How AstraZeneca Is Turning the Tide in Its Legal War Over Antipsychotic Drugs

Last Updated Mar 19, 2010 11:08 AM EDT

AstraZeneca (AZN)'s victory in the first Seroquel lawsuit to go to trial will leave many baffled: How could a company that promoted the antipsychotic drug as better than a generic when it wasn't; that promoted the drug as "weight neutral" when executives knew it led to weight gain; and that hired staffers who traded sex for study write-ups, possibly be winning the legal war?

The answer can be found in history. America may be a litigious nation, famous for its jackpot hot coffee payouts, but the legal nitty gritty is often far less profitable for plaintiffs than most people think. AZ knew this from the start, and has seemingly relied on it for its so-far successful strategy.

Going in to these cases -- there are 10,399 of them -- AZ had the benefit of Merck (MRK)'s experience with the painkiller Vioxx. Those cases were far more serious than Seroquel -- people died -- and at one point Wall Street analysts thought Merck might have to pay $50 billion in costs to plaintiffs. It ended up settling the whole shebang for a tenth of that: Just $4.5 billion.

Merck had advance warning of which way the wind would blow before that settlement came, even though it lost the first case that went to trial. Merck won the appeal of that case. Here's an old press release summing up the state of the Vioxx litigation before the settlement.

Of the 18 plaintiffs whose cases went to trial, only three have outstanding product liability judgments against Merck.
AZ will have to sit through several more trials and rounds of appeals before it knows what percentage of these cases is likely to succeed. That hasn't been cheap. Settlements with the government, plus the company's own legal fees for defending cases, have topped $1.1 billion. But it may just be that AZ has been right all along: There's no "there" there, at least legally.