Stephen Pope Comments: Glaxo Said To Have Paid $1 Billion Over Paxil Suits

July 20, 2010, Bloomberg News

The $2.4 billion charge Glaxo announced for Paxil and Avandia litigation “includes provisioning for settled cases” and those still outstanding, officials said in an e-mailed statement.

No Breakdown

The charge “reflects the company’s ongoing efforts to resolve certain long-standing legal cases,” Dan Troy, the company’s general counsel, said in the release. “This represents a substantial portion of GSK’s outstanding litigation.”

Alspach refused today to specify how much of the $2.4 billion charge is devoted to resolving Paxil litigation and how much has been set aside to deal with Avandia lawsuits. She also declined to say how much of the reserve will be used to pay the company’s legal fees for both cases.

The company has agreed to pay more than $500 million so far to settle suits alleging Avandia posed an increase risk of heart attacks and strokes in diabetics, people familiar with those accords said earlier this month.

$2.5 Million in Philadelphia

The birth-defect settlements came after a Philadelphia jury ordered Glaxo in October to pay $2.5 million in damages to the family of Lyam Kilker, a 3-year-old boy born with a heart defect after his mother took Paxil while pregnant.

In Kilker’s case, jurors concluded Glaxo officials “negligently failed to warn” the doctor treating Lyam’s mother about Paxil’s risks and concluded the medicine was a “factual cause” of the child’s heart defects. The panel declined to award punitive damages against the drugmaker.

During the Kilker trial, the family’s lawyers made public internal Glaxo documents showing executives talked about burying negative studies about Paxil’s links to birth defects and that its own scientists were alarmed by the rising number of children who had been affected by the drug in the womb.

After the verdict in Kilker’s case, an analyst estimated the company may be facing more than $1 billion in additional verdicts in the more than 600 birth-defect cases waiting to be tried in Pennsylvania.

$1.5 Billion Liability

“A liability totaling $1.5 billion is possible,” Savvas Neophytou, a Panmure Gordon analyst in London, wrote in a note to investors the day after the verdict. He still recommended buying Glaxo shares because the award was likely to be reduced on appeal.

The majority of the birth-defect suits filed in Philadelphia have been settled, including Kilker’s case, the people familiar with the accords said. Sean Tracey, the attorney who represented Kilker’s family in the case, declined to comment on the settlement.

Other lawyers who have settled their Paxil cases include Mark Robinson and Karen Menzies, two Los Angeles-based attorneys, and Clayton Clark, a Houston-based plaintiffs’ lawyer, the people said. Robinson and Menzies didn’t return calls for comment. Clark declined to comment on the settlement of his more than 500 cases.

September Trial

Attorneys who continue to press birth-defect claims against Glaxo include Houston litigators Andy Vickery and Ed Blizzard, the people said. Alspach noted yesterday that Glaxo is facing three birth-defect cases that are set for trial in Philadelphia in September.

Blizzard didn’t return a call for comment. Vickery said he was preparing for one of the September trials and wouldn’t comment on whether he’d had settlement talks with Glaxo.

The average $1.25 million payout in the birth defect cases compares with $2 million average settlements in about 150 suicide cases, the people said. Glaxo also paid an average of $300,000 to resolve about 300 attempted suicide cases, they said.

Glaxo also paid an average of about $50,000 per case to resolve about 3,200 claims linking Paxil to addiction problems, the people said.

Black-Box Warning

It also paid $2.5 million to New York to resolve accusations the company withheld safety data about the antidepressant. The company, calling the claims unfounded, agreed to release safety studies on the medicine’s effect on children.

In 2005, the company added a black-box warning to its Paxil label that the drug increased the risk of suicidal thoughts among adolescents, following a request by the U.S. Food and Drug Administration to do so.

In 2001, a jury in Cheyenne, Wyoming, ordered Glaxo to pay $6.4 million to the relatives of a man who shot his family to death and then turned the gun on himself after taking Paxil. The case was settled while on appeal, according to Kevin Colgan, a Glaxo spokesman.

Glaxo fell 14.5 pence, or 1.2 percent, to close at 1,173.5 pence in London trading today. The shares have fallen 11 percent this year. Glaxo’s American depositary receipts, each representing two ordinary shares, fell 21 cents to $36.04 at 12:46 p.m. in New York Stock Exchange composite trading.