July 27 (Bloomberg) -- Johnson & Johnson agreed to pay more than $2.5 million to settle claims that its Duragesic pain- killing patch caused the death of a Florida man, three people with direct knowledge of the accord said.

The agreement means Johnson & Johnson, the world's largest medical-device maker, won't have to pay $5.5 million in damages awarded by a jury in June to the family of Adam Hendelson, the people said. The jury concluded Hendelson overdosed on opiate fentanyl when his pain patch leaked the substance in 2003. J&J could have appealed the verdict.

``The settlement indicates that Johnson & Johnson realizes the seriousness of these cases and that they have to pay serious money to resolve them,'' said Alex MacDonald, a Boston-based lawyer who has four Duragesic overdose cases set to go to trial next year.

The accord, recorded in a court filing without the amount of the payment, marks the first time Johnson & Johnson has settled a case that went to trial over the devices. The company is appealing a $772,500 damage award in July 2006 to the family of a Texas woman who died after her patch leaked.

The patches generated $1.29 billion in global sales last year, making it Johnson & Johnson's sixth-best-selling product, according to the company's Web site.

Plaintiffs' attorneys accuse Johnson and its Janssen Pharmaceutica Products and Alza Corp. units of ignoring production conditions that resulted in defective patches to protect sales.

FDA Probe

Jeff Leebaw, a spokesman for New Brunswick, New Jersey-based Johnson & Johnson, declined to comment and referred inquiries to Janssen, which makes the patch. Diane Pressman, a spokeswoman for Janssen, declined to comment.

In July, 2005, the U.S. Food and Drug Administration began a probe of 120 deaths linked to pain patches made by Johnson & Johnson and Mylan Laboratories Inc. The investigation followed a 2004 recall of some Johnson & Johnson patches after reports of leaks.

Mylan, based in Canonsburg, Pennsylvania, began marketing a generic version of the patches in 2005.

FDA spokeswoman Kimberly Rawlings said in June that the agency hadn't concluded its investigation. Regulators are ``continuing to investigate the safety of these patches to assure they remain safe and effective,'' she said.

The patches, introduced in 1990, release fentanyl into the skin. Researchers say fentanyl, a painkiller more powerful than morphine, can cause addiction or death in some users.

Jury Award

Hendelson, 28, was using the patches to help control the pain of a broken hip suffered in a car accident, his lawyers told jurors. He was found dead sitting in front of his home computer in December 2003. Hendelson, who was studying to be a computer technician, was wearing a patch when he died.

The jury in federal court in West Palm Beach, Florida, found that officials of the Johnson & Johnson units knew about defects in the patches and failed to properly warn doctors and consumers about their risks. They awarded $5.5 million in compensatory damages to Hendelson's family.

Johnson & Johnson and Hendelson's lawyers made the settlement public July 23 when they filed a motion to vacate the jury's award. The lawyers asked U.S. District Judge Daniel T.K. Hurley to throw out the damage award because ``the parties agreed to settle this matter,'' according to court documents.

Ike Gulas, one of the Hendelson's lawyers, declined to comment today on the settlement.

Lost Both Cases

MacDonald, a partner in the law firm of MacDonald Rothweiler Eisenberg, said Johnson & Johnson ultimately may have to work out a global settlement of the 300 to 400 wrongful-death suits over the Duragesic patches.

``They've lost the only two cases that have gone to trial so far,'' he noted. ``That should be an indicator to them of things to come.''

Shares of Johnson & Johnson fell $1.19 to $59.77 or almost 2 percent in New York Stock Exchange composite trading.

The company's top-selling drug in 2006 was the schizophrenia treatment Risperdal, which had worldwide sales of $4.2 billion. It was followed by the anemia-drug Procrit, with $3.2 billion in sales.

The case is Hendelson v. Janssen Pharmaceutica Products LLP, 05-8116, U.S. District Court, Southern District of Florida (West Palm Beach).

To contact the reporters on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net; Lindsay Fortado in West Palm Beach, Florida, at lfortado@bloomberg.net.

Last Updated: July 27, 2007 16:37 EDT