Teva Faces Second Trial Over Hepatitis Cases Linked to Drug

Teva Pharmaceutical Industries Ltd. (TEVA), the world’s biggest generic-drug maker, sold the anesthetic propofol in a way that led some patients to develop hepatitis C, a lawyer said at the start of a second trial over the allegations.

Robert Eglet, a lawyer for three Las Vegas residents who claim they were diagnosed with hepatitis after receiving propofol from tainted vials during colonoscopies, told jurors in opening statements today that officials of Teva, along with drug distributors Baxter International Inc. (BAX) and McKesson Corp. (MCK), knew sales of large vials of the drug could help spread blood-borne diseases.

The companies “made billions of dollars in profits at the expense of patient safety,” Eglet said in Nevada state court in Las Vegas. The trial of the first case against Teva and Baxter last year resulted in a verdict of more than $500 million against the drugmakers.

Teva faces almost 300 lawsuits stemming from a hepatitis C outbreak three years ago in southern Nevada, the Petach Tikva, Israel-based company said in a regulatory filing last month. Nevada health officials blamed the reuse of propofol vials for infecting patients with the incurable liver disease.

Teva manufactures the drug and San Francisco-based McKesson is its current U.S. distributor. Baxter, based in Deerfield, Illinois, sold the drug for Teva until 2009, according to court filings.

Cases Settled

Teva already agreed to settle about one-third of the hepatitis-related suits alleging patients received propofol from reused containers, according to a July 28 filing with the U.S. Securities and Exchange Commission. Teva said it set aside an undisclosed reserve to cover the settlements.

The drugmaker also faces “emotional distress” claims from patients at Las Vegas endoscopy clinics who didn’t develop the disease after receiving propofol during procedures. Propofol is an intravenous agent used for sedation or anesthesia, according to Teva’s website.

In the case that began today, Anne Arnold, Richard Sacks and Anthony Devito contend Teva’s 50-milliliter propofol containers aren’t designed as single-use vials and the drugmaker didn’t properly warn doctors about the dangers of “double dipping” into the anesthetic.

“We are confident that if the jury gets to hear all of the evidence, they will correctly determine that the drug-product defendants were in no way responsible for the tragic hepatitis outbreak that occurred in Las Vegas,” Denise Bradley, a U.S. spokeswoman for Teva, said Aug. 12 in an e-mailed statement.

Deborah Spak, a spokeswoman for Baxter, said Aug. 11 the company declined to comment on the suit because Teva accepted liability for all of the cases stemming from the 2008 hepatitis outbreak involving propofol. Megan Hawkins, a spokeswoman for McKesson, said Aug. 12 that the company doesn’t comment on pending litigation.

In a February SEC filing, Teva officials said the indemnification agreement with Baxter “does not extend to punitive damages.” Four months later, Teva executives acknowledged in another SEC filing that an arbitration panel ruled 2-1 that the agreement covered punitive awards.

The companies contend in court filings that that misuse of propofol vials by medical providers caused the 2008 hepatitis outbreak.

Doctor Indicted

Last year, a state grand jury indicted Dr. Dipak Desai, who ran the Endoscopy Center of Southern Nevada during the time outbreak occurred, on criminal charges. Desai’s case has been delayed after a judge found him incompetent to stand trial. He is also facing federal charges over the outbreak.

Sacks, a marketing executive; Arnold, a former real estate agent; and Devito, a retired barber, all allege they developed hepatitis C after getting propofol from tainted containers during colonoscopies, according to court filings.

Eglet and Will Kemp, another Vegas lawyer representing Sacks and Devito, described the jumbo-sized propofol vials as “weapons of mass infection,” in the first trial over Teva’s marketing of the drug.

A Las Vegas jury awarded Henry Chanin, a private-school principal, and his wife $5.1 million in compensatory damages and $500 million in punitive damages against Teva and Baxter. Chanin argued he developed hepatitis C after getting tainted propofol during a colonoscopy.

Punitive Damages

Jurors ordered a Teva unit to pay $356 million of the punitive award while assessing $144 million of the award to Baxter. A judge later added $8.4 million in attorneys’ fees and $9 million in interest to the final amount. It was the fourth- largest U.S. jury award of 2010, according to data compiled by Bloomberg News.

Teva officials asked the Nevada Supreme Court to throw out Chanin’s verdict, arguing the judge erred in not allowing them to assert claims that medical providers were at fault for Chanin’s infection. Those doctors already had settled claims against them over the hepatitis C outbreak.

Eglet and Kemp may seek to top the Chanin verdict. Eglet asked members of the current jury pool Aug. 8 whether they would have a problem being asked “to put $600 million in a verdict form for punitive damages,” according to a transcript.

‘Jumbo Dangerous Vials’

During opening statements today, Eglet told jurors the companies knew in the early 1990s that selling propofol in “jumbo dangerous vials” would encourage reuse of the containers and pose a risk of exposure to blood-borne diseases, such as hepatitis.

Instead of shifting to smaller vials, the companies retained the larger containers to hold down production costs and continued to sell a product “that was unfit for the purpose for which it is being sold,” Eglet said.

The case is Sacks v. Endoscopy Center of Southern Nevada LLC, 08A572315, District Court for Clark County, Nevada (Las Vegas).

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net.

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net

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