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Lilly ordered to pay $3 billion in Actos damages

April 8, 2014

Takeda Pharmaceutical Co. and Eli Lilly and Co. on Monday were ordered to pay a combined $9 billion after a federal court jury found they hid the cancer risks of their Actos diabetes medicine in the first U.S. trial of its kind.

Indianapolis-based Lilly, Takeda’s partner, was ordered to pay $3 billion, an amount that represents nearly 13 percent of its 2013 revenue total of $23.1 billion.

Takeda, based in Osaka, Japan, was ordered to pay $6 billion in punitive damages by the jury Monday in Lafayette, La. Its shares fell as much as 5.2 percent Monday in Tokyo, their biggest decline since March 2009.

“I hope Takeda executives in Japan heard what this jury had to say loudly and clearly,” Mark Lanier, a lawyer for former Actos user Terrence Allen, said after the verdict. The jury earlier awarded $1.5 million in compensatory damages to Allen, who blamed the drug for his cancer.

Takeda, Asia’s largest drugmaker, faces the Actos claims after it scrapped development of another diabetes drug this year when research linked it to liver damage. More than 2,700 Actos suits have been consolidated before U.S. District Judge Rebecca Doherty in Louisiana for pretrial information exchanges, according to court dockets. Doherty presided over Allen’s trial.

The $9 billion jury award, the seventh-largest in U.S. history based on data compiled by Bloomberg, is almost certain to be reduced because the U.S. Supreme Court has said punitive verdicts must be proportional to the awards of compensatory, or actual damages that underlie them. The country’s highest court has said that in some cases, punitive awards that amount to ten times a compensatory award would be acceptable.

Of the 10 largest U.S. punitive verdicts previously awarded against corporations, all were either reversed or substantially reduced. None were paid at the amounts assessed by the juries.

“Takeda respectfully disagrees with the verdict and we intend to vigorously challenge this outcome through all available legal means, including possible post-trial motions and an appeal,” Ken Greisman, general counsel for Takeda’s U.S. unit, said in an e-mailed statement.

“We also believe we demonstrated that Takeda acted responsibly with regard to Actos,” Greisman said.

Candace Johnson, a spokeswoman for Lilly, said in an e-mail that the company is confident Actos is an important option for the treatment of type 2 diabetes.

“While we have empathy for the plaintiff, we believe the evidence did not support claims that Actos caused his bladder cancer,” Johnson said. “We intend to vigorously challenge this outcome through all available legal means, including possible post-trial motions and an appeal.”

"Under its agreement with Takeda, Lilly said it "will be indemnified by Takeda for its losses and expenses with respect to the U.S. litigation and other related expenses in accordance with the terms of its indemnification agreement." 

Market reaction

Atsushi Seki, an equities analyst at Barclays Plc in Tokyo, said any efforts to reduce the verdict should be watched carefully. The market took about 40 percent to 50 percent of the payment into account when it comes to Takeda and that’s an overreaction, Seki said.

Allen sued both Takeda and Eli Lilly over Actos. Lilly served as Takeda’s U.S. partner in selling and marketing the drug over a seven-year period starting in 1999. While that partnership ended in 2006, Lilly continued to have rights to sell Actos in parts of Asia and Europe, as well as in Canada and Mexico.

After the verdict, Lanier exchanged celebratory high-fives with member of his legal team outside the courtroom. He said evidence presented in the trial showed Takeda agreed to indemnify Lilly for any legal liability tied to Actos. That means that Takeda will probably be on the hook alone for whatever the final amount turns out to be.

Bruce Parker, a lawyer who represented both Eli Lilly and Takeda in the two-month trial, declined to comment as he was leaving the courtroom.

The Louisiana jury is the fourth panel to have weighed allegations that Takeda marketed Actos knowing it could cause cancer and failed to properly warn doctors and consumers about the risks.

Last year, state juries in California and Maryland ordered Takeda to pay a total of $8.2 million in damages to former Actos users. Judges in both states threw out the verdicts. Jurors this year in state court in Las Vegas rejected claims the company failed to properly warn consumers about the risks of Actos.

Generic competition

Actos sales peaked in the year ended March 2011 at $4.5 billion and accounted for 27 percent of Takeda’s revenue at the time, according to data compiled by Bloomberg. Actos has generated more than $16 billion in sales since its 1999 release, according to court filings. Takeda now faces generic competition from Ranbaxy Laboratories Ltd.

The verdict comes as both companies battle rising competition from cheaper generics. Takeda has seen earnings decline due to generic competition on Actos, once the world’s best-selling diabetes medicine, and Lilly has seen treatments for pain and schizophrenia lose market share to lower priced copies.

Takeda, which traces its origins to a medicine wholesale business opened in Osaka in 1781, has been making acquisitions and hiring senior executives from overseas to globalize its business in recent years.

New chief

It has hired French national Christophe Weber as chief operating officer and plans to name him chief executive next year, which would make him the first non-Japanese leader in Takeda’s history. Takeda in February predicted net income would fall 24 percent to a 15-year low of $971.5 million for the year ending March 2014.

Lilly in January reported that fourth quarter sales fell about 2 percent, to $5.81 billion.

In addition to the federal court lawsuits, Takeda and Lilly face hundreds more claims over Actos in state courts including Nevada and Illinois.

Lawyers in an Actos case that began in state court in Las Vegas in February have said they are seeking more than $1 billion in compensatory and punitive damages for two women who blame the drug for their bladder cancers.

Allen alleged in the Louisiana case that he developed bladder cancer after taking Actos for more than five years starting in 2006. Lanier had said before the trial he was seeking at least $15 million in damages for the former hardware- store manager from Attica, New York.

Misleading regulators

Allen alleged in his lawsuit that Takeda executives ignored or downplayed concerns about the drug’s cancer-causing potential and misled regulators about its risks to protect billions in sales.

Takeda didn’t provide a specific warning about Actos’ cancer risks until 2011, seven years after experts said the bladder-cancer link became clear and 12 years after the drug went on the U.S. market, Lanier said.

Takeda executives said in e-mails that Actos “was vital to the company’s survival” and that prompted the drugmaker to drag its feet in acknowledging the medication’s cancer risks, Lanier said.

Takeda officials intentionally destroyed documents about the development, marking and sales of Actos, Lanier said. The company ditched files of 46 former and current employees, including those of top executives in Japan and U.S. sales representatives, he said.

Documents destroyed

Because Takeda failed to properly protect the Actos documents, Doherty penalized the company by instructing jurors they could infer that the files may have buttressed Allen’s claims the company wrongfully hid the medication’s health risks.

“The breadth of Takeda leadership whose files have been lost, deleted or destroyed is, in and of itself, disturbing,” Doherty wrote in a January ruling that opened the door for jurors to hear about the destroyed documents.

After deliberating for about four hours yesterday, jurors found Takeda and Lilly “failed to adequately warn” about Actos’ bladder-cancer risks and that the drug caused Allen’s disease, according to court filings.

Jurors also found Takeda and Lilly executives “acted with wanton and reckless disregard” for patients’ safety in their handling of the drug and that justified a punitive damage award against both companies.

“This verdict sends a message that you must put the health and safety of Americans ahead of profits or American juries will have the courage and resolve to hold global corporations accountable,” Neil Overholtz, a Florida lawyer who represents former Actos users, said in an e-mailed statement.
 

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