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In a ruling that promises to rescue the fen-phen diet drug settlement from a quagmire of satellite litigation, a federal judge has granted final approval to an amended settlement that will streamline claims processing. The new settlement will infuse more than $1.2 billion for resolution within about a year of nearly 42,000 of the less serious claims. In his 68-page in In re Diet Drugs, U.S. District Judge Harvey Bartle III of the Eastern District of Pennsylvania offered a wistful assessment of why the $3.75 billion settlement approved in 2000 needed to be fixed, and concluded that the new settlement is a fair solution that flicks the switch on the light at the end of the tunnel. “One would have expected that relative calm would have prevailed after the approval of the original settlement agreement. Instead, the landscape has been filled with innumerable disputes, motions and hearings,” Bartle wrote. Far from ending the case, Bartle found that the 2000 settlement led to a slew of court battles over purportedly illegitimate claims; the handling of the audit process by the settlement trust; appeals from the audits; and an excessive number of claims “beyond what anyone anticipated at the 2000 fairness hearing.” Without the amendment, Bartle found that the trust was unlikely to have sufficient funds to pay all legitimate claimants. The amendment, Bartle said, “deals fairly and simply with the prospect of illegitimate claims by adopting a straightforward, independent medical review process.” It also promises to end much of the satellite litigation, Bartle found, because it “eliminates claim-specific litigation over benefits and resurrects claims administration as the principal method to adjudicate and disburse benefits.” Bartle found that the new settlement “reduces to a manageable level the amount of judicial involvement necessary.” By using a streamlined benefit-eligibility criteria, Bartle found, the amended settlement “promises a mechanism to administer benefits promptly and fairly, with disposition of the claims of some 40,000 … class members within approximately one year.” In 1997, Pennsylvania corporation American Home Products (now the Madison, N.J.-based Wyeth) withdrew its diet-drug combination known as fen-phen from the market after medical studies showed that the drugs could cause heart valve disease. Under the 2000 settlement, class members were compensated on the basis of a complex matrix that accounted for the seriousness of their heart disease and other factors such as age and the length of time they had taken the drugs. The amended settlement, the seventh since 2000, restructures the processing of Level I and Level II claims, which comprise 98 percent of the cases in the national settlement. The deal, struck in May 2004, was designed to get money — although less of it — in claimants’ hands more quickly. Class members had until Nov. 9, 2004, to decide whether to participate in the amended version of the settlement or opt out and remain under the terms of the original settlement agreement. Wyeth also had a right to “walk away” from the amended settlement, but its deadline for doing so passed Jan. 8. In a hearing in January, attorney Michael D. Fishbein of Levin Fishbein Sedran & Berman, one of the lead plaintiffs lawyers, testified that he and other lawyers realized something needed to be done about problems threatening to topple the settlement fund. The trust was being overwhelmed, he said, by exaggerated claims, and the medical auditing process intended to catch dubious claims was letting too many through. The claims administration process was also far off schedule, Fishbein testified. “For whatever reason, it was difficult to get these claims audited and processed,” said Fishbein. “There was an increasing amount of administrative strictness that prevented the claims from being fairly processed.” Although experts at fairness hearings in 2000 thought that $3.75 billion would be enough for the settlement fund, Fishbein said that turned out not to be true. “The fact is, today there is $1.65 billion left,” he said. “An average of $400,000 is paid per claim on levels one and two. That would be enough for only 4,000 more claims.” Under the amended settlement approved Tuesday, Wyeth agreed to create a supplemental fund of $1.275 billion. Those who pass a medical review and qualify would receive a prorated share of the $1.275 billion, depending on the type and severity of their condition, their age and how long they took the diet drugs. The new settlement also contemplates the possibility that some class members will suffer a progression of their heart valve disease to a more serious condition that could require surgery and allows for renewed claims to be submitted in such instances up to the end of 2011. Lawyers estimated that Level II claims would get $40,000 to $50,000 under the amended settlement structure. Individuals who don’t qualify for payment after the medical review would receive $2,000 from the supplemental fund. In an interview Tuesday, Fishbein said the new claims processing structure has a “two strikes and you’re out” design. Claimants who say their own doctors have found them to be “FDA-positive” — meaning that they suffer from mild or greater aortic regurgitation and moderate or greater mitral regurgitation — will have their files reviewed by one of the 150 doctors employed by the new claims administrator, Fishbein said. If the first doctor rejects the claim, Fishbein said, the file will be passed on to a second doctor who will not know that it has been rejected once. If that second doctor, too, rejects the claim, the decision is final, he said.

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