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A federal judge has granted final approval to SmithKline Beecham’s $65 million settlement of a class action antitrust suit brought by consumers who said they paid inflated prices for Paxil, a popular anti-depressant drug. The suit alleged that SmithKline illegally maintained a monopoly by filing a series of “sham” patent lawsuits that were designed to delay any generic version of the drug from reaching the market. The filing of a patent suit delays a generic drug from entering the market by 30 months, according to court papers. In his 77-page decision Nichols v. SmithKline Beecham Corp., U.S. District Judge John R. Padova approved the settlement and awarded $19 million in attorney fees to a team of plaintiffs lawyers who logged more than 17,000 hours on the case since December 2000. The plaintiffs’ team was led by attorneys Ellen Meriwether of Miller Faucher & Cafferty in Philadelphia, Dianne M. Nast of Roda Nast in Lancaster, Pa., and Kenneth A. Wexler of The Wexler Firm in Chicago. SmithKline admitted no liability in the settlement and maintained its position that its litigation efforts were not designed to cause any delay. In the suit, plaintiffs lawyers alleged that SmithKline attempted to monopolize the Paxil market by filing “sham” patent litigation against Apotex Inc. and TorPharm Inc., both of Weston, Ontario, soon after the generic manufacturers notified SmithKline that they were seeking approval from the Food & Drug Administration to copy Paxil. The suit came on the heels of news reports that said the Federal Trade Commission was investigating SmithKline for possible antitrust violations. But the FTC investigation was later closed without any government action against SmithKline. Paxil is the third-best-selling drug in the burgeoning category of anti-depressants that affect the “re-uptake” of serotonin, a neurotransmitter. Since its discovery in the 1950s, researchers have found mounting evidence that one of serotonin’s roles is to mediate emotions and judgment. With annual sales of $1.4 billion in 1999, Paxil was outsold only by Prozac, made by Eli Lilly, and Zoloft, made by Pfizer. The consumer class action alleged that SmithKline used sham lawsuits and bogus patents filings to delay the debut of generic Paxil by months or even years. In assessing whether the settlement was a fair and reasonable one, Padova applied the 3rd Circuit’s nine-factor test announced in the 1975 decision in Girsh v. Jepson and concluded that nearly every factor weighed in favor of approval. “Given the enormous amounts of money at stake in this litigation, and the vigorous advocacy of counsel for both parties over the last four years, it can reasonably be expected that whichever party did not prevail at trial would file post-trial motions and an appeal,” Padova wrote. As a result, Padova found that the litigation would continue for several more years if the case did not settle. The plaintiffs also faced considerable risks, Padova found, since their theory of liability was a novel one and SmithKline had asserted strong defenses. The settlement also came after four years of intense litigation — in which the lawyers had reviewed hundreds of thousands of documents — and months of arm’s length negotiations, Padova found. “The court concludes, therefore, that the parties had an adequate appreciation of the merits of this case at the time they negotiated the settlement,” Padova wrote. If the case had gone to trial, Padova found, the proof of damages “would undoubtedly result in a ‘battle of the experts’ with each side presenting its figures to the jury and with no guarantee whom the jury would believe.” And class certification also posed a potential obstacle, Padova found, because the plaintiffs alleged several theories of liability under federal and state antitrust laws, state consumer protection laws, and state common law. “If this case were to proceed to trial, the variations in the state laws under which plaintiffs’ state law claims have been brought would create significant issues with respect to typicality and adequacy of representation and the predominance of individual issues,” Padova wrote. Even if the class were certified, Padova said, “it could be decertified at any time later in the litigation as a result of the difficulties presented by the need to apply so many different states’ laws.” Turning to the issue of whether $65 million is a fair amount, Padova found that the sum was somewhere roughly between 9 and 13 percent of the possible maximum damages. An expert for the plaintiffs, he noted, had estimated damages ranging from $466 million to $693 million depending on the date that the generic version of Paxil hit the market. “This percentage is consistent with those approved in other complex class action cases,” Padova wrote. “Taking all of the risks of litigation into consideration, as well as the total amount of the settlement fund and the percentage of total damages … the court finds that this settlement is within the range of reasonableness,” Padova wrote. In the final section of the opinion, Padova found that the plaintiffs’ lawyers were entitled to 30 percent of the settlement fund as their fee. Billing at their normal hourly rates, Padova found that the plaintiffs’ team had invested more than $6.1 million in time by logging more than 17,000 hours. As a result, he said, the requested $19 million fee represented a “multiplier” of 3.15. Padova found that the multiplier was justified due to the risks of litigating with no guarantee of payment. “This litigation presented enormously complex legal and factual issues. In light of [SmithKline's] strong defenses to plaintiffs’ theories of liability, and the possibility that this case could not be maintained as a class action through trial, the risk of non-payment has been high throughout this litigation,” Padova wrote.

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