Merck vows to keep fighting the Vioxx war
A year into its Vioxx litigation war experts agree with the company's no-settlement strategy, but 14,000 cases remain.
By Aaron Smith, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Merck holds the lead in the ongoing legal war against Vioxx plaintiffs, with five wins and three losses, and experts say it's cheaper for the company to keep paying defense lawyers than to buy off plaintiffs in a mass settlement.

"I think they're doing the right thing, at least from a cost-benefit point of view," said Bryan Liang, professor of health law studies at California Western School of Law. "Eventually they're going to wear people down. If they continue to get more wins, I think that some plaintiffs are going to say 'this is too much' and they're going to start dropping these cases."

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Merck (up $0.56 to $41.59, Charts) won the most recent case in a Los Angeles state court on Wednesday, when a jury found that Vioxx did not cause the 2001 heart attack of plaintiff Stewart Grossberg, 71, a retired construction manager from Northridge, Calif.

Throughout the litigation process, Merck has vowed to fight each case one at a time.

"Our scientific message got across to the jury and that confirms our litigation strategy of continuing to look at each of these cases individually, and we will be prepared to go to trial wherever these cases come up and whenever they come up," said Kent Jarrell, spokesman for Merck's outside counsel.

Fighting these cases in a series of one-on-one duels is no small task. Some 14,200 cases have been filed against Merck, the No. 2 drugmaker in America, from patients and their families who blame the arthritis painkiller Vioxx for their heart attacks, strokes and other health problems, some of them fatal. Merck, based in Whitehouse Station, N.J., took the anti-inflammatory off the market on Sept. 30, 2004, after a study revealed that Vioxx doubled the risk of heart attacks and strokes in patients who took the drug for at least 18 months. This evaporated $2.5 billion in annual sales.

Merck has denied that its drug killed anyone, and also denied accusations that it withheld information about Vioxx and deliberately misled patients and doctors. Maintaining this denial is an incentive for Merck to keep fighting and not give in, said Frances Miller, a professor at Boston University School of Health and an expert in healthcare law and policy.

"[Merck] doesn't want to give in on the causality issue," said Miller. "If they keep winning, there's no way they're going to settle and plaintiff lawyers are going to be less willing to pursue because they're not getting any money if Merck wins. As long as [Merck] is winning, it's always cheaper to keep litigating."

The company has set aside $685 million to defend itself. This figure does not include damages for liability, which can be hefty. In April, Merck was found liable in the death of a Vioxx patient and the jury in the Texas border town of Rio Grande City hit the company with $32 million in damages. Merck said it would appeal and maintained that Texas law caps the damages at $750,000.

Also in Texas, Merck lost the first Vioxx case filed against it in August of 2005, in the Houston-area town of Angelton, where the jury ordered the company to pay the widow of a dead Vioxx patient $253 million. The plaintiff's lawyer Mark Lanier said state law capped the damages to about one-tenth that value. In a split verdict in New Jersey in April, Merck was held liable for one of the plaintiffs, a heart attack survivor, who was awarded $13.5 million.

Analyst estimates on total liability damages range from $10 billion to $50 billion. How would Merck avoid further losses and keep the winning scoreboard? Location, location, location, says Jon LeCroy, analyst for Natexis Bleichroeder.

"As long as they're not trying these cases in Texas and some of the Southern states that tend to go against them, they can do pretty well," said LeCroy.

Never surrender

LeCroy said it's early in the war because Merck is "in the first year of at least 10 years of this," but if they keep winning, settlement is the last thing they want to do.

"[Fighting cases one on one] is a lot less expensive than to settle," said LeCroy. "Because when you start doing mass settlement, you start getting settlements of cases that might not have any merit, and you start getting cases filed that have no basis or are very weak claims. If they were going to announce a mass settlement, I wouldn't be surprised if you saw a fivefold increase in cases filed."

Les Funtleyder, analyst for Miller Tabak, agreed that ongoing victories for Merck would "discourage people on the marginal cases to pursue," while a settlement would encourage "people who hopped on the gravy train."

Funtleyder said it's too early to speculate whether Merck's strategy will pay off, because there are more than 14,000 cases to go, but so far, so good.

"I will give them credit because a lot of people were a little skeptical about [Merck's] legal strategy," said Funtleyder. "But a year into this, it's proved to be prudent."

Another Vioxx case is ongoing in New Orleans federal court.

Medical journal publishes Vioxx correction Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.