Takeda, Lilly Hit with $9 Billion Punitive Damages in Actos Lawsuit

Asia’s biggest pharmaceutical company, Takeda, and their marketing partner, Eli Lilly, face $9 billion in punitive damages stemming from their Actos diabetes drug. The plaintiffs alleged that Takeda and Lilly concealed their knowledge of the drug’s bladder cancer risks and failed to provide adequate warnings. Takeda countered that the plaintiff’s bladder cancer wasn’t caused by Actos, and that the drugmaker provided proper warnings as they became known over the years. The jury allocated 75% of the liability, $6 billion, to Takeda and 25%, $3 billion, to Lilly.

This startlingly large special damages award stems from a 2011 lawsuit filed by Terrence Allen and his wife, Susan Allen, who alleged that the diabetes medication caused Mr. Allen’s bladder cancer. In addition to punitive damages, which seek to punish the wrongdoer rather than reimburse the victim, the jury awarded the Allens about $1.5 million in compensatory damages.

Interestingly, judgments were entered in Takeda’s favor in all three previous Actos trials before the $9 billion bombshell. Bloomberg reports that last year, “state juries in California and Maryland ordered Takeda to pay a total of $8.2 million in damages to former Actos users,” but “judges in both states threw out the verdicts.” This year, jurors in a Las Vegas state court rejected claims that the company failed to properly warn consumers about the risks of Actos.

The litigation in the District Court of the Western District of Louisiana is the first federal case to be tried and the first in the consolidated Actos multidistrict litigation. Lilly, who co-promoted Actos with Takeda from 1999 to 2006, was not named in the previous state actions.

Kenneth D. Greisman, senior vice president and general counsel at Takeda, responded to the verdict: “Takeda respectfully disagrees with the verdict and we intend to vigorously challenge this outcome through all available legal means, including possible post-trial motions and an appeal.” He also stated that “[w]e have empathy for the Allens, but we believe the evidence did not support a finding that ACTOS caused his bladder cancer. We also believe we demonstrated that Takeda acted responsibly with regard to ACTOS.”

The Wall Street Journal reported that the news “sent Takeda shares down sharply Tuesday. Takeda shares fell 5.2% to ¥4,572 on the Tokyo Stock Exchange. Motley Fool noted that during 2011, Actos sales peaked with $4.5 billion in sales and accounted for 27% of Takeda’s revenue. “The drug has since gone off patent and faces generic competition from Ranbaxy Laboratories and other drugmakers,” the article notes. Under Lilly’s agreement with Takeda, Lilly will be indemnified by Takeda for losses and expenses related to US litigation.

“There’s no way that these [damages] will be $9 billion at the end of the day,” said the plaintiff’s lawyer, Mark Lanier. The Wall Street Journal’s Law Blog notes that the Supreme Court has ruled that punitive and compensatory damages “must bear some relationship to one another.” The article states that “[g]enerally speaking, punitive damages that are more than nine times that of compensatory damages have a poor survival rate.”

Indeed, in this case the $9 billion punitive damages dwarfs the $1.5 million compensatory damage to an almost absurd degree. These types of damages may reflect particularly bad conduct. However, when deliberating punitive damages, juries are allowed to consider the net worth and profits of the defendants. The Wall Street Journal stated that “[p]erhaps they wanted to scale the award so it would financially sting the pharmaceutical companies, which are each worth tens of billions of dollars.”

Punitive damages tend to be reduced on appeal, often drastically so. We will keep you posted on the outcome of the Actos lawsuits.