ParfumGigi@aol.com ParfumGigi@aol.com

Big Pharma drew a line in the sand for plaintiffs lawyers seeking the next litigation gold mine

All of the necessary elements of a litigation blockbuster seemed to be in place.

The science was good. The defendants -- a handful of enormous pharmaceutical companies -- still deny it, but two long-term studies have shown that a tiny percentage of the people who took over-the-counter drugs containing a chemical called phenylpropanolamine (PPA) were victims of PPA-associated hemorrhagic stroke. According to the epidemiological studies, thousands of people who used nonprescription diet pills or cold remedies suffered sudden bleeding into their brains as a result.

The liability case appeared just as promising. Industry files were full of damning evidence that pharmaceutical companies had questioned PPA's side effects long before November 2000, when the Food and Drug Administration demanded that drugs containing the chemical be withdrawn from the market. Even after an industry-designed and -sponsored study demonstrated the link to stroke in 2000, drugmakers stalled the FDA for almost a year, continuing to sell PPA-containing products until the government called for their withdrawal. "We had a good liability story," says Ellen Relkin of New York's Weitz & Luxenberg, one of the plaintiffs firms that poured millions of dollars into PPA cases. "We were very optimistic."

The PPA litigation launched with the fanfare that always accompanies an incipient mass tort: the blare of lawyers advertising for clients and the bass line of thousands of case filings. Newspapers picked up the story: The New York Times and later the Los Angeles Times ran accusatory investigative pieces about PPA and the drug industry. Early jury research showed panels angry at perceived corporate cover-ups. Plaintiffs lawyers talked about PPA as the next fen-phen, the next gold mine of a litigation.

It wasn't. And though there are still a few plaintiffs firms with significant PPA caseloads, many others are closing down their PPA dockets, settling the cases for which they can wrest something from defendants and dismissing the rest. "PPA was not a successful litigation for us," concedes Christopher Seeger of New York's Seeger Weiss, who has transferred his attention to the Vioxx litigation. Adds Relkin of Weitz & Luxenberg: "It hasn't been as profitable as we would have liked."

In some ways the course of the PPA litigation was determined by factors no lawyer could control. It was difficult to prove that victims had taken over-the-counter medicines considered so safe that they were rarely noted in medical charts. Moreover, jurors didn't like to think that everyday drugs they and their families had taken without incident might have caused devastating strokes, particularly when a victim's stroke could be attributed to some other cause.

But there was another important reason for the relative failure of the PPA mass tort, one with implications for big product liability litigations that will begin long after the last PPA case is over. Call it defense intransigence. Instead of attempting to resolve the litigation quickly through a class action or masses of settlements, defendants dug in, defying conventional wisdom about the dangerous corporate implications of litigation uncertainty. Fighting, for some of the defendants in the PPA litigation, was preferable to settling, even when fighting might be more expensive, in the short term, than writing a check to make a case go away. PPA defendants Novartis Consumer Health and Bayer Corp. insisted on bringing PPA cases before juries -- and then won them. Of nine PPA verdicts since 2000, only one was a plaintiffs win, and even that award, $400,000 against Bayer in a Texas state court, was hardly a bonanza. Novartis, Bayer and the other PPA defendants have settled, in the aggregate, hundreds of the plaintiffs' best PPA cases -- without the Damoclean sword of a huge jury verdict hanging over their heads. Settlement offers, as a result, have been low. Novartis, for example, has settled 134 of approximately 900 cases. Of those 134, 60 percent settled for less than $50,000. Only three Novartis PPA cases have settled for more than $1 million -- and scores have been dismissed by plaintiffs lawyers who decided the PPA litigation simply wasn't worth the risk.

Of course, not every burgeoning mass tort can accommodate the PPA approach. Not every case can be defended as successfully. (Just ask Merck & Co. Inc., in the wake of its $253 million Vioxx loss in Texas.) But every defendant can learn an important lesson from PPA. Mass torts are merely agglomerations of individual cases. Some plaintiffs are deserving, and some are not. Some have strong cases, and some don't. What keeps a mass tort from becoming a defense debacle is proving that reality to plaintiffs lawyers, even if doing so seems risky and expensive.

For Novartis, the story of the PPA litigation actually begins with a drug called Parlodel. In 1996, when Ciba-Geigy merged with Sandoz to form Switzerland-based Novartis, Ciba Pharmaceutical counsel Dorothy Watson inherited a troublesome docket involving Sandoz's drug Parlodel. Widely prescribed to postpartum women who wanted their milk to dry up, it was alleged to cause strokes. Sandoz had been settling cases as they came up for trial, including one for $8 million. That was not a strategy to the liking of Watson, who grew up at Ciba in what she describes as a culture of aggressive product liability defense. Nevertheless, Watson was forced to settle her first Parlodel case; she did not think the firm hired by her Sandoz predecessor, a 50-lawyer Colorado firm, was prepared to go to trial in Texas against famed litigator Joseph Jamail. Watson agreed to pay Jamail's client $20 million.

But after that settlement, Watson says, "we completely reversed course." For the remaining Parlodel cases, she retained a defense firm she trusted, Washington, D.C.'s Spriggs & Hollingsworth, and instructed its lawyers to challenge plaintiffs lawyers at every turn. "We said, 'Let's make them work.' Why should we make it easy for them?" says Watson, now vice president and general counsel of Novartis Pharmaceuticals Corp. "I knew I was going to have to pay more up front to have a case prepared, to go through the tactical, strategic moves, but that was ultimately going to give me more power."

Novartis confronted plaintiffs on their science -- often persuading judges to exclude plaintiffs' experts -- and on individual causation. Watson did settle some Parlodel cases -- most for about $10,000 -- but Novartis won others at trial, even in jurisdictions that usually make defendants shudder. After Watson initiated her aggressive defense strategy, the corporation spent less than $4 million to resolve more than 100 Parlodel cases -- a fraction of what it cost to settle that one case against Joe Jamail.

The success of Watson's Parlodel defense ultimately informed Novartis's approach to the PPA litigation, but not right away. Mass torts have a sort of predetermined orchestration in their early phases, and PPA followed it faithfully. The litigation began at the end of 2000, after the FDA's call for a withdrawal of PPA products. The agency was acting on the basis of a five-year study conducted by a team of scientists from Yale University -- under protocols approved by Ciba-Geigy and another pharmaceutical company -- that found an increased risk of hemorrhagic strokes in women who used drugs containing PPA. (The study was initially designed to look only at diet drugs, but when researchers expanded it to include decongestants, they found an association between stroke and the use of any PPA-containing product.) The study was published in the New England Journal of Medicine in December 2000. By the end of the month, Novartis and other drug companies had begun receiving notice of PPA suits.

They came as no surprise. Both of Novartis's predecessor companies had made products that contained PPA; Ciba-Geigy used it in an appetite suppressant and Sandoz in the Tavist and Triaminic brands of cough and cold medicine. And PPA had been controversial for more than 20 years. Then-congressman Ron Wyden of Oregon held hearings on PPA and diet drugs in 1990, and in 1991 an FDA researcher undertook a review of reports of strokes associated with PPA. It was her findings that prompted the FDA and pharmaceutical companies to work with Yale researchers in designing and sponsoring a full-blown study of PPA's side effects.

Novartis first saw a draft of the Yale study in the spring of 2000, several months before its publication. The company was shocked at the results -- it was expecting the study to affirm the safety of PPA -- and though Novartis executives found flaws in the study that they believed compromised the findings, they braced for fallout. "I read it and I said, 'mass tort,'" says Sean Reilly, senior vice president and general counsel of Novartis Consumer Health Inc. So even as Novartis and other drug companies began debating the implications of the study with government regulators, Novartis lawyers prepared for the inevitable litigation onslaught. In October, when an FDA advisory committee recommended the withdrawal of PPA drugs, the company hired Randolph Sherman of New York's Kaye Scholer, who had regularly represented Ciba-Geigy in commercial and antitrust litigation, to coordinate its PPA defense. Novartis and Kaye Scholer began lining up experts to challenge the Yale study findings, and the company notified its insurers that a mass tort was coming. Kaye Scholer lawyers made rough guesses of how expensive the PPA litigation might be. Their worst-case scenarios ran to about a billion dollars. Over on the plaintiffs side, meanwhile, the mass tort was playing allegro. Firms ran Internet and print ads, and referral networks funneled potential cases to trial firms. They, in turn, set up screening operations to sift out viable clients.

"We looked at thousands of cases," says Relkin of Weitz & Luxenberg, which ended up filing about 150 PPA suits. At Weitz, potential clients filled out questionnaires, which were reviewed by lawyers and paralegals. Then lawyers sent for and reviewed the medical records of people who passed the initial screening. By the time a PPA suit was filed, a plaintiffs firm might already have invested thousands of dollars in expenses and lawyer time -- but well-run firms considered it money well spent. "If you don't screen closely you can spend tens of thousands, even hundreds of thousands, on cases you shouldn't even have taken," says Peter Kraus of Dallas's Waters & Kraus.

As the litigation developed in that first year, the federal courts established a PPA multidistrict litigation under the supervision of Seattle federal district court judge Barbara Rothstein. A handful of well-financed plaintiffs firms agreed to lead the MDL, assuring that their side would be as formidable as the defense. (As has become common in MDLs, Judge Rothstein established a fund -- into which 4 percent of federal court settlements and 3 percent of state court settlements are paid -- to compensate plaintiffs lawyers who worked "for common benefit" on discovery and motions in the MDL.)

Little would happen in individual PPA cases until Judge Rothstein decided the defense's challenge to the science underlying claims that PPA caused strokes. (The U.S. Supreme Court set a standard to prevent so-called junk science claims in a 1993 case called Daubert v. Merrell Dow Pharms., Inc.; defense motions to exclude plaintiffs' experts are now called "Daubert" challenges.) In the unlikely event that the defense prevailed at Judge Rothstein's Daubert hearings, the PPA litigation would essentially be wiped out. For a year and a half after the MDL was established, both sides immersed themselves in science, deposing the Yale study researchers and outside experts. It was an expensive undertaking. Alex McDonald of Boston's Robinson & Cole, one lead plaintiffs firm, estimates that between them, plaintiffs and defendants spent $50 million on the Daubert fight.

The MDL process tends to make litigation unwieldy, slowing it to lento pace. MDLs also lend a certain gravitas to a set of cases, an acknowledgment that a mass tort is under way. That's one of the reasons defendants almost always oppose MDLs, as they did in PPA. But once the defense lost that battle and cases were massed before Judge Rothstein, says Terry Tottenham of Fulbright & Jaworski, lead defense counsel for Bayer, "we wanted the judge to set about assuring federal/state coordination." Particularly with complex science at issue, defendants didn't want a maverick state court ruling to precede Rothstein's Daubert finding. In general, Tottenham says, Rothstein was able to assure what he calls an "orderly procession" of the litigation, keeping Judge Rothstein ahead of the state courts.

The state court judges of Maine, however, prefer that plaintiffs in their jurisdiction receive trials within a year of filing suit, a quirk plaintiffs lawyer Alex McDonald planned to use to his side's advantage. "I'm always looking," he says, "for [an individual state court] case you can work up at the same time you saddle up for the MDL. If you win, you can color the whole MDL." McDonald had found a heartbreak of a case in Maine. Tricia Newenham was the star of her eighth-grade class, a beautiful, athletic girl who planned to be the first person in her family to go to college. After taking one dose of Triaminic, a Novartis cold medication, Newenham suffered a stroke that left her with severe brain damage. McDonald had screened his cases very thoroughly; in Newenham's, as in all the PPA cases he filed, the medical records contained a specific notation that she'd taken medicine with PPA in it. Newenham's case was scheduled to go to trial in June 2003. It would have been the first PPA trial in the country.

Novartis settled it. The settlement is confidential, but it is widely believed by lawyers involved in the PPA litigation to be several million dollars. "We were not ready to try the case, and it was a terrible case," says Sherman of Kaye Scholer. "You have to be smart as well as tough."

Rothstein's formal Daubert opinion, issued soon after the settlement of Newenham's case, was another blow to the PPA defense. The judge not only found that the science linking PPA to hemorrhagic stroke was sound for both men and women, she also shocked the defense with a ruling that cases involving PPA and ischemic strokes (strokes resulting from an arterial blockage) could also proceed. "We were disappointed in that," says Tottenham, the Bayer lawyer. "I suspect that the Daubert ruling was a high point [for plaintiffs]."

Novartis counsel Reilly and Kaye Scholer's Sherman traveled to Switzerland to meet with top management of the parent company after the Newenham settlement and the Daubert ruling. The Swiss were concerned. "[The general counsel] turned to me and said, 'You're good at litigation,'" recalls Sherman. "'We're going to take care of this, right?'"

Novartis, like most defendants facing mass torts, craved certainty, a number defining the ceiling of its exposure. The company's insurers, too, wanted to know what reserves to set. In 2003, Reilly and Watson resisted offering an estimate. Too early, they said. They needed a better sense of what plaintiffs cases looked like and how successful their defense of individual claims would be. "You can't judge exposure without experience," Watson says.

What was becoming clear, through the number of cases being filed, was that no major pharmaceutical firm faced ruin from the litigation. The epidemiology of the Yale study, says plaintiffs lawyer Kraus, indicated that there were about 10,000 victims of PPA-related strokes in the ten years preceding the FDA withdrawal. Plaintiffs firms did look at many thousands of potential cases, but good ones turned out to be hard to find. Most stroke victims hadn't recorded their use of over-the-counter medications. Some could not remember exactly which product they'd used. Some were overweight or had diabetes or high blood pressure or other health problems that might have accounted for their strokes. Some had suffered mild strokes or appeared to have recovered completely. "They just straggled in," says Paul Rheingold of New York's Rheingold, Valet, Rheingold, Shkolnik & McCartney, who settled three big-money PPA cases in the 1990s, before the FDA withdrawal. Rheingold is the cochair of the Association of Trial Lawyers of America PPA working group. "There just wasn't a big volume of cases," he says.

Moreover, the cases were spread among several defendants. Bayer, for instance, was named as a defendant in 3,000 PPA cases -- a number that was dangerous, but not catastrophic. Bayer outside counsel Tottenham says the number permitted Bayer to evaluate cases one by one, assessing the specific facts of each as it came up for trial or mediation. Novartis ended up with about 900 PPA cases. (A smaller company that manufactured appetite suppressants, Chattem Inc., was in more danger from the litigation; it made a $20 million class action settlement deal to stay afloat.) Plaintiffs never achieved the leverage of a devastating caseload -- like the tens of thousands of fen-phen cases Wyeth faced -- against any of the big defendants. "We were always a flea on their butt," says plaintiffs lawyer Kraus of Waters & Kraus.

Novartis's lawyers were spoiling for a chance to reenact the strategy they'd used so successfully in their most recent mass tort experience, the Parlodel litigation. They wanted to show plaintiffs lawyers that they would fight weak cases all the way to a jury. "The going-in philosophy was to play tough," says Watson. The company first invested in jury research in May 2003, hiring consultants and mock-trying a number of cases to figure out juror-friendly defenses. Watson, Reilly, and the Kaye Scholer lawyers settled five or six PPA cases after the Daubert ruling, waiting for the right vehicle through which to send their message of stubborn fearlessness.

They got three at almost the same time, two in California and one in New Jersey, at the end of 2003. California started first -- two plaintiffs cases tried before one jury. Novartis didn't consider Los Angeles County Superior Court an ideal trial venue, but both plaintiffs were demanding more than $5 million to settle. "There was no chance of that," says Reilly. Kaye Scholer's Sherman believed both California plaintiffs, moreover, were vulnerable to defense arguments. One of the women was an overweight diabetic with chronic hypertension. The other woman appeared only minimally injured -- and had given an account of her use of Novartis medicine at her deposition that didn't match what she told doctors when she was admitted to the hospital.

The New Jersey trial began in the middle of the California case. It was in a friendlier defense venue -- Kaye Scholer's Sherman calls Middlesex County, where it was tried, "the breadbasket of the drug industry" -- but was against a powerful opponent. Weitz & Luxenberg had a relatively large PPA docket, and would consider this first case a benchmark for future settlements. Novartis's mock juries reassured Kaye Scholer: The plaintiff had a decade of high blood pressure readings, and mock jurors blamed doctors for failing to treat her high blood pressure instead of blaming Novartis.

Between jury research, experts, lawyers and trial presentations, Novartis spent millions on these first trials. "This client understands: You can't skimp," says Sherman. Ellen Relkin of Weitz & Luxenberg estimates that Novartis forced her firm to invest between $60,000 and $100,000 in the New Jersey case just to get it to trial.

The verdicts came within a week of each other in January 2004. Novartis prevailed in all three: As the company's research had shown, jurors were reluctant to find familiar products defective, particularly when victims' strokes might have been caused by other health problems. A few months later, GlaxoSmithKline won its first PPA trial, a case in state court in Pennsylvania, against the plaintiffs firm Kline & Specter. (National coordinating counsel Charles Preuss, of the San Francisco office of Drinker Biddle & Reath, says that Glaxo, like Wyeth, has a policy of settling PPA cases in which plaintiffs make "reasonable demands. ... We can't try all these cases." But the Pennsylvania case, he says, "didn't have anywhere near the value the plaintiffs insisted it did." In general, Preuss insists, the PPA defendants' success is due more to deficiencies in the plaintiffs' cases than defense strategy. Still, he says, the PPA plaintiffs lawyers "have had to adjust their thinking. ... This isn't a gravy train.")

Bayer's PPA strategy was akin to Novartis's. "Generally we believed that if a case didn't have merit, we'd try it," says Tottenham, Bayer's national counsel. Bayer had followed a similar rule with good results in its most recent mass tort, an anticholesterol drug called Baycol that was alleged to cause muscle atrophy, sometimes leading to kidney failure or death; in March 2003 Bayer trial counsel from Bartlit Beck Herman Palenchar & Scott won the first Baycol trial, a well-publicized victory in Texas against a formidable plaintiffs lawyer, Mikal Watts, that helped to stymie further cases. Bayer lost its first PPA trial in Texas in October 2004, but considered the $400,000 verdict a victory of sorts, since jurors found no negligence by Bayer and awarded no punitive damages. Bayer followed with a pair of PPA wins in 2005, one in Utah and one in Florida, both against well-respected plaintiffs firms. "Our strategy has been highly successful in Baycol, and hopefully in PPA as well," says Tottenham.

Novartis tried two more PPA cases in 2005. The first, against Waters & Kraus, the firm that won the Bayer verdict, ended in a mistrial. Plaintiffs lawyer Peter Kraus says it cost him about $250,000 to try the case, an investment he'll have to add to if Novartis continues to refuse to settle and there's a second trial. Meanwhile, Kraus says, "Novartis doesn't care about how much they spend to try these cases. ... They want to come off as tough and resolute." Novartis also won the fifth PPA trial, a diet pill case in New Jersey. (All of Novartis's cases were tried by Kaye Scholer and cocounsel from other firms.)

All of the defendants, Novartis included, have continued settling PPA cases -- for amounts ranging from a few thousand to more than a million dollars -- while compiling their impressive trial record. As several plaintiffs lawyers note, defendants picked the cases that were tried, so their success isn't entirely surprising. Lawyers at Weitz & Luxenberg, Robinson & Cole, and Waters & Kraus say their firms made money in the PPA litigation despite defendants' trial victories.

But there's no question, says Kraus, that the tough-guy posturing of Bayer and Novartis, backed by their trial record, stopped whatever momentum the PPA litigation had after the Daubert ruling and the first settlements. Settlement amounts have been palatable for defendants, who can credibly threaten expensive trials.

Even Wyeth, which hasn't tried a PPA case, has reaped the benefit of its codefendants' courtroom success. (Novartis believes, however, that its settlements are lower than those of other defendants, because it has been the most aggressive about going to trial.) "We're getting good settlement results," says Wyeth's national PPA counsel, David Dukes of Columbia, South Carolina's Nelson Mullins Riley & Scarborough. "Mediators say, 'You have to look at the track record.'" Wyeth, Dukes says, had expected inflated settlement demands, because of a fen-phen-inspired perception in the plaintiffs bar that the company would pay out. But Wyeth changed its tactics from the fen-phen litigation, settling PPA cases one by one as they were assigned trial dates. The company is willing to go to trial, Dukes says, but not unless plaintiffs make unreasonable settlement demands. So far, that hasn't happened, Dukes says.

Moreover, settled cases are the exception. The "vast majority" of Wyeth's PPA cases, Dukes says, have been dismissed, either by plaintiffs lawyers who decided not to put money into the litigation or by Rothstein of the MDL, who has dismissed hundreds of cases on procedural grounds. (Some of those dismissals are on appeal to the 9th U.S. Circuit Court of Appeals.) All of the defendants have seen drastic decreases in their PPA dockets. Novartis's PPA docket is down from 900 to fewer than 110 cases, and shrinking week by week. "Plaintiffs are coming in in droves," says Sherman of Kaye Scholer. "They're settling in packages for peanuts."

Novartis and Bayer, not surprisingly, attribute the falloff in PPA cases to their own resolve. Should Novartis face a similar mass tort crisis in the future, its lawyers say, it will show the same stubbornness. And other defendants would be well advised to heed Novartis's experience. What general counsel wouldn't want to echo Novartis's Sean Reilly five years after the start of a mass tort? "It's under control," Reilly says. "Our management views this as a potential disaster that didn't happen."

gigi-Karen pass this on to our sisters and brothers please.