Endo to Pay $830 Million to Resolve Vaginal-Mesh Suits

Endo International Plc will pay about $830 million to resolve about 20,000 lawsuits that alleged its vaginal-mesh implants eroded in some women and left them incontinent and in pain.

Endo’s American Medical Systems Inc. unit said yesterday in a statement that it’s settling the suits over devices including the Perigee, Apogee and Elevate implants. Dublin-based Endo still faces more than 23,000 claims over the inserts, Chief Executive Officer Rajiv De Silva said in a call with investors today. Some of those cases have been consolidated for pretrial proceedings in West Virginia.

The settlement came a day after the U.S. Food and Drug Administration said vaginal-mesh inserts should be subject to stricter safety requirements because they are high-risk devices. Thousands of women contend the implants cause organ damage and make sex painful.

Endo said in securities filings in February it was reserving $520 million to deal with vaginal-mesh litigation. The company also has said it has insurance that may cover all or part of the costs of resolving the implant cases. Endo said yesterday it has set aside a total of $1.1 billion for legal costs tied to the device cases.

Net Loss

Endo today reported a net loss of $436.9 million, or $3.41 a share, in the first quarter and attributed the loss to the addition of about $625 million to its vaginal-mesh reserve to cover costs of the settlements.

“The settlements, once final, will resolve a substantial majority of the AMS vaginal mesh-related claims,” Endo officials said in yesterday’s statement.

Endo rose 5.4 percent to $66.36 in New York trading today after the company boosted its sales and profit forecasts for the year.

Endo’s move to settle is a sign many vaginal-mesh makers are ready to end litigation over the devices, Carl Tobias, who teaches product-liability law at the University of Richmond in Virginia, said yesterday in an interview.

“We could very well see a wave of similar settlements in coming months,” Tobias said. “The device makers haven’t won many cases in court and settlement is looking more attractive to them.”

FDA Order

The FDA had previously ordered Endo, Johnson & Johnson, C.R. Bard Inc. and 31 other vaginal-implant makers to study rates of organ damage and complications linked to the devices after manufacturers faced a wave of lawsuits.

Doctors inserted more than 70,000 mesh devices in the U.S. in 2010, threading them through incisions in the vagina to fortify pelvic muscles that failed to support internal organs or to treat incontinence, according to court filings.

J&J, the world’s biggest maker of health-care products, pulled four lines of vaginal implants off the global market last year.

Under Endo’s settlement, women who contend they were injured by the implants will receive an average of about $40,000 per case based on the total payout of $830 million.

The settlement is designed to allow women to seek more for their claims if the devices caused severe injuries and forced them to undergo multiple surgeries to have the inserts removed, said Joseph Rice, a South Carolina-based plaintiffs’ attorney who helped negotiate the deal.

‘Professional Negotiations’

“This settlement has been the result of adversarial, but respectful and professional negotiations on the part of all parties,” Rice said in a release. Rice helped negotiate the $246 billion tobacco-litigation accord on behalf of state attorneys general in November 1998.

Other lawyers who settled their inventories of vaginal-mesh cases included Henry Garrard, an Athens, Georgia-based attorney who won a $2 million jury award against Bard last year in West Virginia.

Endo still faces the vaginal-mesh suits consolidated in Charleston, West Virginia, before U.S. District Judge Joseph Goodwin, who is overseeing information exchanges and trials.

The settlement helps remove “an overhang from our business and that is a positive step,” De Silva said in today’s call.

First Trial

Endo hasn’t yet faced a trial over its devices. The company is slated to face its first trial early next year in Minnesota state court on claims that it defectively designed the vaginal-mesh implants, Bryan Aylstock, a Florida-based lawyer who hasn’t settled his claims against AMS, said in an interview today.

Last month, New Brunswick, New Jersey-based J&J was found liable for a woman’s injuries in connection with an insert used to treat incontinence and ordered to pay $1.2 million in damages.

Other insert makers, including Bard, based in Murray Hill, New Jersey, Natick, Massachusetts-based Boston Scientific Corp. and Coloplast A/S also were engaging in settlement talks, people familiar with the discussions said in September.

Coloplast, based in Humlebaek, Denmark, agreed in March to pay about $16 million to resolve 400 claims that its inserts harmed women, people familiar with the settlement said. Women in those cases are receiving an average of $40,000 each, they said.

Vaginal-mesh makers may have more incentive to settle after the FDA’s announcement regulators are considering tightening the devices’ safety standards.

High-Risk Devices

If the inserts are designated high-risk devices, manufacturers would be forced to conduct studies showing their products are safe and effective. Currently, manufacturers get approval based on comparing their mesh to similar products that are already on the market, rather than study results.

“The meshes are an example of innovative devices that seemed good at the time but were not sufficiently tested prior to being introduced,” said Erik Gordon, a University of Michigan business and law professor who teaches classes about how drugs are developed and regulated in the U.S.

“There is tension between allowing innovative products to market quickly so that they can help patients versus being reasonably sure that the products do no harm,” Gordon said in a phone interview yesterday.

The consolidated AMS cases are In re American Medical Systems Inc. Pelvic Repair Systems Products Liability Litigation, 12-md-02325, U.S. District Court, Southern District of West Virginia (Charleston).

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