There was a touchy and defensive tone to the voice of E. Claiborne Robins Jr., president of A. H. Robins Co., when he opened up a recent press conference on the continued problems his company faces over the Dalkon Shield birth control device.
"I am proud of this company and its people," declared Robins, son of the company's chairman and great-grandson of its founder. "Many of our people were not even here when the Dalkon Shield was a marketed product. And many of us who were had no involvement with it."
Robins' words aptly reflect the sense of injustice and wounded pride that many in the company feel about the Dalkon Shield controversy.
The nickel-sized intrauterine device was sold by Robins to about 2.5 million women between 1970 and 1974. It was never more than a speck on the Robins balance sheet; the company has estimated cumulative profits were only about $500,000.
But the consequences of those sales have been haunting Robins ever since, producing a legal and financial nightmare that has shattered the company to its core.
By most standards, were it not for the Dalkon Shield, these would be joyous days at Robins, a diversified pharmaceutical and health care firm that is a major economic and philanthropic presence in this capital city. The company, which began as a small apothecary here 119 years ago, recently reported record sales of $631.8 million in 1984 -- a 12 percent increase over the previous year -- and record operating earnings of $128 million -- a 21 percent jump over 1983.
"Those figures speak for themselves," said Roscoe E. Puckett Jr., the company's spokesman. "Obviously, without the Dalkon Shield, it would have been a fantastic year."
Much of the company's growth has been attributed to a relatively new line of prescription drugs such as Reglan, which is used to control nausea and vomiting in cancer patients undergoing chemotherapy. Such prescription drugs -- or "ethical pharmaceuticals," as the company calls them -- have been responsible for a steadily larger share of Robins' business in recent years, accounting for about 76 percent of its operating profits in 1984, Puckett said.
The company, which has about 30 foreign subsidiaries, also makes such well-known consumer products as Chap Stick, the country's leading lip balm, Robitussin, the best-selling cough syrup, and Sergeant's pet-care products.
But there is no talking about Robins these days without considerable dwelling on the Dalkon Shield. More than 12,000 claims and lawsuits have been filed against women who claim they suffered pelvic infections, sterility and involuntary abortions caused by the Shield. As of the last year, the company and its insurer, the Aetna Life & Casualty Co., had paid out $314.6 million to dispose of about 8,300 of those claims.
Moreover, there are still 3,800 suits pending, and a recent company-commissioned study, performed by the Washington consulting firm of Resource Planning Corp., estimated there probably will be about another 8,300 filed before the Dalkon Shield episode is finally over sometime in the early years of the 21st century.
One of the problems, Robins officials readily acknowledge, is that the lawsuits have become a hydra-headed monster; each new suit or jury award generates more publicity, which in turn spurs more suits. Another lawsuit generator, ironically, has been the company's own television campaign urging women who are still wearing the Shields to have them removed at Robins' expense.
Also stoking the fires, according to some legal experts, is a national army of personal injury lawyers, many of whom have found suing Robins to be a source of regular employment and lucrative contingency fees. Some lawyers have gone hunting for Dalkon Shield cases in newspaper advertisements.
"The plaintiffs' lawyers in the Dalkon Shield case are out there banging the hustings trying to get as many cases as they can," said Calvert Crary, a litigation analyst at Bear Stearns. "It's become a very profitable business."
Meanwhile, the continued outflow of litigation expenses, settlements and jury awards had been creating havoc for analysts and investors trying to figure out the company's true financial health. (In 1982, Robins paid only $7.1 million in litigation expenses that weren't covered by its insurance. By last year, this figure had ballooned to $78 million.)
On April 2, after months of studies and agonizing debates with its auditors that forced the company to postpone its annual meeting (it is now scheduled for May 30) and the publication of its annual report (it will be mailed out April 29), Robins finally took a big step toward getting a handle on the problem.
It set up a special "reserve fund" of $615 million to pay for Dalkon Shield litigation. The amount, Robins said, represented its best estimate of the "minimum" costs it will face from compensatory damages and other Dalkon Shield legal expenses in disposing of pending and future lawsuits.
The move was praised by analysts, but in setting up the fund, the company was forced to swallow a bitter pill. The fund was charged against the company's fourth-quarter earnings, forcing it to absorb a book loss for the last three months of 1984 of $481.8 million (or $19.24 per share).
For the year, the company's recorded loss was $461.6 million ($18.44 per share), a sum larger than the company's entire net worth and a loss large enough to wipe out any dividends to shareholders for the next two years.
The figures looked bleak enough, but when Senior Vice President and Chief Financial Officer G. E. R. Stiles announced them at the company's news conference, he was quickly hit by some obvious questions.
Was Chapter 11 hovering on the horizon?
Not only was the answer no, Stiles shot back, he wouldn't even be prodded into saying the forbidden word (bankruptcy).
"We are not in danger of that," Stiles said at one point. A few moments later, responding to yet another question on the subject, he added: "It's business as usual around here, and the company has no plans for any of those ominous things that I even hesitate to mention."
The "business as usual" comment might seem subject to debate for a company under legal siege, but some financial analysts believe Robins is strong enough to withstand the Dalkon legal onslaught in the long run.
One reason is that the reserve fund, as bad as it looked on paper, is for the moment nothing more than a bookkeeping entry. The actual payments will be disbursed over the next 17 years, and normal company cash flow -- about $80 million last year -- should be able to handle them without otherwise disrupting operations, some analysts say.
"The reserve fund doesn't have a goddamn thing to do with the real world," said Louis E. Hannen of Wheat, First Securities in Richmond. "They took their loss . . . but not a single penny changed hands. And, in most instances in the past, companies that have set up reserve funds have tended to overreserve. It's very problematical. We don't know what the ultimate number is going to be."
The question mark hanging over Robins is the issue of punitive damages, generally awarded by juries when they find that companies have acted with "reckless disregard" and are deserving of punishment. In 1979, in the first and biggest punitive award in the Shield cases, a Denver jury awarded $6.2 million in punitive damages -- plus $600,000 in compensatory damages -- to a woman who suffered a near-fatal pelvic infection and miscarriage.
Yet the reserve fund makes no provision for big punitive damage awards for the simple reason that, as Hannen puts it, "there's no methodology whatsoever for estimating punitive damage awards.
"The punitive damages are a wild card, and if some crazy judge decides that a woman's inability to have a child is worth $100 million, then they have a problem," Hannen says. "But I don't see more than a 1 percent chance of that. . . . I don't think there's any question at all about the company's long-term survivability and viability."
Still, fresh reminders of the Shield fiasco come in daily. Last October, the company began a $4.5 million publicity campaign urging any woman still using the Dalkon Shield to have it removed at Robins' expense. Since then, the company has received an average of 100 claims per week and has spent another $1.1 million in removing the devices.
The company also set up a special toll-free phone line to handle questions about the Shield. No Shields have been on the market since 1974, but the the company was still being deluged with 1,500 calls per day last fall and has received about 18,250 calls so far.
More recently, the calls have tapered off to 22 to 23 per week, but not all are legitimate inquiries, Robins general counsel William A. Forrest said at the recent news conference. "We get a lot of calls from kooks, quite frankly," he said.