Memorandum

Jury holds Takeda, Lilly liable for $9 billion in damages in Actos lawsuit – April 8, 2014

Executive Highlights

  • Takeda and former US Actos co-promoter Lilly were found liable for $9 billion in punitive damages and $1.5 million in compensatory damages for hiding cancer risks associated with Actos.
  • The companies plan an appeal, and based on past precedent and Supreme Court rulings, a sharp reduction in total damages seems likely.
  • Under the parties' indemnification agreement, Takeda would likely be responsible for any damages levied against Lilly following the apellate process.

Marking the end of one of the first US federal lawsuits over Takeda’s TZD Actos (pioglitazone) and bladder cancer, a Louisiana jury found Takeda and its former US Actos co-promoter Lilly liable for a whopping $9 billion in punitive damages (plus $1.475 million in compensatory damages) in the case of Terrence Allen, et al. v. Takeda. The jury awarded $6 billion in punitive damages against Takeda and $3 billion in punitive damages against Lilly. The jury also determined that Takeda’ share of compensatory damages is 75% of $1.475 million, while Lilly’s share is 25% (these figures, of course, are much smaller). Takeda has been defending Lilly in the Actos lawsuits in the United States, and under the parties’ indemnification agreement Takeda may be responsible for an award ultimately entered against Lilly after the appellate process is completed. For background, compensatory damages are meant to re-pay the plaintiff for costs associated with the defendant’s wrong-doing, while punitive damages are meant to deter the defendant from engaging in such conduct again (and are not paid to the plaintiff). Obviously the compensatory damages are nothing compared to the proposed punitive damages.

Takeda and Lilly both published press releases expressing disagreement with the verdict, arguing that the evidence presented did not show that Actos led to the plaintiff’s bladder cancer, and stating that the companies acted responsibly in disclosing Actos’ safety information. Both press releases made it clear that the companies plan to appeal the decision. It seems likely that an appeal would yield a sharp reduction in punitive fees since the US Supreme Court has previously ruled that punitive damages should be roughly proportional to compensatory damages (with punitive damages not exceeding ~10x compensatory damages, although there have been exceptions to this guideline). This would suggest that the maximum in punitive fines that Takeda and Lilly should reasonably be expected to pay would be closer to $15 million than $9 billion.

As background, Lilly co-promoted Actos in the US from 1999 through 2006. The case described here is one of the first of over 7,000 lawsuits Takeda faces in the US (along with a smaller number of cases in Canada and Europe). The final outcome of this case (in terms of the ruling and any damages awarded) will obviously be important in terms of setting a precedent for Actos’ remaining. Certainly, if Takeda and Lilly were expected to pay billions for each of the 2,500 cases, that would amount to an insurmountable sum. Actos at its peak brought in $4.3 billion in worldwide revenue in 2011, before going generic in mid-2012. Its total revenue since launch in 1999 has been around $16 billion. While pharmaceutical companies should certainly be held accountable for their actions, $9 billion sounds like quite a large sum that would place an enormous burden on two companies that are both currently trying to invest in better options for people with diabetes by continuing to investigate new options. The jury that made this ruling purportedly took only 45 minutes to deliberate on the magnitude of the fines, calling into potential question the rationality of the ruling. Law experts (such as Professors Erik Gordon at the University of Michigan and Carl Tobias at the University of Richmond in Virginia, as cited by Bloomberg and the New York Times, respectively) do not expect that a judge will uphold the magnitude of the verdict in an appeals court.

  • While this is the first federal case against Actos in the US, two state juries in California and Maryland in 2013 ordered Takeda and Lilly to pay a total of $8.2 million, but both cases were later overturned by judges.
  • The broader PPAR agonist class has had a rough previous few years: GSK’s Avandia (rosiglitazone) was subject to a harsh REMS program following fears of CV risk (see our report on the 2010 FDA Advisory Committee), at which point the product was withdrawn in Europe and sales plummeted in the US. Late last year, upon re-adjudication of the RECORD outcomes study, the FDA backtracked and decided to remove a number of the restrictions on Avandia. At the recent American College of Cardiology 2014 Scientific Sessions, we learned the reasons why trials for Roche’s PPAR dual agonist aleglitazar were discontinued (an overall poor risk/benefit profile).
  • See our Takeda F3Q13 Report for the company’s latest update on Actos – in F3Q13 (calendar 4Q13), Actos sales were level sequentially but down 45% year-over-year due to generic competition, bladder cancer concerns, an established (but modest) risk of heart failure, and other factors.

-- by Manu Venkat, Jessica Dong, and Kelly Close