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December 18, 2014

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Endoscopy plaintiffs target drug suppliers

Insurance thought not to be nearly enough to cover $300 million in liability

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STEVE MARCUS / LAS VEGAS SUN FILE

Lawyers involved in the endoscopy center cases say the personal wealth of Dr. Dipak Desai could be as much as $30 million.

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Lawyers suing Dr. Dipak Desai and his clinics say it would take $300 million on the table to negotiate a settlement for thousands of former patients whose lives were disrupted by last year’s hepatitis outbreak.

The bulk of that money would not come from Desai and the other medical defendants, who have limited malpractice insurance, but rather from the wealthy medical suppliers that did business with Desai’s clinics. The defendant with the deepest pockets is Israeli-based Teva Pharmaceutical Industries, which last year logged a record $11.1 billion in sales.

To get Teva to the table, the lawyers believe they will have to obtain two or three multimillion-dollar jury verdicts holding the company’s U.S. subsidiary liable for distributing products that led to the potentially deadly hepatitis C infections here.

“You have to have a knife to their throat in a back alley to get money out of them,” lead plaintiffs lawyer Will Kemp said. “They never settle easy.”

Looking to Teva for the pot of gold is crucial because the lawyers estimate the medical defendants’ insurance proceeds — most, if not all of them, are covered by Nevada Mutual Insurance — would provide only $54 million to $60 million to the former patients. As many as 20 doctors and nurses are named as defendants, each with a maximum of $3 million in insurance. The insurance policies are standard for the health profession, but do not take into account a medical calamity with large numbers of potential victims seeking financial damages, the lawyers said.

“What’s available in insurance doesn’t begin to scratch the surface of what’s needed,” said Robert Cottle, another lead plaintiffs attorney in the endoscopy litigation.

Of the nearly 5,000 former patients suing Desai and his clinics, about 300 are claiming they were infected with the hepatitis C virus. The average jury award in this kind of case ranges from $2 million to $5 million.

Cottle and Kemp expect that as many as 150 of the infected former patients will be able to prove they contracted the virus at Desai’s clinics. Using the low-end $2 million award figure, a settlement would total $300 million.

Nevada’s $350,000 cap on noneconomic damages for plaintiffs does not apply to non-medical defendants such as Teva.

The other 4,500 noninfected plaintiffs in the endoscopy litigation would likely receive about $5,000 each for the stress of having to get tested for hepatitis C, which throws another $22.5 million into any settlement, Cottle said.

The lawyers acknowledge that these figures are early estimates for the massive litigation, which experts say could drag on for several years.

“It’s an incredibly complex case,” said Robert Correales, a UNLV Boyd Law School professor. “There is no blueprint for what could happen.”

Attorneys on both sides prefer to settle large litigation cases like this because it saves everyone, including the courts, the time and cost of putting on a large number of hard-fought and often lengthy trials.

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Correales, a torts expert, said the strategy of going after big-money manufacturers is common, but not always successful.

In this case, the plaintiffs will have a tough time proving that the products distributed to Desai’s clinics led to the hepatitis C infections of the former patients, he said.

But Cottle, who expects to try the first case against Desai and Teva in April, disagrees.

Desert Shadow Endoscopy Center

Cottle’s client, Henry Chanin, alleges he was infected with the hepatitis C virus June 26, 2006, when he was given the anesthetic propofol from a contaminated vial during a procedure at Desai’s Desert Shadow Endoscopy Center, 4725 Burnham Ave.

Chanin and the other infected patients have charged that sloppy handling of propofol at Desai’s clinics led to their medical problems.

Cottle contends that it takes only about 10 to 12 milliliters of propofol to put a patient under during a routine procedure, such as a colonoscopy.

Propofol is commonly sold in 10-milliliter vials, but from 2005 until January 2008, several manufacturers, including one of Teva’s companies, Sicor Pharmaceuticals, were providing Desai’s clinics with the anesthetic in 20-milliliter and 50-milliliter vials.

The 50-milliliter containers are meant for use on one patient who receives the sedative in drip form over a long period of time. Desai’s clinics, however, in an effort to boost profits, allegedly squeezed out doses for multiple procedures from the 50-milliliter vials, sometimes contaminating the vials in the process.

“These products were dangerous in the way that they were distributed,” Cottle said. “They were shipping 50s when they knew it created an unreasonable risk to the patients.”

As far back as July 1995, the New England Journal of Medicine cited the potential for contamination in an article warning against the use of 50-milliliter vials for multiple patients.

Las Vegas attorney Michael Stoberski, who represents Teva in the endoscopy litigation, declined to comment.

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If the plaintiffs’ lawyers are unable to prove Teva’s liability in the hepatitis C infections, they would have the option of going after Desai’s personal wealth, which the lawyers said could be as much as $30 million, and that of some of the other physicians named as defendants.

A district judge had that possibility in mind in May 2008 when he barred Desai from conducting any personal financial transactions of $50,000 or more without the court’s permission. Plaintiffs’ lawyers raised concerns that Desai might try to liquidate his assets.

Looking for compensation from Desai’s three clinics — Desert Shadow Endoscopy Center, the Endoscopy Center of Southern Nevada and the Gastroenterology Center of Nevada — is another option. But that will be difficult.

All three clinics, which are now closed, have filed for Chapter 7 bankruptcy protection, and have reported having only a combined $100,000 in cash on hand. The biggest current asset of the clinics is their insurance coverage with Nevada Mutual. But just how much money is available is unclear.

In Bankruptcy Court papers, attorneys for the insurance company said the Gastroenterology Center has a $3 million policy limit, but the other two clinics share maximum coverage with Desai and the other medical defendants. The insurance attorneys did not put a dollar value on the shared coverage, but Bankruptcy Court officials believe it is included in the $54 million to $60 million the plaintiffs’ lawyers estimated would be available for court settlements.

Chip Wallace, a Nevada Mutual Insurance director and spokesman, declined to discuss the insurance policies with the Sun, citing the ongoing litigation.

Despite the relatively minimal assets of the clinics, lawyers for Brian Shapiro, the bankruptcy trustee looking out for the interests of the creditors, are trying to engineer an overall settlement of the endoscopy lawsuits through Bankruptcy Court.

Shapiro’s attorneys first disclosed their efforts in Bankruptcy Court papers last week. Shapiro wants Bankruptcy Judge Mike Nakagawa to order a settlement conference with all of the defendants and plaintiffs.

“All creditors of the bankruptcy estate, including the plaintiffs, need to be treated fairly,” Shapiro said. “Because there’s limited insurance coverage, no one should be able to settle with one party to the detriment of the others.”

Walter “Skip” Scott, a Dallas attorney representing Shapiro, added, “If we proceed on a piecemeal basis, the one thing I’m certain of is we will run out of coverage.”

Because of those fears, Shapiro and his lawyers want Nakagawa to block a confidential settlement that Nevada Mutual Insurance struck with one of the infected endoscopy plaintiffs, Michael Washington, on behalf of Desai.

But the plaintiffs’ lawyers say Shapiro’s efforts to have the matter resolved in Bankruptcy Court are a pipe dream.

“The party with all the money isn’t in Bankruptcy Court — the court has no authority over Teva,” Cottle said.

To the plaintiffs’ lawyers, the bankruptcy proceedings are a nuisance. They view the clinics as a minor player in any potential overall settlement.

Cottle said he’s considered dropping the clinics as defendants so he doesn’t have to deal with Bankruptcy Court, but he’s reluctant to because the public views the clinics as the “bad guys” in the litigation.

“At some point, if you’re going to have a global settlement, there will be some bankruptcy court settlement,” Kemp added. “But right now that’s premature until you get Teva’s liability resolved.”

Jeff German is the Sun’s senior investigative reporter.

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