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Fen-phen hearing begins
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May 2, 2000: 4:21 p.m. ET
Hearing by federal judge considered a final hurdle for a fen-phen deal
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NEW YORK (CNNfn) - A federal judge in Philadelphia began hearing testimony Tuesday about the fairness of a $3.75 billion settlement between drug maker American Home Products Corp. and former users of the "fen-phen" diet remedy.
The hearing, which is expected to last several weeks, is considered one of the final steps before the proposed pact can go into effect. Industry analysts have speculated that once the settlement is approved - effectively ending the long-running diet pill case - the company can move on looking for a new merger partner. A planned merger with Warner-Lambert Co. (WLA: Research, Estimates) fell apart earlier this year after Pfizer Inc. (PFE: Research, Estimates) trumped American Home's (AHP: Research, Estimates) bid.
American Home was forced to withdraw the once-popular diet cocktail in 1997 after it was linked to heart valve damage. An estimated 6 million Americans used the diet treatment.
U.S. District Judge Louis Bechtle already has given preliminary approval to the settlement, which includes refunds for the cost of the drugs and medical screenings for the least serious cases, to bigger payouts for more serious heart valve problems. About 100 former users contend that they developed primary pulmonary hypertension, a serious heart condition, by taking the diet pills.
 "We think it's a fair, comprehensive settlement and we believe Judge Bechtle will approve it," said Doug Petkus, a spokesman for Wyeth-Ayerst Laboratories, the pharmaceutical division of Madison, N.J.-based American Home.
Wall Street, which has dumped American Home stock in the wake of its fen-phen and merger woes, also has largely put the diet drug matter behind it, said Hemant Shah, a pharmaceutical analyst at HKS & Co.
"If they can resolve, it, it will be a very positive for the company," he said. "If they are looking for a merger partner, it will make it a lot easier."
AHP shares gained 7/8 to 56-3/4 Tuesday. The stock has risen from a 52-week low of 36-1/2, before the settlement was announced, but is still far off its year-long high of 70-1/4.
American Home Products withdrew the diet remedy Pondimin (fenfluramine) - the "fen" in the fen-phen combination - and a related drug Redux (dexfenfluramine) under pressure from federal regulators three years ago.
Phentermine, the other half of the fen-phen cocktail, has not been linked to medical problems when taken alone. Other companies manufacture the drug, which remains on the market.
American Home did not admit any guilt in agreeing to the settlement. Even if the deal is approved, the company still faces potential lawsuits from about 45,000 former users of the drug who "opted out" of the pact.
The company took a $4.75 billion pre-tax charge against its earnings for the proposed settlement last year. It announced last month that it believes that amount is adequate to cover the settlement costs, which according to company studies could rise to as much as $4.83 billion during the proposed 16-year payout period.
However, one plaintiffs' lawyer at the settlement hearing Tuesday raised doubts about whether the settlement is big enough to cover all of the claims, Reuters reported. Attorney Michael Fishbein said that 107,00 people have filed claims, including 10,000 who say they are suffering from symptoms that could qualify them for maximum payments of $1.5 million apiece.
Fishbein was one of the lead plaintiffs' lawyers involved in the negotiations that produced the settlement last October. 
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