Bloomberg News

Teva Said to Pay $250 Million to End Nevada Propofol Cases

February 21, 2012

(Updates with Teva comment in sixth paragraph.)

Feb. 21 (Bloomberg) -- Teva Pharmaceutical Industries Ltd. will pay more than $250 million to settle more than 80 lawsuits alleging the drugmaker sold the anesthetic Propofol in a way that led colonoscopy patients to develop hepatitis C, people familiar with the accords said.

Teva, the world’s biggest maker of generic medicines, confirmed the settlement today without specifying how much it will pay. The company agreed last week to resolve claims by Las Vegas residents that it intentionally sold Propofol in vials large enough to be reused by doctors, the people said. They spoke on the condition they not be named because they aren’t authorized to speak publicly about the agreements.

The deal also resolves a May 2010 case over Teva’s sales of the anesthetic that spawned a jury award of more than $500 million against the Israeli drugmaker, according to the people familiar with the settlements and a filing with the Nevada Supreme Court. Henry Chanin, a private-school principal from Las Vegas, alleged he developed hepatitis C after getting tainted Propofol during a colonoscopy.

“The parties notify the court that they have agreed to a settlement in this matter,” Chanin’s lawyers told the Nevada Supreme Court in a Feb. 17 filing. Teva had asked the state’s highest court to overturn Chanin’s verdict.

Denise Bradley, a U.S.-based spokeswoman for Petach Tikva, Israel-based Teva, confirmed that the company had settled the Nevada Propofol cases.

“Teva is pleased to have put the vast majority of these matters behind us,” Bradley said in an e-mail. Fifteen Propofol cases remain active on court dockets in Las Vegas, she said.

$285 Million Reserved

Teva has settled about 120 Propofol lawsuits and reserved $270 million for the litigation, the drugmaker told the U.S. Securities and Exchange Commission in a Feb. 17 filing. Teva will set aside an additional $15 million in the first quarter for the cases, Bradley said in an interview.

Teva’s American depositary receipts, each representing one ordinary share, rose 1.3 percent to $45.24 at 11:45 a.m. New York time in Nasdaq Stock Market trading. They earlier climbed as much as 1.7 percent.

Teva said last week that fourth-quarter profit rose 23 percent as last year’s acquisition of Cephalon Inc. shifted the company further away from its original identity as a generic-drug maker.

Profits Rise

Earnings rose to $1.4 billion, or $1.59 a share, from $1.1 billion, or $1.25, a year earlier, the company said Feb. 15. Teva bought Cephalon, based in the Philadelphia suburb of Frazer, Pennsylvania, for $6.5 billion last year in a bid to broaden its portfolio of brand-name drugs.

Teva, which no longer makes Propofol, had San Francisco- based McKesson Corp. and Baxter Healthcare Corp., based in Deerfield, Illinois, as U.S. distributors, according to court filings. Teva signed an indemnity agreement accepting financial responsibility for all the Nevada Propofol cases.

The drug is an intravenous agent used for sedation or anesthesia, according to Teva’s website. The patients’ lawyers allege Teva intentionally sold Propofol in jumbo-sized vials to encourage doctors to reuse them, even with the risk of spreading blood-borne illnesses such as hepatitis, an incurable liver disease.

Jackson Death

Propofol is the medication that was at issue in the involuntary manslaughter trial in Los Angeles of Conrad Murray, who was pop star Michael Jackson’s doctor. Murray was convicted in November and sentenced to four years in jail for giving the singer injections of Propofol and other sedatives that led to his 2009 death.

Lawyers for Las Vegas colonoscopy patients argued during a series of trials that Teva officials stopped selling Propofol in single-use-sized vials because it was more profitable to sell it in larger containers that encouraged reuse.

Probes by Nevada health officials and regulators from the federal Centers for Disease Control and Prevention blamed the 2008 hepatitis C outbreak on the reuse of Propofol vials.

In 2010, a state grand jury indicted Dr. Dipak Desai, who ran the Endoscopy Center of Southern Nevada at the time of the outbreak. Many of the hepatitis-related cases were linked to that colonoscopy clinic. Desai also faces federal charges over the outbreak.

Trial Ended

Teva faced a series of multimillion-dollar verdicts over its Propofol sales in Nevada, including the award to Chanin and more than $162 million awarded to fellow colonoscopy patients Anne Arnold, Richard Sacks and Anthony Devito in October.

The settlement resolves all those verdicts and a Propofol trial that was under way before Judge Jerry Wiese in Las Vegas, the people familiar with the agreements said.

The case involved four colonoscopy patients who blamed their hepatitis C on tainted Propofol from Teva vials. Wiese dismissed the jury last week after learning about the settlement, the people said.

The Nevada Supreme Court case is Teva Parenteral Medicines Inc. v. Chanin, No. 07085, Supreme Court of Nevada (Carson City).

--With assistance from Margaret Cronin Fisk in Detroit. Editors: Andrew Dunn, Stephen Farr

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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