J&J Is Willing to Pay $400 Million-Plus in Hip-Device Cases

(Bloomberg) -- Johnson & Johnson is willing to pay more than $400 million to settle some of the thousands of consumers' allegations that the company sold defective artificial hips and hid the health risks of the devices, people familiar with the negotiations said.

The world's largest health-care products maker has settled, or is in the process of settling, about 3,300 of 10,000 lawsuits targeting its Pinnacle line of hip-replacement devices, a judge said in a Dec. 9 court filing.

J&J officials have agreed to pay an average of about $125,000 per case to resolve about a third of the suits pending against the company over Pinnacle hips, five people familiar with the settlement said. They spoke on the condition of anonymity because they weren't authorized to speak publicly about the deals.

An average payout of $125,000 for 3,300 cases would cost the company about $413 million.

J&J is seeking to resolve the remaining Pinnacle cases before a trial gets underway in January, the people added. Talks are continuing with lawyers for the residual hip recipients who have sued, they said.

The accords are the first settlements in the bitter seven-year litigation battle over the metal-on-metal hip implants, which some consumers say failed prematurely or gave them metal poisoning. J&J's DePuy unit made the hips, which were taken off the market in 2013.

Mindy Tinsley, a spokeswoman for J&J's DePuy unit, declined to comment on the settlements.

The settlements come as J&J is set to face a Jan. 14 trial in Dallas, where five Pinnacle-hip recipients will press claims the companies rushed the devices to market with little testing and misled doctors about the devices' safety profiles. J&J has denied those claims and said it developed and marketed the hips responsibly.

Over the past two years, juries in federal court in Dallas have ordered the company to pay at least $1.7 billion in damages over claims related to faulty hips. Several verdicts have been thrown out on appeal or reduced by trial judges, including a $1 billion award to six hip recipients that was slashed almost in half.

The U.S. Fifth Circuit Court of Appeals, based in New Orleans, is weighing whether to uphold the verdict that produced the $1 billion award. The company may be motivated to settle to avoid the risk of losing the appeal, said Elizabeth Burch, a University of Georgia professor who teaches about mass-tort cases. “The value of these cases goes up if a verdict is upheld,” she said.

Rather than seeking one global settlement of Pinnacle claims, J&J is settling separate groups of cases handled by individual lawyers, U.S. District Judge Ed Kinkeade in Dallas said in a court filing. The company is using the same tactic to resolve lawsuits over its vaginal mesh inserts.

Under terms of the settlements, plaintiffs' lawyers will get a lump sum to distribute to their clients. Consumers who had the Pinnacle devices surgically removed would receive more than others who'd had minor adjustments made to the inserts, the people said.

The Pinnacle suits were consolidated before Kinkeade in 2011 for pre-trial information exchanges and test trials. J&J won the first case over the devices and then lost the next two, one of which featured the $1 billion verdict.

The case is In Re DePuy Orthopaedics Inc. Pinnacle Hip Implant Products Liability Litigation, 11-md-2244, U.S District Court, Northern District of Texas (Dallas).

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

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, ;Tina Davis at tinadavis@bloomberg.net, Steve Stroth, Drew Armstrong

©2018 Bloomberg L.P.