Jan. 31 (Bloomberg) -- GlaxoSmithKline Plc said it settled on the eve of trial a lawsuit alleging its Avandia diabetes drug caused a North Carolina man to die of a heart attack, avoiding a jury determination over risks associated with the medicine.
The U.K.’s biggest drugmaker resolved the suit by the family of James Burford, an Avandia user who died in 2006. The company declined to provide details of the accord’s terms. The resolution eliminates the risk Glaxo would face a large jury award, said Navid Malik, a drug-industry analyst at Matrix Corporate Capital in London.
Investors worried it “could lead to substantial punitive damages,” Malik said in a Jan. 25 interview. The company has already agreed to pay almost half a billion dollars to resolve claims it hid the drug’s health risks. “GSK needs to successfully settle as many of these cases as possible.”
The lawsuit, scheduled for trial this week in Philadelphia federal court, was the first of 2,000 heading to court alleging London-based Glaxo hid Avandia’s health risks. Regulators in Europe had the drug withdrawn from the market and U.S. sales were limited because of heart attack risks. Glaxo had also said it was setting aside money to address federal prosecutor probes of its marketing of at least nine drugs, including Avandia.
Mary Anne Rhyne, a U.S.-based spokeswoman for Glaxo, said in an e-mailed statement yesterday that the company settled the Burford case to avoid the risks and costs of litigation.
$3.5 Billion Charge
Glaxo announced Jan. 17 that it is taking a $3.5 billion charge to cover expenses linked to investigations and suits over Avandia. The reserve brings to $6.4 billion the amount the drugmaker has set aside in the past 12 months for legal costs tied to Avandia.
The latest settlement resulted from Glaxo’s move to resolve all Avandia cases brought by Joseph Zonies and Thomas Cartmell, two plaintiffs’ attorneys picked by U.S. District Judge Cynthia Rufe in Philadelphia to lead a group steering the progress of more than 1,600 cases consolidated there. Zonies, of Denver, and Cartmell, of Kansas City, Missouri, didn’t return calls seeking comment.
Glaxo said in September it would stop promoting Avandia worldwide after regulators said the medicine would be withdrawn from Europe and sales would be limited in the U.S.
The company agreed last year to pay about $460 million to resolve about 10,000 suits accusing it of hiding Avandia’s heart attack risks.
Facing 13,000 Lawsuits
At the time, the drugmaker was believed to be facing about 13,000 cases over the drug, Gbola Amusa, an analyst at UBS AG in London, said in an interview. Company officials said the accords resolved the majority of those suits.
Those settlements generated another wave of lawsuits, Vance Andrus, a plaintiffs’ lawyer involved with the consolidation of cases in Philadelphia, said this month.
When they announced the $3.5 billion in charges, Glaxo officials said some of the funds would go toward covering the “substantial” number of new Avandia claims filed in the U.S.
The company said it also set aside money to cover fallout from an investigation by federal prosecutors into Glaxo’s marketing campaigns for nine drugs, including Avandia.
Federal prosecutors in Colorado issued a subpoena in 2004 over Glaxo’s “sales and promotional practices relating to nine of its largest selling products,” the company said in its 2009 annual report.
Federal prosecutors in Colorado are investigating whether Glaxo promoted the drugs for unapproved uses, the company said.
The company still faces at least 1,600 cases filed in Philadelphia and another 400 in state courts across the U.S., lawyers for Avandia users and the company said last week. Lawyers also have other cases that haven’t yet been filed under agreements with the drugmaker.
Burford, an electrical-parts salesman, took Avandia for 15 months to treat diabetes before having a fatal heart attack in his North Carolina home, according to court filings. He was 49 at the time of his death.
Glaxo’s lawyers said diabetics like Burford are at an increased risk for heart attacks regardless of what drugs they take and that Burford’s lawyers couldn’t conclusively link Avandia to his heart woes.
Lawyers for Burford’s family alleged that Glaxo refused to take Avandia off the market, even though studies concluded it increased risks of heart attacks and strokes. They also claimed Glaxo officials withheld studies by regulators showing the increased risk tied to the drug.
Glaxo fell 15 pence, or 1.3 percent, to 1,128.5 pence at the close of London trading.
The case is Deborah A. Burford v. SmithklineBeecham Corp., 07-CV-05360, U.S. District Court for the District of Pennsylvania (Philadelphia).
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