Nov. 27 (Bloomberg) -- Johnson & Johnson may pay as much as $1 billion to insurers who covered the medical costs of removing its recalled hip implants under a settlement announced last week, according to a lawyer involved in the accord.
J&J, the world’s largest seller of health-care products, said Nov. 19 it would pay patients at least $2.47 billion to settle about 8,000 lawsuits against its DePuy unit. J&J will also reimburse insurers for some costs of hip-removal surgeries known as revisions, Michael Kelly, a San Francisco-based lawyer who represents hip patients, told other plaintiffs’ lawyers in a Nov. 22 letter.
“The amount being paid by DePuy across the United States to satisfy medical-lien claims under this proposed program has been estimated to be between $500 million and $1 billion,” Kelly said in the letter, obtained by Bloomberg News. The letter was marked as “confidential communication for plaintiffs’ attorneys only.”
Paying $1 billion for hip surgeries, along with other expenses related to J&J’s push to resolve cases over DePuy’s ASR implants, will drive the cost of the accord to more than $4 billion, said Carl Tobias, who teaches product-liability law at the University of Richmond in Virginia.
“When everything is all said and done, J&J may wind up paying double that $4 billion to resolve all current and future litigation over those devices,” he said.
The ASR settlement, which doesn’t require a judge’s approval, was the second multibillion-dollar accord this month for J&J. The company, based in New Brunswick, New Jersey, agreed Nov. 4 to pay $2.2 billion to resolve criminal and civil probes into the marketing of Risperdal and other medicines.
Lorie Gawreluk, a DePuy spokeswoman, declined to comment on the lien estimate in Kelly’s letter. “We don’t comment on speculation,” she said today by e-mail.
J&J has spent about $1 billion on medical costs and informing patients and surgeons about the hip recall, Gawreluk said earlier this month. It set aside an undisclosed amount for litigation, which it increased before June 30, she said.
The company recalled 93,000 ASR hip implants worldwide in August 2010, saying 12 percent failed within five years. Internal J&J documents show 37 percent of ASR hips failed after 4.6 years. The failure rate in Australia last year climbed to 44 percent within seven years.
Under the terms of the accord, only plaintiffs who had an ASR hip implanted in the U.S. and had it removed by Aug. 31 are eligible for this settlement. The patients must have had the implant for at least 180 days before its removal, according to the terms.
J&J’s lawyers have said the average payment under the settlement for a hip removal will be $250,000. Those who suffered extraordinary injuries as a result of the procedures will be entitled to more.
The settlement doesn’t bar patients whose hips fail in the future from seeking compensation, which may add billions of dollars to the accord’s ultimate cost.
The company faces a total of about 12,000 hip suits filed or consolidated in federal and state courts in Ohio, California, Illinois and New Jersey. The settlement covers about 8,000 patients who’ve already had DePuy hips removed. The remaining claims were filed by patients who haven’t yet had such surgeries.
If 94 percent of eligible clients don’t agree to participate in the settlement by April 1, J&J can walk away from the deal. Some lawyers have said they will counsel their clients to reject the offer and hold out for more money.
By agreeing to pay Medicare and other insurers for the costs of hip-replacement surgeries, J&J is creating “a greater net recovery” for patients, Kelly said in the letter. Such costs are typically deducted from individual settlements.
Kelly said in an interview that he sent the letter to help patients and their lawyers in California understand the settlement and make informed decisions on whether to join.
“My job is not to sell the settlement or force anybody into joining it,” he said. “We wanted to provide information that clients and lawyers can use to evaluate the settlement.”
Kelly, part of a plaintiffs-lawyer group overseeing cases gathered in state court in San Francisco before Judge Richard Kramer, noted in the letter that the accord isn’t a “mandatory program.”
“For those who opt out, the road ahead will be unpredictable -- there is no indication DePuy will voluntarily pay more in settlement in the absence of some verdicts against them in trials that are not likely to be set for at least 9-12 months,” Kelly wrote.
Earlier this year, the 62-year-old Kelly persuaded a California jury to award $8.3 million in damages to a retired prison guard who sued over his ASR hip. The panel ruled the device was defectively designed and DePuy was responsible for the man’s injury. It also held that DePuy officials properly warned about the device’s risks and the company didn’t owe punitive damages.
J&J had touted the metal-on-metal implants, first sold in the U.S. in 2005, as a new design that would last 20 years and offer greater range of motion.
As failures mounted, patients complained in lawsuits that the implant caused dislocations, pain and follow-up surgeries known as revisions. They claimed that debris from the chromium and cobalt device caused tissue death and increased metal ions in the bloodstream.
The consolidated federal case is In re DePuy Orthopedics Inc., ASR Hip Implant Products Liability Litigation, 10-MD-2197, U.S. District Court, Northern District of Ohio (Toledo).
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