Teva, Baxter, McKesson to Pay $162 Million Punitive Damages Over Propofol

A jury said Teva Pharmaceutical Industries Ltd. (TEVA) unit and two other drugmakers must pay $162.5 million in punitive damages for selling the anesthetic Propofol in a way that led three colonoscopy patients to develop Hepatitis C.

Jurors in state court Las Vegas ordered Teva Parenteral Medicines Inc., Baxter Healthcare Corp. and McKesson Corp. to pay so-called punishment damages over sales of the anesthetic in vials large enough to be reused by doctors. Anne Arnold, Richard Sacks and Anthony Devito contend they contracted Hepatitis C from reused vials during colonoscopy procedures. They had sought more than $700 million in damages.

It’s the second punitive award against Baxter and the unit of Petach Tikva, Israel-based Teva over a 2008 hepatitis outbreak in Nevada tied to Propofol. The first case resulted in a punitive verdict of more than $500 million against the drugmakers. Teva has agreed to cover all damage awards arising from the Nevada cases on behalf of Baxter and McKesson.

“It only took two atomic bombs to force the Japanese to surrender,” Will Kemp, one of the lawyers for the colonoscopy patients, said in a telephone interview yesterday. “We’re hoping Teva will start thinking about settling these cases after being hit with two punitive-damage verdicts of this size.”

Denise Bradley, a U.S.-based spokeswoman for Teva, said they plan to appeal the punitive award to the colonoscopy patients and the jury’s earlier award of $20.1 million in compensatory damages. The combined verdicts make the case the 10th largest jury award in the U.S. this year, according to data compiled by Bloomberg.

‘Full Defense’

“We believe that if we had been able to present our full defense, this verdict and the following decision would have had a different outcome,” Bradley said in an e-mailed statement. “We believe that the allegations against Teva are without merit.”

Deborah Spak, a Baxter spokeswoman, didn’t immediately return calls and e-mails seeking comment on the award.

“McKesson believes that the claims against it lack merit and that the verdicts against it will be reversed,” Megan Hawkins, a McKesson spokeswoman, said in an e-mailed statement.

A separate jury in the same courthouse yesterday also held Teva and Baxter liable for another colonoscopy patient’s hepatitis diagnosis and awarded he and his wife $14 million in compensatory damages. Jurors in that case will decide later this week how much the companies should pay in punitive damages.

Jurors in Arnold’s, Sacks’s and Devito’s case deliberated more than six hours over two days before ruling yesterday that Teva should pay $89.4 million in punitive damages and Baxter should pay $55.2 million. The panel found McKesson’s share should be $17.9 million.

Indemnity Agreement

Teva makes Propofol and San Francisco-based McKesson Corp. (MCK) serves as its current U.S. distributor. Baxter, based in Deerfield, Illinois, sold the drug for Teva until 2009, according to court filings.

Teva signed an indemnity agreement accepting financial responsibility for all the Nevada Propofol cases. A judge in Delaware ruled last month that the agreement was “valid and enforceable.”

The drug is an intravenous agent used for sedation or anesthesia, according to Teva’s website. The patients’ lawyers allege Teva intentionally sold Propofol in jumbo-sized vials to encourage doctors to reuse them, even with the risk of spreading blood-borne diseases such as hepatitis, an incurable liver disease.

Jackson Case Drug

Propofol is the same medication at issue in the involuntary manslaughter trial in Los Angeles of Conrad Murray, who was pop star Michael Jackson’s doctor. The physician is accused of giving the singer injections of Propofol and other sedatives that led to his 2009 death.

After awarding Arnold, Sacks and Devito compensatory damages last week, jurors were asked to consider whether Teva, Baxter and McKesson should be punished over their sales of Propofol in reusable-sized vials.

Lawyers for the colonoscopy patients told jurors at a hearing last week that Teva had total net sales of $9.7 billion last year while Baxter had $6.1 billion in net sales and McKesson had $1.9 billion.

Robert Eglet, one of the lawyers for the colonoscopy patients, urged jurors not to let the companies off with a “bargain-basement fine” and to “send a message” to drugmakers that they shouldn’t put profit over patient safety.

‘Hear This Verdict’

“They’ve got to be able to hear this verdict in Israel or this will never stop,” Eglet said referring to Teva’s headquarters.

Eglet and Will Kemp, another of the colonoscopy patients’ lawyers, asked jurors to award more than $735 million in punitive damages over the Propofol sales to Nevada endoscopy clinics.

Mark Tully, one of Teva’s lawyers, told jurors the drugmakers already understand that the panel was unhappy with sales of Propofol vials that can be reused for multiple patients because of the compensatory damages they awarded earlier.

That verdict “sent a message,” Tully said. “It’s a big verdict already.”

In the first Propofol case to go to trial in Las Vegas, jurors 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.

300 Lawsuits

Jurors ordered Teva to pay $356 million of the punitive damages award while assessing $144 million of the award to Baxter. Teva officials have asked the Nevada Supreme Court to throw out Chanin’s verdict.

Teva faces almost 300 lawsuits stemming from a hepatitis C outbreak three years ago in southern Nevada, the company said in a regulatory filing last month. Probes by Nevada health officials and regulators from the federal Centers for Disease Control and Prevention blamed the reuse of Propofol vials for infecting patients with hepatitis.

Last year, a state grand jury indicted Dr. Dipak Desai, who ran the Endoscopy Center of Southern Nevada at the time of the outbreak, on criminal charges. Many of the hepatitis-related cases were linked to that colonoscopy clinic. Desai also faces federal charges over the outbreak.

Shoddy Practices

Lawyers for Arnold, Sacks and Devito argued that Teva stopped making smaller Propofol vials because the larger containers were more profitable. The drugmaker marketed the 50- milliliter vials knowing doctors and staff would reuse them to save money, the attorneys added.

Attorneys for Teva and the Propofol distributors countered that improperly sanitized medical equipment, not reused Propofol containers, caused some Nevada colonoscopy patients to develop hepatitis and that the drugmakers shouldn’t be held responsible for colonoscopy clinics’ shoddy medical practices.

“Teva should not be held liable for the blatant disregard for patient safety by the medical professionals at their facility,” Bradley said in yesterday’s statement. “While the mistreatment of patients is unacceptable, it was not Teva’s fault.”

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

To contact the reporters on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net; Liz Benston in Las Vegas at lbenston@yahoo.com.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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