After years of escalating fallout and legal action, Johnson & Johnson ($JNJ) has confirmed an agreement to fork over at least $2.5 billion to settle thousands of lawsuits alleging injuries caused by defective all-metal hip implants. A large majority of eligible plaintiffs reportedly must support the agreement for it to go forward, and legions of legal cases not included in the deal will remain in play.
News broke of the impending deal on Nov. 19. Lawyers representing J&J and patients claiming their J&J/DePuy ASR all-metal hip implants injured them unveiled the settlement plan before various judges around the country on Tuesday, the company said. Bloomberg reported that both sides have said the final tally could surpass $4 billion.
J&J/DePuy explained that about 8,000 patients who received the company's beleaguered ASR hip implants and needed replacement surgery are eligible for compensation. They had to have had a repeat procedure to remove a defective implant as of Aug. 31, 2013. Patients who must face hip removal/repeat surgery after that point are encouraged to contact the company as part of a care program established after J&J issued a voluntary global recall of 93,000 of the devices in 2010.
The New York Times and Bloomberg reported that the final deal will break down to about $250,000 per person on average before legal fees. Payments will dip depending on how long patients dealt with the affected implant before removal, meaning the longer a patient lived with the implant, the smaller the award. The New York Times calls it a "user's fee." Out of that $2.5 billion, $2 billion would pay for basic awards. About $475 million more is expected to compensate patients who dealt with particularly tough injuries either relating to the ASR implant or the surgeries needed to remove and replace it.
Andrew Ekdahl, worldwide president of DePuy Synthes Joint Reconstruction, said in a statement that "the U.S. settlement program provides compensation for eligible patients without the delay and uncertainty of protracted litigation. DePuy remains committed to our purpose of advancing innovative treatment options to serve those who need joint replacement surgery."
Of course, there are conditions before the deal becomes final. "People briefed on the plan" told the NYT that 94% of eligible plaintiffs must support the settlement for it to go forward. The NYT story explained that J&J has additionally agreed to pay medical costs relating to surgeries involving removal and replacement of the ASR hips, and this would be separate from payment for pain and suffering.
In all, however, there are approximately 12,000 ASR-related legal claims pending in the U.S., meaning about 4,000 plaintiffs aren't included in the deal. Also, patients who face problems in the future still have the right to sue. J&J/DePuy acknowledged that a number of lawsuits will remain and noted in its settlement statement that it "will continue to defend against remaining claims and believes its actions related to the ASR Hip System have been appropriate and responsible."
In short, the settlement as it now stands will address most of the claims against J&J/DePuy, but not all.
J&J said it has accounted for the deal over time and that it won't lead to an additional charge against the company's earnings. Most payments will take place in 2014 "from available cash," it said.
J&J settled at least two other metal hip lawsuits in October. And reports that the company had begun to consider settling the bulk of the hip lawsuits against it began to surface over the summer. The company's ASR-related troubles began after reports of unusually high failure rates for the ASR metal hips led to the 2010 recall of 93,000 of the devices around the world. More than 37,000 of that total hit the U.S.
Metal hip manufacturers including Stryker ($STK) and Biomet are also facing lawsuits from patients alleging that their implants were faulty and caused them harm.
Editor's note: This story has been updated to include J&J/DePuy's confirmation of its hip implant settlement agreement as well as new details as disclosed by the company. Additionally, new details from Bloomberg's coverage of the settlement have been added.