Strategy Shift May Not Aid Merck in Vioxx Cases
Although Merck & Co. hinted this week that it might try to settle some of the lawsuits filed over its medication Vioxx, experts said Friday that resolving the mountain of litigation would still be a long and expensive test for the nation’s No. 3 drug maker.
Merck pulled Vioxx off the market almost a year ago after studies showed the blockbuster pain reliever could cause heart problems -- a move that unleashed thousands of lawsuits around the country, including in California.
The company said this week that it was considering settling some of the most formidable cases, a shift in its previously stated stance that it would fight every suit in court. The unusually swift change in strategy comes only days after a Texas jury hit the New Jersey-based drug maker with a $253-million verdict in the first trial over Vioxx.
But financial analysts, legal experts and plaintiffs’ lawyers said the move wouldn’t guarantee that Merck would emerge from its legal woes more quickly than drug, auto, asbestos and tobacco companies that were swamped by mass litigation in the past.
“Just because they want to settle doesn’t mean it’s going to happen,” said Arthur Hogan, chief market analyst at Jefferies & Co.
The reasons: a jackpot verdict in the Texas case, which was considered a weak claim; the sheer number of suits; and the fact that the cases involve claims of death or serious injury.
Los Angeles lawyer Tom Girardi, whose firm has filed hundreds of Vioxx suits, said Friday that he was taking a page from Merck’s playbook: “We’re going to try every single case. Merck taught us that.”
The scope of the litigation against Merck is growing. Experts say as many as 50,000 plaintiffs may come forward. Analysts have said the price tag for Merck ultimately could top $50 billion.
By the company’s own count, more than 5,000 people have filed legal claims over Vioxx. More than 250 suits have been filed in California involving more than 1,650 plaintiffs. They have been consolidated under Los Angeles Superior Court Judge Victoria Cheney, who is expected to set a mid-2006 trial date.
Cheney’s Vioxx docket is second in size among state courts only to that of the master court in New Jersey, Merck’s home state. Because of the volume of cases and the reputation of the plaintiffs’ bar in California, any trials here are expected to shape the course of the litigation.
Newport Beach lawyer Mark Robinson, whose firm represents more than 100 Vioxx plaintiffs, said it was premature to discuss settlements because there had not been enough trials to establish the value of the wide variety of cases involved.
“You need to try a number of cases to get proper evaluation,” he said. “I’m not even thinking settlement because, in my experience as a trial lawyer, it sort of dilutes your motivation. I know now we need to be in a trial mode.”
Columbia University law professor John Coffee said Merck’s Vioxx problem looked a lot like what American Home Products Corp., now Wyeth, had faced with its diet drug fen-phen.
“This looks a lot like fen-phen, deja vu all over again,” he said. “After they started losing big time in individual cases, American Home Products thought the only way out was to engineer a class-action settlement with a price tag of about $4 billion.”
The strategy ultimately backfired because, in order to win court approval, the diet drug maker was forced to allow plaintiffs the option of going to trial, Coffee said. Some of the stronger ones did, winning jury awards larger than the deal the company had contemplated.
Coffee said it would be hard for Merck to win court approval of a settlement involving all or most of the eventual plaintiffs because the circumstances of their cases vary widely.
Still, analyst Hogan praised Merck for recognizing earlier than most companies that escaping a litigation swarm would have to involve some settling.
After the Aug. 19 verdict, “they must have said to themselves, ‘Let’s get to Plan B sooner rather than later,’ ” Hogan said.
Merck general counsel Kenneth Frazier signaled the company’s shift in a TV appearance Tuesday. “We will take each case as it comes,” Frazier said in an interview on CNBC. “We will make reasonable decisions about how to proceed in defending each one of those cases.”
Despite the broad hints about settling, Merck has not reached out to plaintiffs’ lawyers, said Kent Jarrell, a spokesman for the company’s outside lawyers. He said the company would give consideration only to “a relatively small subset of cases” in which the plaintiff could prove that he or she was on Vioxx continuously for 18 months before suffering a stroke or heart attack and had no other risk factors, such as obesity.
“We have no intention of entering into a global settlement,” Jarrell said.
Plaintiffs’ lawyers scoffed at the idea of settlements in such a small portion of the cases and didn’t put much credibility in the company’s comments.
“Most of the litigation is about all the people who took it and had heart attacks in the first 60 days,” said Chris Seeger, a New York lawyer scheduled to face Merck in a trial set for Sept. 12 in New Jersey. “So it’s a ridiculous offer they’ve made. This was all designed to get their stock price back up.”
Merck shares fell 1.4% this week, losing 11 cents Friday to close at $27.66.
