Merck Names Panel to Review Firm's Actions Involving Vioxx
By BARBARA MARTINEZ and SUZANNE VRANICA
Staff Reporters of THE WALL STREET JOURNAL
December 8, 2004; Page B2
Merck & Co. said its board appointed a special committee to "review the company's actions" before its Sept. 30 withdrawal of Vioxx, the one-time blockbuster painkiller that has been linked to an increase in heart attacks and strokes.
Merck said the five-member special committee, consisting of directors who have stood firmly behind Chief Executive Raymond Gilmartin, will act for the board in "responding to shareholder litigation matters related to the withdrawal of Vioxx and advise the board with respect to any action that should be taken as a result of the review."
Analysts have estimated a wide range of potential litigation costs for Merck, climbing as high as $38 billion.
Merck of Whitehouse Station, N.J., withdrew Vioxx after a Merck-financed study found that Vioxx users had twice the risk of a heart attack or stroke after 18 months of continual usage as patients taking a sugar pill. The company faces hundreds of lawsuits as well as inquiries by the Justice Department and the Securities and Exchange Commission.
The new committee's members include longtime directors William Bowen, president of the Andrew W. Mellon Foundation, who will head the committee; and Lawrence A. Bossidy, former chief executive of Honeywell International Inc.
The special committee also includes Shelly B. Lazarus, who was appointed to Merck's board in October, and who is chairman and chief executive of WPP Group's Ogilvy & Mather. Ogilvy & Mather has created ads for Merck's cholesterol treatment Zocor since 1996 and also helped create part of the crisis ads that have been running since Merck withdrew Vioxx.
Ms. Lazarus referred calls for comment to Merck. A spokesman for Merck, Tony Plohoros, said in a statement that the Merck board considers the amount of business "that Ogilvy & Mather provides to Merck to be immaterial to both companies, and in no way compromises Ms. Lazarus's ability to exercise critical, disinterested and independent judgment on behalf of Merck and its stockholders."
The special committee has hired John S. Martin Jr., of counsel at Debevoise & Plimpton, to assist with the independent review. Mr. Martin was a U.S. district judge in the Southern District of New York for 13 years and was the U.S. attorney there for three years.
Mr. Martin will scrutinize what executives knew about the drug's problems and when they learned of them, according to a person close to the situation. Mr. Martin's law firm hasn't previously worked for Merck, and the retired judge will have free rein "to do anything he wants" from an investigative standpoint, this individual said.
In a news release announcing the creation of the committee, Mr. Gilmartin said the committee will have Merck management's cooperation and that management "looks forward to the results of the special committee's review and is convinced that it will show that the company acted responsibly and appropriately."
--Joann S. Lublin contributed to this article.
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