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Legal Blow Prompts Bayer Warning On Settlements

Oct 15, 2004 | The Times, UK

BAYER, the German chemicals to healthcare giant, last night admitted that it may need to set aside extra provisions as it said it would consider settling lawsuits from US claimants who suffered strokes after taking cold remedies containing one of its chemicals.

A spokesman for the company told The Times that Bayer might have to compensate as many as 1,200 Americans who suffered severe strokes after taking phenylpropanolamine (PPA).

The chemical, which was used in more than 30 different products ranging from cold and cough medicines to anti-obesity pills, was withdrawn from pharmacy shelves in 2000 after regulators decided that it could cause strokes in younger people.

The spokesman said that Bayer may have to make provisions which could “have a negative impact on the results of our operations, our financial position and cash flows”.

The warning accompanied a statement that Bayer would consider settling outstanding lawsuits relating to PPA on a “case by case” basis and “without conceding liability”.

The statement follows a ruling by a court in El Paso, Texas, ordering the company to pay $400,000 (£224,000) in damages to a man who suffered a stroke after taking a cough remedy containing PPA.

The case marks the first time that a US judge has upheld a claim for damages against Bayer in relation to PPA. At its peak, the chemical is estimated to have generated more than $1 billion a year in sales for Bayer.

Until yesterday, the group and other companies that used the chemical in their medicines, such as GlaxoSmithKline and Novartis, had successfully fought claims that they had made an unsafe drug.

Bayer emphasised yesterday that PPA was a “safe and effective ingredient” when used in accordance with the directions on the label. The company added that it would continue vigorously to defend those cases that end up in court.

The ruling comes at a bad time for Bayer, which is about to use up the last of more than $1.2 billion in insurance cover earmarked to settle other product liability litigation.

The company admitted last month that it had spent all but $100 million of the sink fund made available to it by its insurers to cover payouts relating to Baycol, a cholesterol-lowering drug. America’s Food and Drug Administration ordered Bayer to pull Baycol in August 2001 after it was linked to more than 100 patient deaths.

Earlier this year Bayer said that it would set aside an extra €300 million over and above its insurance cover to meet damage claims from more than 1,600 patients who suffered heart problems after taking Baycol.

Analysts last night said that the Texas court ruling marked another worrying development for “big pharma” at a time when the industry is struggling to bring new drugs to market. One analyst, who declined to be named, said that Bayer’s exposure to PPA could make it an “easy target” for class action lawyers.