A jury's $9 billion pharmaceutical penalty is a punitive overdose. Japan's Takeda and its diabetes drug partner Eli Lilly were ordered by a panel of Louisiana citizens to pay the 10-figure sum for covering up cancer risks. Whopping fines are common in the high-risk world of pharmaceuticals. Past cases and judicial guidance, however, imply this one may go too far.
Nearly all drugs have side effects. Unfortunately, studies revealed that long-term use of Actos was associated with a significant increase in the chances of contracting bladder cancer. The overall risk is small but since millions of patients took the drug, a few thousand patients may have suffered. Hurting Takeda further is that it fought use of a warning label in ads and on packaging because it didn't want to hurt sales. A judge also found that the company had destroyed relevant documents.
No two cases are the same but Merck's experience with Vioxx, for one, suggests Takeda's legal bill could wind up much lower. Merck withdrew the painkiller after studies showed it increased the risk of heart attack. The drug may have caused 140,000 of them and, tragically, perhaps 50,000 deaths, according to a study published in 2005 in the medical journal Lancet.
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While Takeda's conduct may be interpreted as more damning, courts also have generally limited punitive damages to a reasonable multiple of compensatory damages. For example, Exxon was initially ordered to pay $5 billion for the Exxon Valdez oil spill, but the US Supreme Court later slashed the figure to a roughly one-to-one ratio of $500 million.
In this latest case, the jury awarded one patient $1.5 million and yet put Takeda and Lilly on the hook for the $9 billion punishment. Investors knocked five per cent off Takeda's market value, equivalent to about $2 billion. That discounts the understandable outrage and reflects a more logical legal reality.
