American Home Products May Be Near
Partial Settlement of Diet-Pill Litigation

By Richard B. Schmitt, Robert Langreth and Elyse Tanouye, Staff Reporters of The Wall Street Journal
Copyright 1999 Wall Street Journal
September 16, 1999


Plaintiffs' lawyers and American Home Products Corp. are in advanced talks to settle a big chunk of the diet-pill litigation, with some close to the situation predicting the company is within days of announcing a deal valued at about $3 billion.

While terms of the proposed deal are sketchy -- and it may still fall through -- AHP has proposed to pay for medical check-ups for thousands of people who took the diet pills and offer some cash awards to those who have been injured to varying degrees, lawyers familiar with the situation said. At the same time, the proposal would allow people who consider the awards to be inadequate to "opt out" of the settlement and pursue cases on their own.

A spokesman for AHP's Wyeth-Ayerst Laboratories division in Radnor, Pa., declined to comment. Christopher Placitella, a Woodbridge, N.J., plaintiff's lawyer, who has been part of the settlement team, also declined to comment.

Some lawyers said they believed a tentative deal has already been reached and that it could be presented for approval as soon as Friday to a U.S. district judge in Philadelphia who has been overseeing the diet-pill cases in federal court.

The deal would provide some closure for embattled AHP, Madison, N.J., which has faced a series of drug- and safety-related setbacks in the last two years. But it wouldn't fully resolve the company's massive potential liability. According to the lawyers familiar with the situation, the proposal doesn't address the claims of scores of people with some of the most serious disorders stemming from the drugs, including an often-fatal lung disease known as primary pulmonary hypertension. Those cases, in total, could cost the company as much as $500 million to $1 billion, analysts say. Moreover, plaintiffs who reject any settlement and pursue separate claims may further run up the company's tab.

At issue are the drugs Pondimin (the "fen" in the formerly popular fen-phen combination) and Redux, a chemical cousin. About six million people took the pills in the 1990s, before American Home pulled them from the market in September 1997, following studies linking the drugs to heart-valve disease.

AHP faces more than 4,000 diet-pill injury suits covering about 8,000 people around the country, and the number of suits filed has been growing rapidly. Earlier this summer, a Texas jury hit AHP with a $23 million verdict in a case involving a woman whose diet-pill injuries were considered moderate at best. It was the first such case to reach a verdict, and the company's stock price plummeted.

The company said about 130 plaintiffs have had heart-valve surgery, with more than 100 allegedly diagnosed with primary pulmonary hypertension. The company acknowledged that other patients may have PPH who have not yet been diagnosed. In court cases, lawyers for the diet-pill takers allege the company misled the public about the risks of the drugs and hid evidence of potential heart-valve disease and pulmonary hypertension from taking the pills. AHP has said it acted responsibly and disclosed all known and reasonable risks.

The deal would settle a national class-action suit certified last month in which people who took the drugs are demanding the company pay for regular "medical monitoring" -- essentially doctor visits to keep tabs on their health. In addition, the two sides are preparing a "matrix" that would offer payments to settle cases brought by those who claim they were injured by the drugs.

The federal "medical monitoring" class includes people who took the drugs for at least 30 days. It might also include residents of a handful of states, including New Jersey, Texas and New York, where state courts have approved their own monitoring classes.

Many lawyers and analysts believe AHP is under growing pressure to put its diet-pill woes behind it as it grapples with other issues. As reported, the FBI has begun interviewing employees of the Food and Drug Administration to determine whether AHP or FDA officials committed any improprieties in hearings that led to Redux's approval in 1996.

In New York Stock Exchange composite trading Wednesday, American Home rose $1.4375 to $43.25 a share.


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