Baxter sues Teva over propofol liability suits

In the midst of liability cases blaming tainted vials of the anesthetic propofol for a hepatitis C outbreak, Baxter ($BAX) has sued Teva Pharmaceutical Industries ($TEVA) to enforce a previous indemnification agreement. Baxter is a named defendant in the liability cases taking place in a Las Vegas court over the last couple of weeks.

As Bloomberg reports, Teva faces almost 300 lawsuits spawned by that hep C outbreak three years ago in Nevada. Health officials there blame reuse of propofol vials for the hepatitis C infections. Teva manufactured the drug, while Baxter marketed it on behalf of the generics giant until 2009.

The first propofol suit went against the two companies; a jury awarded $5.1 million in compensation and $500 million in punitive damages to plaintiff Henry Chanin, who said he developed the liver infection after receiving tainted propofol. The jury assessed $356 million of the punitive damages to Teva and $144 million to Baxter.

But Baxter says an arbitration panel determined that under an agreement between the two companies, Teva was solely liable in the propofol cases. "Teva is obligated to indemnify Baxter for any and all claims, damages, liabilities or losses, including" punitive-damage awards in propofol cases, Baxter's new lawsuit claims.

Meanwhile, Teva said in a February SEC filing that the indemnification deal doesn't cover punitive damages. However, it later disclosed the arbitration panel ruled 2-1 the agreement did, in fact, cover punitive awards, Bloomberg says.

- read the Bloomberg coverage