The Philadelphia Inquirer from Philadelphia, Pennsylvania on October 8, 1999 · Page 16
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The Philadelphia Inquirer from Philadelphia, Pennsylvania · Page 16

Philadelphia, Pennsylvania
Issue Date:
Friday, October 8, 1999
Page 16
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I- A16B THE PHILADELPHIA INQUIRER Friday, October 8, 1999 Agreement lifts American Home Products' stock rose 8 percent yesterday. An agreement on diet-drug suits stopped a distraction. By Susan Warner INQUIRER STAFF WRITER Shares in American Home Products rose 8 percent yesterday on news of the company's settlement of diet-drug lawsuits. The company's stock closed at $48.69 on the New York Stock Exchange, up $3.56 from Wednesday's close. American Home Products, whose Wyeth-Ayerst Laboratories subsidiary is in St. Davids, said it would take a $3.29 billion charge after taxes in the third quarter to cover costs of the settlement. "I think it's a very comprehensive and positive agreement for American Home Products," said Sena Lund, an analyst with Mehta Partners in New York. "They had been hampered by this issue for the last couple of months. This agreement clears away some of the cloud," Lund said. . Judges pressured lawy ers, and a deal was set into motion Judges Louis C. Bechtle and Marina Corodemus, simply by moving suits along speedily, helped achieve resolution. By L. Stuart Ditzen INQUIRER STAFF WRITER . Two powerful figures in black robes played an important, if indirect, role in the $3.75 billion settlement worked out over the last six months by American Home Products Corp. and key lawyers in the mass litigation involving the ill-fated diet drugs Pondimin and Redux. One was U.S. District Judge Louis C. Bechtle in Philadelphia, who is presiding over pretrial proceedings in more than 1,000 diet-drug cases filed 'in federal courts around the nation. The other was New Jersey Superior Court Judge Marina Corodemus, who is overseeing a statewide class-action trial in New Brunswick that seeks to have American Home pay for medical monitoring for roughly 100,000 state residents who used the diet drugs. Lawyers involved in the settlement said yesterday that the two . judges helped achieve a resolution to the sprawling litigation, in which the diet drugs are blamed for heart-valve damage and other injuries, simply by keeping pressure on the lawyers to move their cases steadily toward trial. It is an axiom of civil litigation that the closer a case gets to trial, the more likely it is to be settled out of court. "Both Judge Bechtle and Judge Corodemus behaved like judges in this litigation," said Arnold Levin, one of the lead lawyers in the federal diet-drug cases. The judges set firm deadlines, imposed efficiencies in pretrial proceedings, and generally made lawyers keep their noses to the grindstone. "By doing that, both these judges facilitated the settlement," Levin said. "They kept these cases moving toward resolution." Both judges must approve the settlement before it can be finalized, lawyers said. Trump says Minn. Gov. Jesse Ventura has been recruiting the New York developer. But polls show little support. By Thomas Ferraro REUTERS WASHINGTON - Donald Trump, the billionaire New York developer and New Jersey casino owner, said yesterday that he was moving toward a possible bid for the U.S. presidency. "I will be forming a presidential exploratory committee ... effective, I believe, tomorrow," Trump told CNN's Larry King Live. Trump, 53, said he planned to confer later yesterday with Minnesota Gov. Jesse Ventura, who has been recruiting him for months to seek the Reform Party's presidential nomination. Ventura has lured Trump as a possible alternative to Patrick J. Buchanan, a three-time Republican presidential candidate who is expected to bolt to the Reform Party. CNN political analyst Bill Schneider noted that polls showed little public interest in Buchanan, Trump, or any other possible Re The diet drug Pondimin, widely used as the "fen" in the popular "fen-phen" combination, and its chemical cousin Redux were withdrawn from the market two years ago after studies linked them to heart-valve damage. Analysts said the diet-drug lawsuits created a major distraction for a company that has been wrestling with other product problems, the launch of new drugs, and the possible spin-off of its agricultural division. Last year, American Home Products withdrew a blood-pressure drug and a pain killer over concerns about liver problems. In July, the company said it would suspend shipments of an an-tidiarrheal vaccine, RotaShield, after the U.S. Centers for Disease Control and Prevention found preliminary evidence that the drug Bechtle has been dealing with mass litigations, and corralling them, for more than 20 years. "He is a great facilitator," said John J. Cummings, a plaintiffs' law-, yer who has been involved in several previous huge cases before Bechtle. The 71-year-old jurist, a former federal prosecutor who was appointed to the bench in 1972, has presided over mass litigations involving hotel fires, airline crashes, and faulty surgical devices. Nationally recognized for his skill at devising efficiencies in dealing with hundreds and sometimes thousands of cases at once, Bechtle said in a recent interview that he enjoys the work in large part because mass litigations attract topflight lawyers, both on the defense and the plaintiffs' sides. Bechtle recently certified a national medical-monitoring class action, in the diet-drug litigation which, lawyers said, increased the pressure for a settlement. Like Bechtle, Judge Corodemus, 43, has become New Jersey's designated hitter on statewide mass litigations. Cases are assigned to her ' to avoid conflicting court rulings by multiple judges. She has overseen cases involving hazardous substances, breast implant claims, tobacco injuries, and gasoline explosions. She is known for moving cases along at a crisp pace. Thus, the medical-monitoring class-action case assigned to her in the diet-drug litigation was the first of its type to go to trial. And once the trial began, in August, the tempo of settlement negotiations picked up. Gene Locks, a plaintiffs lawyer in the New Jersey case, said yesterday when asked what role Corodemus played in bringing about the settlement: "Without Judge Corodemus, we would not be here at this time." he will explore Reform bid for White House form Party candidate. "This is not being driven by voters," Schneider said. Indeed, a possible Buchanan-Trump showdown has been pushed by forces loyal to Ross Perot, the Reform Party's founder, and supporters of Ventura, the party's highest-ranking elected official. While Ventura favors Trump, Perot's forces like Buchanan. Trump, who said he hoped to make a decision by January, noted that "I've got a lot to lose." "I'm the biggest developer in the hottest city in the world," he said. "I'm building 90-story buildings all over the place." The developer made billions in the New York real estate boom of the 1980s and lost most of it in the bust of the early 1990s. He bounced back and Forbes Magazine now puts his fortune at $1.6 billion. Trump said he would run only if he was convinced he could win. "The polls have been unbelievable," he said. A variety of surveys, however, showed Trump would be a long shot to win either the presidency or the Reform Party nomination. A CNNTime poll last month 1 . 9 drag nrm could lead to bowel obstruction in infants. . And in August it recalled kits to fight certain allergic reactions after some samples were found to be "subpotent," and it agreed to a $50 million settlement of health claims made by users of its contraceptive, Norplant. All of this comes a year after the collapse of two proposed mergers, with SmithKline Beecham and Monsanto. AHP's stock price hit a more-than-five-year high of $70.25 in April. But it took a sharp turn downward in the summer as diet-drug cases moved toward trial. On Aug. 6, AHP shares fell 12 percent after a Texas jury awarded $23.3 million to a woman with heart-valve damage. And last month, the company's share price hit a 52-week low of $38.50 on reports of a preliminary FBI investigation into how American Home Products got U.S. Food and Drug Administration approval for Redux. Plaintiffs' lawyers (left to right) John J. DRUGS from 29 tainty and distractions of litigation." He reiterated the Madison, N.J., company's stance that it had behaved "lawfully and responsibly at all times." Pondimin was the "fen" in the once-popular "fen-phen" diet-drug combination, taken by millions of Americans in the mid-1990s until September 1997, when American Home withdrew Pondimin and Redux from the market after they were linked to heart-valve disease. The "phen" part of the formula, a generic drug called phentermine, is still available. Since then, , several scientific studies have been published about the side effects of the drugs, but few definite conclusions have been reached. Each side has hired prominent scientists, who have rendered opposing opinions. Under the settlement, $1 billion -will pay for refunds of the prescription costs and for the long-term medical monitoring of every person who took either .drug but has shown no ill effects, including people who have not sued. Another $200 million is set aside for lawyers' fees. In addition, $2.55 billion will cov p - - 1 1 f 11 11,1 w"" "" " : i V r . - I J.L : w j jfci . : am,-1 in r ii mi ii mi iim nfi ni'mim-ti m-- .mt iMP Settlem Ni I TO P MITCH JACOBSON Associated Press Real estate tycoon Donald Trump and Minnesota Gov. Jesse Ventura stop forjhe cameras on their way into Trump International Hotel in New York. asked 1,011 adults nationwide whom they would "most prefer" to see as the Reform Party candidate. Buchanan got 28 percent, followed by Ventura with 24 percent, and Trump, 11 percent. Ventura has said he will not run for president next year. A Fox News poll asked 900 voters nationwide last month whom they s snares First Call Corp., the Boston firm 80 -that monitors analysts' recommendations, found no change in its con sensus of analysts who follow AHP following yesterday's settlement announcement. Analysts forecast that AHP would earn 47 cents a share in the third quarter and $1.76 for the year. "We view this settlement as positive as it puts a relatively firm boundary on the liability," Steven C. Tighe, an analyst with Merrill Lynch, said in a report issued yesterday afternoon. Analysts cautioned that the company still faces litigation from patients who say they contracted a rare lung disorder after using its diet drugs. "There are some issues remaining," Lund said, ."but now I think the management can focus on other issues." 3Q He said the company has several products about to be launched and is seeking FDA approvals for others. Cummings, Arnold Levin and Christopher Placitell discuss the settlement at ent reached in diet cases er payments over 16 years to people suffering from "significant" heart-valve disease, as defined by government standards, and up to $229 million in legal fees. Depending upon such factors as age, other medical conditions and severity of injury, each person could receive up to $1.5 million. American Home said it would record a third-quarter, pre-tax charge against earnings of $4.75 billion to pay for the settlement plus other judgments, settlements and legal costs associated with the litigation. The after-tax cost to shareholders will be $2.51 per share. In the past six months, diet-drug suits have contributed to a steep decline in AHP's value. From a 52-week high of $70.25 a share on April 13, the stock hit a low of $38.50 on Sept. 9, a 45 percent drop. Yesterday, the share price closed at $48.75, up nearly 8 percent. The settlement could fall far short of ending all litigation, and the company said it would exercise its option to rescind the deal if there were too many opt-outs. Plaintiffs have three opt-out opportunities. Lawyers in several states who represent personal-injury cases favored for the Reform Party nomination if the choice was between Buchanan and Trump. Buchanan won, 49 percent to 24 percent. A survey of New Yorkers released this week by Quinnipiac College had a blunt, New York-style message for Trump: He should forget about it Sixty-six percent of those sur- Aug. 6 AHP shares close at $44.88 after Texas jury awards '$23.3 million to woman with heart-valve 1 a 1939 A M J SOURCE: Bloomberg News vowed yesterday to opt out of the deal and take their chances in court. "I just think it's a shameful settlement as far as what you're getting and how much you're giving up," said Kip Petroff, a Texas lawyer who recently saw a jury award one of his clients $23.3 million. Although the client eventually agreed to accept about one-tenth of that amount, she would have received only $21,000 under yesterday's settlement, Petroff said. Said Paul Napoli, whose Manhattan law firm has 5,000 diet-drug cases: "We believe that 99 percent of our clients will opt out." The tone was much different at a news conference yesterday in Philadelphia held by plaintiffs' lawyers who participated in the settlement. "We put our lif eblood into this settlement," said Michael Fishbein, one of the negotiators. "This settlement does an enormous amount of good. ... It has achieved what we as lawyers seldom see, and that is a full measure of justice." Christopher Placitella, another lawyer who participated in the negotiations, said: "We consider this case to be the greatest consumer-protection case of all time." April 13 More-than-five-year high of $70.25 70 -ft damage. lft A 60- -i j! - ! M ! 50 - i f 40i c;A!IP:C::;k 'y v, 5 i J X ? veyed said they definitely would not vote for Trump, just 3 percent said they would vote for him, and 22 percent said they probably would not support him. "He is good at building buildings, but he just isn't a very good presidential candidate," Maurice Carroll, director of Quinnipiac's Polling Institute, told the New York Daily News. Regardless of his political potential, the flamboyant Trump can cause a buzz. CNN delivered as "breaking news" his taped comments on Larry King Live, which was to be broadcast last night, that he was set to form an exploratory committee. Within minutes Nora Fe-derer, a Trump spokeswoman in New York, was deluged with scores of calls from reporters nationwide. "I'm going nuts," she said. "He should hold a news conference." CNN analyst Schneider said: "This man likes attention. Clearly vanity is a large part of this." Still, Schneider said, a Trump campaign could cause concern in Democratic and Republican circles. "The main thing that they are worried about is his money," Schneider said. "It's not clear what his politics are." ' " Sept. 9 AHP shares hit 52-week low Of $38.50 on reports of preliminary FBI probe into the company's conduct in getting FDA approval of Redux. Yesterday $48.63 Partial settlement announced. CYNTHIA GREER Inquirer Staff Artist WILLIAM F. STEINMETZ Inquirer Staff Photographer a news conference in Center City. A key reason for that, Placitella said, was that the settlement provides funds for medical testing for poor and uninsured people. The lawyers downplayed the $429 million in fees they could be paid under the settlement. Arnold Levin, one of the lead lawyers in the federal litigation, said the fees would be in the range of nine percent. Traditionally, he said, lawyers get 20 percent to 25 percent in class-action settlements. Global settlements of the type announced yesterday have fared poorly in winning court approval in recent years, but several plaintiffs' lawyers described the American Home deal as having unique and flexible features that are designed to overcome hurdles in court. One of those features is the succession of opt-out opportunities. Acknowledging that it will be "a legal challenge" to win court approval, Fishbein said: "We think we did it right. We think we did it so right that if this settlement fails judicial approval, that no class settlement will ever be approved." The settlement must be approved by U.S. District Judge Louis C. Bechtle of Philadelphia, who is over seeing the nationwide litigation, as well as several state judges. Last week, Bechtle rejected a proposed $100 million settlement with another pharmaceutical company involved in the litigation, Interneuron Pharmaceuticals Inc. Among the state judges who will review the deal is New Jersey Superior Court Judge Marina Corodemus, who is presiding over a trial in which up to 100,000 state residents want the company to pay for long-term medical monitoring. Last week, she dismissed the jury after receiving assurances from lawyers that a settlement was near. American Home officials said they expected court approvals to take as long as two years. They estimated that the number of diet-drug lawsuits against the company now totals about 6,500, involving 11,000 individuals. Central to the litigation has been the contention that American Home deliberately withheld what it knew about the dangers of the drugs. The company has said that it behaved "lawfully and responsibly" throughout, keeping the Food and Drug Administration fully informed. The deal does not affect the dozens of other pharmaceutical companies, weight-loss centers and physicians who were sued after American Home pulled Pondimin and. Redux from the market. Inquirer staff writer L. Stuart Ditzen contributed to this article. Aug. 11 AHP shares close at $41 on day that New Jersey trial starts. i

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