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Glaxo Said to Pay $250 Million to Resolve Avandia Suits

Glaxo Said to Pay $250 Million to Settle Avandia Lawsuit
GlaxoSmithKline Plc's Avandia diabetes drug. Photographer: JB Reed/Bloomberg

GlaxoSmithKline Plc agreed to pay more than $250 million to resolve about 5,500 claims related to its Avandia diabetes drug and avoid the first trial over claims it can kill users, two people familiar with the accords said.

Glaxo, the U.K.’s biggest drugmaker, agreed to settle the lawsuits claiming the drug causes heart attacks and strokes for an average of at least $46,000 each, said the people, who declined to be identified because they weren’t authorized to speak publicly.

The accords included a previously reported settlement of an undisclosed amount for the family of James Burford, an Avandia user who died in 2006. The Burford family’s case, filed in federal court in Philadelphia, was set for trial last week.

“An average of $46,000 per case is a modest price to pay, in the grand scheme of things,” Gbola Amusa, an analyst at UBS AG in London, said in a telephone interview. “If Avandia definitively had caused heart attacks, Glaxo would have been forced to pay” as much as $1 million a case, he said.

The cases settled were filed by plaintiffs’ lawyers Joseph Zonies and Thomas Cartmell. Glaxo was facing about 2,000 suits alleging the drugmaker hid Avandia’s heart-attack and stroke risks prior to the settlements, lawyers for former users and the company said in court hearings. The company already agreed to pay about $460 million to resolve allegations it didn’t properly warn doctors and consumers about the medicine’s risks.

European Sales Halted

Mary Anne Rhyne, a U.S.-based spokeswoman for Glaxo, declined to comment on the settlements. Zonies, of Denver, and Cartmell, of Kansas City, Missouri, didn’t immediately return calls seeking comment.

The company said Sept. 23 it would stop promoting Avandia worldwide after regulators said the treatment would be withdrawn from the market in Europe and sales would be limited in the U.S. because of studies linking the drug to increased risks of heart attacks.

Avandia sales fell 43 percent to $710 million last year in the wake of the sales restrictions, the company said. Avandia was once the world’s best-selling diabetes pill, generating $3 billion in annual sales.

Glaxo said Jan. 17 it’s 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 year for legal costs tied to Avandia.

GlaxoSmithKline officials said today they’ve updated Avandia’s warning label to include safety restrictions ordered by federal regulators, who cited studies showing the drug poses an increased risk of heart attack and stroke for some users.

10,000 Cases

The label now warns users that the drug is only intended for consumers who can’t control their blood-sugar levels with other diabetes drugs, according to an e-mailed statement from the company.

Glaxo officials agreed in July to resolve about 10,000 Avandia cases, which they said was the majority of claims over the drug at the time.

Publicity about those accords brought in another wave of suits over the drug, said the people familiar with the settlement of the Zonies and Cartmell cases.

The lawyers were appointed by U.S. District Judge Cynthia Rufe in Philadelphia to lead a group steering the progress of more than 1,600 cases consolidated in that court. London-based Glaxo is facing another 400 claims in state courts across the country, according to a September court filing.

The Zonies and Cartmell settlement included some cases that haven’t yet been filed under an agreement with Glaxo, the people familiar said. Such pacts, known as “tolling agreements,” are common in mass-tort cases.

Shares Rise

Trial was slated to begin Jan. 31 in federal court in Philadelphia in the Burford family’s case.

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 American depositary receipts, each representing two ordinary shares, rose 67 cents, or 1.8 percent, to $38.68 at 12:47 p.m. in New York Stock Exchange composite trading. The company rose 18 pence to 1,189 pence in London trading today.

The consolidated case is In re Avandia Marketing, Sales Practices and Products Liability Litigation, 07-01871, U.S. District Court, Eastern District of Pennsylvania (Philadelphia). The Burford case is Deborah Burford v. SmithklineBeecham Corp., 07-CV-05360, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).

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