settle any outstanding future PPH cases," Shah said.

Wyeth spokesman Doug Petkus said yesterday that "a handful of other PPH cases remain" and that the company said evidence admitted in the Texas case "has already been ruled inadmissible in the heart-valve cases in federal court in Philadelphia."

"Another big potential cloud hanging over the company, which is totally ignored by the financial community," said analyst Shah, is future possible litigation concerning Wyeth's hormone-replacement therapies, Prempro and Premarin. The female hormone drugs, used by millions of women to treat menopausal conditions, have been linked in studies to increased risk of heart disease and stroke in some women.

Morningstar analyst Bernstein said she did not see litigation over hormone-replacement treatments as a big threat.

"It's too hard to prove increased risk of stroke, specifically because of the drug," she said. "There are so many other things that cause stroke and heart attack. It's just a much more difficult case to make. It's a risk. I don't see it as a likelihood to the extent of fen-phen."