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AHP settlement said near
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September 16, 1999: 10:26 a.m. ET
Drug maker, plaintiffs reportedly may settle diet pill lawsuits for $3B
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NEW YORK (CNNfn) - American Home Products Corp. may be near a multibillion dollar settlement in many of the "fen-phen" diet drug lawsuits, according to published reports Thursday.
American Home (AHP) stock, battered in recent months as the diet drug cases have progressed through the courts, jumped immediately on the news, gaining 1-9/16 to 44-13/16 at the start of trading.
The Wall Street Journal, citing lawyers familiar with the case, reported that under a tentative deal with plaintiffs' attorneys, the company would pay approximately $3 billion for medical check-ups for thousands of people who used the diet drugs Pondimin and Redux. Additional cash awards would go to those who suffer serious health problems caused by the pills.
The Star-Ledger of Newark said the settlement could exceed $5 billion, and would settle more than 4,100 lawsuits
A spokeswoman for American Home Products' pharmaceutical division, Wyeth-Ayerst Laboratories, declined comment.
The Journal cited unidentified lawyers who believed a tentative deal already has been worked out and that it could be presented to a federal judge in Philadelphia as early as Friday. A spokesman for the law firm Wilentz, Goldman & Spitzer, which represents the plaintiffs, declined to comment on the reports.
AHP faces more than 4,000 lawsuits covering about 8,000 people who took the once-popular diet drug cocktail, which has been linked to heart valve damage and other problems. AHP manufactured a portion of the combination. As many as 6 million people took the pills before they were withdrawn in 1997 under pressure from the Food and Drug Administration.
Hemant K. Shah, an independent pharmaceutical analyst, said he thought reports of a partial settlement were premature, saying that any such deal would be extremely complicated to work out in practice because of the unprecedented demand for medical monitoring.
"You try to monitor these patients -- you potentially have to monitor them for the rest of their life," said Shah, who has a "hold" rating on Madison, N.J.-based company's stock. "Monitoring liability is far greater than a product negligence liability."
But, he said, if the company could cap much of its liability for $3 billion, it would be a major coup.
"That would be very positive news for the company and the stock. They can easily absorb the cost and put the whole thing behind them," he said. But, "my gut feeling is that this is not over yet."
Such a deal would in effect help the company get "off the hook very nicely," said Michael Krensavage, an analyst at Brown Brothers Harriman.
While many plaintiffs likely would continue to pursue individual claims, a deal would effectively dismiss most of the litigation AHP faces, he said. Krensavage has a neutral rating on AHP stock.
Under the partial settlement, the Journal said, people could opt out of the agreement should payments not be deemed sufficient, allowing them to seek greater compensation through suits of their own.
The deal wouldn't address claims from people with the most serious diet pill-related injuries, including the lung disease primary pulmonary hypertension, which is often fatal, it said. The additional cost of addressing these cases could be $500 million to $1 billion, the Journal reported.
In August, a Texas jury awarded $23 million in a case involving a woman whose diet-pill injuries were considered moderate.
Last week, several media reports said the FBI is investigating how American Home Products won approval to sell the diet drugs.
In a separate case, the company settled claims last month by about 36,000 women who said they suffered severe side effects from the company's Norplant birth control implant. 
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American Home Products
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