Y DANIEL LEVINE AND EDMUND KLAMANN
SAN FRANCISCO/TOKYO – Takeda Pharmaceutical Co Ltd said it would contest $6 billion in punitive damages imposed by a jury in the United States in a case that accused Japan’s largest drugmaker of concealing cancer risks associated with its Actos diabetes drug.
Eli Lilly and Co, Takeda’s co-defendant in the case, was ordered to pay $3 billion in punitive damages by the jury in Louisiana on Monday. It also awarded $1.475 million in compensatory damages.
Legal experts said it was unlikely that such a large award would stand after challenges in court by both companies. Eli Lilly and Takeda have said they would dispute the verdict, which could include appeals to a higher court or filing motions asking the trial judge to set aside or reduce the verdict.
“Although there’s no mathematical bright line” to determine how high is too high when it comes to punitive damage awards, federal appeals courts generally scrutinize the ratio of punitive to compensatory damages, preferring those that fall into the single-digit range, according to Professor Catherine Sharkey, a tort law expert at New York University School of Law.
Punitive damages are meant to discourage companies from bad conduct. Compensatory damages are meant to pay victims for their actual losses. With a ratio of more than 6,100 to 1 of punitive to compensatory damages, the Actos award could be highly vulnerable.
“It’s definitely the case that the U.S. Supreme Court has signaled to lower courts that they should be restraining very large punitive awards,” Sharkey added.
Lilly, which co-promoted Actos from 1999 to 2006, said in a press release it will be indemnified by Takeda for its losses and expenses around the litigation based on the terms of its agreement with Takeda.
Takeda’s shares fell as much as 8.8 percent to an eight-month low in Tokyo trading on Tuesday after the verdict. The stock ended 5.2 percent lower at 4,572 yen.
Lilly shares fell 0.2 percent, or 12 cents per share, to $58.50 per share in New York Stock Exchange trading.
The massive award was met with “stunned silence” in the Lafayette, Louisiana, courtroom, plaintiffs’ lawyer Mark Lanier said.
Lanier acknowledged it was not certain whether the damages award would be sustained.
“Nobody has gone out and bought a new home,” Lanier said.
“This is a conservative judge and a conservative court and she’s very ‘balls and strikes.’ We’re not under any grand illusion.”
The $9 billion in punitive damages awarded by the jury against Takeda and Eli Lilly exceed the $5 billion penalty that a jury in Alaska imposed on Exxon Mobil Corp for the Exxon Valdez oil spill in 1989.
The U.S. Supreme Court ruled in 2008 that the previous Exxon Valdez award had been “excessive.” The company was ultimately ordered to pay $500 million. That and other rulings have been read as limiting punitive damages in federal cases.
Lanier said the jury deliberated for only an hour and 10 minutes to deliver its verdict finding liability on all 14 questions, and 45 minutes longer to come out with the multibillion-dollar punitive damages.
The allocation of liability for compensatory damages was 75 percent for Takeda and 25 percent for Lilly, according to Lilly.
Takeda said judgments were entered in Takeda’s favor in all three previous Actos trials, while this was the first federal case to be tried in a consolidated multidistrict litigation comprising more than 2,900 lawsuits.
Last May, a U.S. judge had nullified a separate jury verdict for $6.5 million against Takeda after ruling that the plaintiffs failed to offer any reliable evidence that Actos had caused cancer.
Germany and France suspended use of the drug, a multibillion-dollar seller, in 2011 because of concerns about a possible link to cancer. (Reuters)