Merck's bad day in court
Federal jury finds drugmaker misrepresented painkiller, while New Jersey judge tosses out earlier verdict that favored it.
By Aaron Smith, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Merck was found negligent in the latest Vioxx case, as a jury in New Orleans federal court found that the drugmaker misrepresented the risks of the arthritis painkiller and awarded the plaintiff more than $50 million in damages.

In a double-whammy, a New Jersey court judge tossed out an earlier verdict that favored Merck in a separate trial, based on new evidence stemming from a correction in the New England Journal of Medicine.

The company said it plans to appeal the verdict from the New Orleans case.

"We do not believe that the verdict was supported by the evidence that was introduced in the case," said Phil Beck, an outside counsel for Merck, in a teleconference with reporters. He said he was "obviously disappointed with the result."

Jerry Barnett, 62, a former agent for the Federal Bureau of Investigation and a former Vioxx patient, is the fourth plaintiff to successfully sue Merck, blaming the drug for his nonfatal heart attack.

The jury held that Merck was negligent in warning Barnett and his doctors about the risks of Vioxx and said compensation of $50 million was adequate. Also, the jury awarded the plaintiff $1 million in punitive damages.

Merck's general counsel Kenneth Frazier said the finding and the damages were "totally uncalled for."

The stock price for Merck (down $2.35 to $38.83, Charts) slipped on the news.

Plaintiff attorney Andy Birchfield, whose firm is representing some 7,000 Vioxx plaintiffs, said that new evidence was introduced showing that Vioxx caused a dangerous amount of plaque buildup that contributed to Barnett's heart attack in 2002 and led to his two bypass surgeries.

"The evidence here, from a scientific and medical standpoint, is very strong that Vioxx actually caused plaque buildup, in addition to the heart attack," said Birchfield, noting that this evidence could figure in upcoming trials.

As for the voiding of an earlier verdict by a New Jersey judge, Merck outside counsel Ted Mayer said, "We believe that this decision to set aside a decision based on an editorial published after the trial is absolutely unfounded."

Bad day for Merck

Judge Carol Higbee, a New Jersey justice, tossed out a November verdict that had favored Merck over plaintiff Frederick Humeston as a result of new evidence unrelated to the New Orleans case. A law clerk said the decision was based on a correction issued by the New England Journal of Medicine in June, and the case might be retried with other Vioxx cases in January.

"This [is] worrisome for [Merck], and to have two of them on the same day gets a bigger splash in the press," said Frances Miller, Boston University law professor and an expert in health care law. "It certainly gives an adrenaline charge to [plaintiff lawyers] and will cause a great deal of Monday morning quarterbacking at Merck."

The NEJM correction removed a previously published finding that Vioxx increased the risk of heart attacks only after 18 months of Vioxx use. This finding, based on a Merck study, is the reason why Merck took the drug off the market, but it has also been used by defense lawyers to undermine claims that risks emerged earlier than 18 months.

Merck pulled Vioxx off the market in 2004, after a Merck-funded study found that the drug increased the risk of heart attacks and strokes.

Since that time, some 14,200 cases have been filed against the New Jersey-based drugmaker from former Vioxx patients and their families.

Merck has consistently denied all allegations of wrongdoing, saying that Vioxx did not kill anyone, and has vowed to fight each case individually.

The loss of Vioxx evaporated $2.5 billion in annual sales and resulted in a 40 percent plunge to Merck's stock price. Since that time, the stock price has partly recovered, and it is now down about 8 percent from its September 2004 level.

Many analysts believe that Merck could face tens of billions of dollars in potential damages as cases proceed over the next few years, but this concern is mostly priced into the stock.

Going forward

Merck faces its next Vioxx case on Sept. 11 in New Orleans federal court, followed by two more federal cases this year and state cases in New Jersey, California, Alabama, Texas and Illinois.

Lawyers for Merck said they won't be changing their legal strategy, which is founded on presenting scientific data to the juries to demonstrate that Vioxx did not cause heart attacks.

"It's a tough job to present complex scientific and medical information to juries and we have a short period of time in which to do it," said Merck lawyer Beck in a teleconference with reporters following the verdict. "We feel like we get better and better at it as we go on, and we'll continue to do it."

Merck lawyers have won five cases, including the Humeston case in New Jersey last year, by effectively picking apart a plaintiff's claim that Vioxx caused his or her heart attack. Merck lawyers typically do this by highlighting the health flaws of plaintiffs and the non-Vioxx conditions that may have led to the heart attacks.

But this strategy didn't work in New Orleans. Bryan Liang, professor of health law studies at California Western School of Law, said the plaintiff lawyers effectively demonstrated to the jurors that Barnett was a robust former FBI agent who would not have suffered a heart attack, were it not for Vioxx.

"From the point of view of Merck, this is a tremendous setback," said Liang. "What they thought was a great strategy, doesn't seem to be a great strategy anymore. The lawyers are really going to have to get together and figure out how they're going to deal with damage control."

The correction published by the NEJM and the New Jersey judge's decision to throw out the verdict is sure to haunt Merck in upcoming trials. Liang said that Merck lawyers should try to find flaws in data being used against the company and to fight science with science by presenting these flaws to the jury.

"It looks like Merck lied, and that doesn't look good to the juries, but if they can come up with an independent assessment that indicates that the additional data isn't going to change the conclusion about 18 months, then that's going to matter to the jury," said Liang. "They've got to find a way to spin control this, and the way to do it is to spin science."

Before Thursday's verdict and the decision of the New Jersey judge, Merck was leading the fight with five courtroom wins and three losses. Merck won the most recent case in a Los Angeles state court Aug. 2, when a jury found that Vioxx did not cause a plaintiff's nonfatal heart attack.

Merck vows to keep fighting the Vioxx war Top of page

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Market indexes 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. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.