The Big Payout

It was a nickel-size birth control device that sold for $3 and was supposed to be easy and effective to use. But the Dalkon Shield proved a health menace to some users, and it has been a continuing financial nightmare for A.H. Robins, which stopped manufacturing the intrauterine contraceptive more than a decade ago. Robins, whose products include Robitussin cough syrup, Chap Stick lip balm and Sergeant's flea and tick collars, last week reported a 1984 loss of $462 million, giving the company a net worth of minus $128 million. Reason: the lingering and costly legal side effects of the Dalkon Shield.

The Virginia-based company (1984 sales: $632 million) said the loss was caused by the creation of a $615 million fund, the largest in a pharmaceutical liability case, that the company set up to cover pending and future claims filed by women who bought Dalkon Shields between 1971 and 1974. The firm stopped marketing the product in the latter year, following the reported death of a user. Since then, more than 12,000 people have filed suits claiming that the Dalkon Shield causes pelvic infections, sterility and infected miscarriages. The device, which was bought by some 2.9 million women in the U.S., has since been linked to 20 deaths from uterine infection. By the end of last year Robins had settled an estimated 8,300 claims at a cost of $332 million in compensatory and punitive damages.

The fund may not be enough to cover all the claims the company may have to pay. To ease the burden of such awards, Robins wants to have 3,500 suits against it consolidated into a class action. The amount that it might have to pay in a single case will be smaller than the total that thousands of separate awards could reach.

Company officials said last week that Robins remains financially sound despite its current troubles. When asked at a news conference whether the firm would file for bankruptcy, Senior Vice President G.E.R. Stiles replied, "We are not in danger of that. We are operating today just as we did yesterday. It's business as usual." Wall Street analysts agree. Said Barbara Ryan of the Bear, Stearns brokerage firm: "This will cost Robins a lot of money, but the company's survival is not in question."

Robins, meanwhile, has spent $4 million since last fall on a media and letter campaign to warn women about the devices and say that it will pay to have them removed. So far, it has paid $1 million to doctors and health clinics to take out the Dalkon Shields.