American Home Seeks SettlementSep 28, 1999 | The Wall Street Journal
American Home Products Corp. stands ready to spend about $4 billion to settle much of the litigation over its diet drugs. Although final terms have yet to be worked out -- meaning a deal could still elude the company -- the settlement under negotiation would be the biggest ever over hazardous medicine.
Part of the reason the sum is so big is the sheer number of people involved. Six million Americans took Pondimin, the "fen" in the fen-phen cocktail, or its chemical cousin Redux before American Home Products withdrew them two years ago amid links to heart-valve disease.
But American Home may also be interested in reaching a settlement because its strategic position has eroded in recent weeks. For one thing, the Federal Bureau of Investigation has begun, in a preliminary way, to look into Redux's 1996 approval by the U.S. Food and Drug Administration; any new revelations could hurt American Home's defenses in civil trials. The company says that it isn't aware of any FBI inquiry and that all its actions with respect to diet drugs have been lawful.
More important, the first of 4,000-plus diet-drug lawsuits to reach a verdict went badly for American Home last month. In Canton, Texas, a jury voted to award $23.4 million to Debbie Lovett, who developed heart-valve leaks after she took fen-phen.
The case was settled for less, but the evidence presented revealed a record of monitoring patient safety that struck some jurors as callous. "They were looking at the dollars and at how to please their stockholders, and not at how to protect the public," says one, Ronnie Wilson Jones.
The proposed $4 billion settlement would affect only litigation involving heart-valve damage. American Home would still face suits based on primary pulmonary hypertension, a rare but often-fatal lung disease also associated with the drugs. Further complicating the picture: Monday a judge rejected a proposed $100 million settlement involving the small firm that developed Redux, Interneuron Pharmaceuticals Inc. of Lexington, Mass.
Federal rules require pharmaceutical companies to collect and quickly send to the FDA any reports of "adverse events" involving users. But in both the Texas trial -- in federal court -- and an ongoing one in state superior court in New Brunswick, N.J., the effectiveness and staffing of American Home's safety department were central issues.
There was testimony that at critical junctures, American Home was receiving reports of heart-valve problems but not passing them on immediately to the FDA. Other testimony portrayed the company as resistant to stiffening package-insert warnings about side effects.
Plaintiffs' assertion that American Home gave short shrift to safety "is just so wrong," says Robert Essner, executive vice president of the company. "American Home puts the highest possible standards on integrity, safety and regulatory compliance. We don't cut corners."
The company says the evidence didn't support the outcome of the Texas case. "There are those that have taken sections of selected company memoranda out of context to argue that AHP disregarded safety in the pursuit of profits. That argument is absolutely baseless," American Home says.
Much of the evidence in the Texas case came from company insiders. At one point, a plaintiff's attorney asked company executive Axel Olsen why Pondimin's label warned of possible hair loss but not of heart-valve problems. Weren't heart-valve problems worse than hair loss?
"One would really need to have more information than simply the term in order to say one was more serious than the other," Dr. Olsen said, in a reply that angered Mr. Jones, the juror. "How could he not know that? A human life is worth more than hair damage," the juror says.
Another setback came when Bernard Poussot, president of global pharmaceuticals at American Home's Wyeth-Ayerst unit, testified that "similar issues" to the heart-valve problems had been seen "as early as 1960." He couldn't be reached for comment, but American Home says he was referring to reports about Aminorex, a diet drug sold in Europe. Although testimony presented no specific link between the 1960 date and Pondimin or Redux, Mr. Jones says the long history of red flags helped persuade him as a juror to support the plaintiff's side.
In the New Jersey suit -- a class action seeking medical monitoring for those who took the drugs -- current and former American Home employees testified that the company was hard-pressed to keep up with its growing responsibility of monitoring side-effect reports. First, the company's workload increased in 1994 with American Home's acquisition of American Cyanamid Co. and its Lederle drug unit. Then, sales of Pondimin took off. Pondimin had been a minor drug since the 1970s, becoming a product of American Home via its 1989 acquisition of A.H. Robins. The drug became a big seller after a report on how to use Pondimin -- technically, fenfluramine -- with a drug called phentermine to create fen-phen, the appetite-dulling combo that ignited a craze.
An official testified to a 30% rise during the first half of 1996 in reports of "adverse events" problems with American Home's drugs, the more serious of which went into red folders. "Will this flood of red folders never end," employee Mary Frances Moeller wrote to a colleague in an October 1996 memo involving Pondimin reports. "We are in desperate need of a lull." American Home says Ms. Moeller nonetheless completed her work on time.
The company relied heavily on temporary employees to monitor and process side-effect reports. Marc Deitch, former global medical director for Wyeth-Ayerst, testified that as of July 1996, soon after Redux won FDA approval, 33% of safety staffers were temps. One monitor, Amy Myers, testified that she repeatedly complained to her boss about the burgeoning workload, including time spent training short-term temps.
The FDA, during a 1997 FDA inspection, found deficiencies in American Home's safety-monitoring computer system. According to an internal company summary of the inspection, Dr. Deitch told the FDA the problem was due to rapid growth. "He said that he wasn't making excuses, but offering this as an explanation; Ayerst, Robins, Lederle, Cyanamid, and the system simply could not accommodate the growth," the summary read.
Dr. Deitch, who has left the company, declines to comment. American Home says it has always allocated adequate resources to safety surveillance. A spokesman, noting there may have been "a little turmoil" following its acquisitions, says the company has upgraded its computers and substantially increased its safety staff.
Value Problems in Europe
A major trial issue was why American Home didn't warn the public after receiving reports of several dozen cases of heart-valve problems involving Pondimin in Europe, well before valve problems arose in the U.S. in the spring of 1997.
Fredrick S. Wilson, one of American Home's medical monitors for Pondimin, testified via deposition in the Texas trial that he took a month-long vacation in February 1995, the same time that several reports of heart-valve problems from Belgium reached the company. Dr. Wilson's deposition said that when he returned to work part-time in March, he didn't review the valve reports that had arrived during his vacation.
American Home says another staffer reviewed the reports in his absence. Its defense was that the European reports it got weren't alarming because the heartvalve leaks were very mild, of a kind that isn't uncommon in the population at large. And it said the Belgian cases -- the bulk of the reports -- were complicated by the fact that many patients also took a concoction of Chinese herbs to lose weight.
One juror, Peggy L. Jacobs of Edgewood, Texas, says she was willing to give American Home the benefit of the doubt on the Chinese herbs. But she says she couldn't forgive the company's repeated efforts to avoid putting prominent warnings on the the drug's package insert.
The first trial evidence about the warnings dated back to June 1994, when Dr. Wilson found out that the company had reports of 41 Pondimin users coming down with primary pulmonary hypertension, while the package insert was showing just four, according to his testimony. Dr. Wilson testified that he proposed updating the warning to reflect additional cases of the dangerous disorder and that company officials initially agreed to a draft change. But the warning wasn't strengthened until two years later, according to Ms. Myers's testimony in the New Jersey case.
That was in July 1996, about two months after Pondimin's chemical cousin, Redux, won FDA approval in a close vote, in the wake of considerable debate over side effects. Lawyers for American Home Products say the company didn't update the package insert sooner because it was waiting for results of a large-scale study on the incidence of the lung disorder. The company adds that the FDA told it in 1994 that the warning didn't need to be updated.
But Mr. Jones, the Texas juror, says the delay seemed like an attempt to sweep the issue under the rug until Redux won approval. And in the New Jersey case, Dr. Deitch, who was responsible for the label at the time, testified that it was a "mistake" not to update the Pondimin label's reference to just four pulmonary-hypertension cases. "I'm not saying we shouldn't have changed the number four. We should have," he testified.
During the approval process for Redux, the company argued against a "black box" warning for pulmonary hypertension on the package insert, which is sent to pharmacies and printed in doctors' reference manuals. In these warnings, the cautionary information is set off in a bordered box to draw attention. Lawyers for Ms. Lovett produced a document circulating at American Home showing a consultant had said Redux sales could be as much as 50% lower if there was a black-box warning.
The memo was solely for "informational purposes" for the marketing department and didn't have "any impact" on the company's labeling negotiations with FDA on Redux, a spokesman says.
On Feb. 27, 1996, Wyeth-Ayerst official JoAlene Dolan wrote to the group assigned to help her prepare a presentation opposing the black box. "The meeting with FDA yesterday was a tremendous success!" she wrote to this SWAT group (Special WyethAyerst Team). "No black box!" Ms. Dolan, has left the company and couldn't be reached for comment.
Marc Farley, a lawyer for American Home in the New Jersey case, says the Dolan memo "is a classic example of an out-of-context memo" used by plaintiffs' lawyers to assert misleadingly that the company wasn't concerned about safety. Since the company's top medical experts thought a black box wasn't necessary, it was natural for Ms. Dolan to be pleased when the FDA agreed, he says. Redux won FDA approval in April 1996 without the black box.
(It is unclear what elements of the approval have piqued the FBI's curiosity. Its agents are still trying to determine whether there is evidence warranting a criminal investigation, according to people familiar with the matter. Plaintiffs' attorneys are eagerly aiding the probe.)
Four months later came some bad news: A study published in the New England Journal of Medicine provided further evidence linking primary pulmonary hypertension to diet-drug use.
One of American Home's immediate reactions was to strategize on how to prevent the paper from scaring off customers. Kelly Davis, a doctor in charge of monitoring the drugs' safety for American Home, wrote to Ginger Constantine, a high-ranking doctor at the company: "In order to be truly convincing that the risk of primary pulmonary hypertension is worth taking, I would recommend making a comparison of risks for another drug or medical risk that physicians are more comfortable with, such as the risk of dying from an anaphylactic reaction associated with the use of an antibiotic." American Home declines to comment on this memo or on whether it took any safety steps in reaction to the New England Journal of Medicine paper.
Other testimony told of employees being instructed to delay processing new heart-valve reports. Ms. Myers, the safety monitor, testified in Texas that the company received reports of heart-valve problems from a doctor in Fargo, N.D., on March 6, 1997; she said that soon afterward she entered about 14 cases into the firm's computer system and gave them identifying "manufacturer control numbers."
But when Ms. Myers updated her superiors on the cases five days later at a safety-surveillance meeting, Dr. Constantine told her she shouldn't have entered the cases into the computer because the information the Fargo doctor gave on the phone wasn't detailed enough. "I basically told her that I thought she had jumped the gun," Dr. Constantine testified.
Dr. Olsen, vice president of global medical operations at the Wyeth-Ayerst unit, suggested at the same meeting that "the cases could be canceled," Ms. Myers testifed. In his own deposition, Dr. Olsen denied telling her to "erase" the entries and replace them with other reports; reached by phone, he declined to comment. Dr. Constantine couldn't be reached.
Following the meeting, Ms. Myers testified, she overwrote the files and reused numbers she had given to diet-drug reports. According to records at the FDA, American Home didn't inform the agency of the North Dakota incidents until April 11, after sending officials to Fargo and the Mayo Clinic in Minnesota, which was working with the Fargo doctor.
The FDA, in a Dec. 4, 1997, inspection report, told American Home that it had improperly reused the manufacturer's control numbers. The FDA also alleged that American Home was 11 business days late in reporting the Fargo problems. Drug firms are required to inform the agency of any serious safety problems "as soon as possible," but no later than 15 days after hearing of them.
"It did seem like they were trying to buy some time, stretch it out as long they could and keep selling" the diet drugs, says Ms. Jacobs, the Texas juror.
The company says it believes it "reported everything according to FDA guidelines." Mr. Farley, its lawyer, says the original reports opened by Ms. Myers "were not complete, and they would not have provided the FDA with meaningful information." He acknowledges that it was a mistake for her to overwrite the manufacturer's control numbers.
Lars Noah, a food-and-drug-law expert at the University of Florida in Gainesville, says that even a company that has an incomplete report from the field should be able to get enough to file a report to the FDA within in a day or two. "The obligation to file the 15-day report kicks in immediately," he said. "If there's going to be follow-up ... that's a subsequent report to FDA. You don't decide internally, 'Let's get all our facts straight and only when we're sure there's a problem here do we raise the red flag with the FDA.' "
American Home has said that it has resolved the FDA concerns in the inspection report, in part by a computer-system overhaul that makes it impossible to overwrite a report once it is entered.
By July 1997, evidence of heart-valve problems was growing. A Mayo Clinic study on the subject, set for publication late in August, was instead released by Mayo at a July 8 news briefing.
American Home heard about the plan for an accelerated release. In an internal memo dated July 1 and headed "URGENT URGENT URGENT URGENT," marketing employee Gerald V. Burr warned officials that the Mayo report might leak before the news conference and provided a "standby statement" for responding to inquiries.
"Well, does it say anywhere under the four urgents here that there's one iota of concern for the people who have the heart-valve problems?" Kip Petroff, an attorney for Ms. Lovett in Texas, asked Carrie Smith-Cox, formerly vice president for women's health at Wyeth-Ayerst, during a video deposition played during the trial.
"This memo does not refer to that," Ms. Smith-Cox replied. "However, that would also not have been within the responsibilities of the people charged with writing the standby statement to look at the overall plan." American Home says Mr. Burr's memo was "simply a heads-up" to prepare for questions from the media.
Meanwhile, although Redux had been approved without a black-box warning, documents and testimony from a former FDA official show that the idea of a black-box warning for the newly discovered heart-valve problem was under discussion at the agency in July 1997. American Home initially argued against it, and in succeeding weeks, relations with the agency grew tense. In a Sept. 5 internal FDA memo introduced at the Texas trial, FDA scientist David J. Graham wrote that he and colleague Lanh Green had "have become concerned about the diligence of Wyeth-Ayerst in pursuing leads and obtaining and reporting full clinical details of cases to FDA."
American Home says it never heard such criticism from the FDA. It also says the scientific evidence at the time didn't warrant a black-box warning because the heart-valve incidents were "anecdotal case reports" that needed evaluation.
About a week later, according to testimony, the FDA asked American Home officials to come to agency headquarters. At the meeting, the FDA says, it asked the officials to recall the drugs. American Home says that it would have withdrawn the drugs from the market even if the FDA hadn't asked it to.