Wright Medical agrees to pay $240 M to settle metal-on-metal hip revision claims

Wright Medical Technology, Inc. (WMT), a wholly owned subsidiary of Wright Medical Group N.V., has entered into a Master Settlement Agreement (MSA) on November 1, 2016, pursuant to which the medical device manufacturer will pay $240 million to settle claims brought by patients as part of a metal-on-metal hip revision multi-district litigation known as In re: Wright Medical Technology, Inc., CONSERVE® Hip Implant Products Liability Litigation, MDL No. 2329 (MDL) and the consolidated proceeding pending in state court in California known as In re: Wright Hip System Cases, Judicial Council Coordination Proceeding No. 4710 (JCCP). In addition, on October 28, 2016, the medical device manufacturer entered into a Settlement Agreement with three of its insurance carriers. Of the $240 million, approximately $180 million will be funded from cash on hand and $60 million will be funded from insurance recoveries (Wright Press Release, November 2, 2016).

Under the terms of the MSA, the parties have agreed to settle 1,292 specifically identified CONSERVE, DYNASTY or LINEAGE revision claims which meet the eligibility requirements of the MSA and are either pending in the MDL or JCCP, or are subject to tolling agreements approved in the MDL or JCCP. Eligibility requirements of the MSA include that the claimant has a pending or tolled case in the MDL or JCCP, has undergone a revision surgery within eight years of the original implantation surgery, and that the claim has not been identified by WMT as having possible statute of limitation issues. Claimants who have had bilateral revision surgeries will be counted as two claims but only to the extent both claims separately satisfy all eligibility criteria.

The MSA, which includes a 95 percent opt-in requirement, may be terminated by WMT prior to any settlement disbursement if claimants holding greater than five percent of eligible claims in the Final Settlement Pool elect to “opt-out” of the settlement. No funding of any individual plaintiff settlement will occur until the 95 percent opt-in requirement has been satisfied or waived.

Although the MSA will help bring to a close significant metal-on-metal litigation activity in the United States, WMT has declared its intention to continue to defend vigorously all metal-on-metal hip claims not settled pursuant to the MSA. As of September 25, 2016, the company estimated that there were close to 600 outstanding metal-on-metal hip revision claims that would not be included in the MSA settlement, including approximately:

  • 200 claims with an implant duration of more than eight years,
  • 300 claims subject to possible statute of limitations preclusion,
  • 30 claims pending in U.S. courts other than the MDL and JCCP,
  • 50 claims pending in non-U.S. courts, and
  • 20 claims that would be eligible for inclusion in the settlement but for the participation limitations contained in the MSA.

The company also estimated that there were nearly 700 outstanding metal-on-metal hip non-revision claims, which are excluded from the MSA, as of September 25, 2016.

In announcing the company’s third quarter earnings, WMT disclosed the loss range applicable to a substantial portion of revision cases of $150 million to $198 million and, in accordance with U.S. generally accepted accounting practices (US GAAP), the company recognized $150 million as a charge within discontinued operations in the second quarter of 2016. This second-quarter loss represented the low end of the range of probable loss for these cases. During the third quarter of 2016, the company recorded charges of roughly $39 million in order to increase its accrual from the low end of probable loss range that had been recognized during the second quarter to amounts more in line with the final agreements and to record accruals for certain other revision cases.