Judge Approves $40 Million Settlement of Paxil Third-Party Payer Claims - September 30, 2008

Chris Coffin, a Pendley, Baudin and Coffin partner, was class counsel in the case.

A federal judge in Minnesota issued an order of final approval to a $40 million settlement for class claims brought by third-party payers against the maker of Paxil for sales of the antidepressant to patients under 18 and handed down a separate order awarding plaintiffs' attorneys $13.3 million in fees.

U.S. Judge Michael J. Davis of the District of Minnesota issued the orders after reviewing evidence and hearing arguments from the parties.  The judge, who pointed out that the case was "heavily litigated," noted that amount of opposition to the settlement was de minimis and ruled that if the aggregate amount of claimed benefits does not exceed the $40 million settlement amount, up to $1 million will be donated to one or more charitable organizations whose primary purpose includes mental health affecting children.

The class consists of "[a]ll third-party payors in the United States and its territories, including administrators and benefits managers, who reimbursed, purchased, or paid for Paxil or Paxil CR prescribed for consumption by any person under the age of 18, between Jan. 1, 1998, and Dec. 31, 2004."  Under the settlement plan, class members would be refunded up to 40 percent of their actual cost for Paxil if they provide proof that a patient under 18 with diagnosis of a major depressive disorder was prescribed Paxil or Paxil CR.  Class members would receive 15 percent of their actual cost if the diagnosis is not included.  Magistrate Judge Susan Richard Nelson on May 19 granted preliminary approval to the settlement and certified the class for settlement purposes.

The plaintiffs, which include the Carpenters and Joiners Welfare Fund, Universal Care Inc. and Philadelphia Firefighters Local 22 Health and Welfare Fund, were each class representatives of four individual class actions in California, Minnesota and Pennsylvania that sought a refund of monies paid by third-party payers who purchased Paxil for patients under 18 from Jan. 1, 1998, to Dec. 31, 2004.

Since the settlement plan was preliminarily approved, the parties issued notice to more than 42,000 third-party payers, based on a database maintained by an experienced claims administrator, published notice in two national periodicals directed at benefits administrators and human resources professionals, provided electronic notice through a dedicated Web site and staffed a toll-free information line to answer questions.  Judge Davis said the parties spent nearly $50,000 to disseminate the notice.

Finally, Judge Davis granted the plaintiffs' attorneys' request for 33 percent of the fund go to counsel fees, litigation costs and incentive payments.