Court Upholds Vioxx Class Action
Stakes Rise in Merck Suit
As Health-Care Plan Win
Threatens Triple Damages
By HEATHER WON TESORIERO
April 1, 2006; Page A3
Merck & Co. faces higher stakes in a lawsuit brought by insurers and other parties that paid for Vioxx taken by millions of patients after a New Jersey appeals court on Friday upheld the suit's national class-action status. (See the full text of the court's ruling.)
The case hasn't been scheduled for trial, and a Merck spokesman said the company will appeal the decision to the New Jersey State Supreme Court.
The lawsuit, which seeks reimbursement for as much as $9.6 billion of Vioxx purchases, could significantly complicate Merck's defense efforts as it battles thousands of cases brought by individuals. If it goes to trial, the stakes will be large and the plaintiffs will face a lower bar to prove their case than in the personal-injury cases that have been seen so far. A loss in the case would trigger triple damages under state law. That could increase pressure on Merck to consider a settlement, at least for some cases, which it so far has resisted, experts said.
"I think it's a thorn in Merck's side," said Tony Butler, a drug-industry analyst with Lehman Brothers Holdings Inc. "Merck believes each case has individual facts that should be decided on an individual basis."
The suit was brought by a fund operated by a New Jersey union to supply its members with health-care benefits. The fund, International Union of Operating Engineers Local 68 Welfare Fund, was joined by more than a dozen entities that offer health-care benefits, including the AARP and the American Federation of State, County and Municipal Employees.
The suit was filed with Judge Carol E. Higbee, who last July certified a nationwide class that includes all nongovernmental health plans that paid for members' Vioxx prescriptions. The plaintiffs allege that Merck misrepresented the safety profile of its painkiller, ignoring clear and early warning signs as it continued to sell the former blockbuster. The health plans say they wouldn't have included Vioxx on their lists of approved medicines or agreed to reimburse their members for its cost if they had known that it carried significant safety risks.
Merck, which maintains that it handled Vioxx properly, sold the drug from 1999 until September 2004, when it pulled it from the market after a study linked it to increased risks of heart attacks and strokes in people who took it for more than 18 months. At its peak, Merck sold $2.5 billion of the drug a year.
Since the drug was taken off the market, Merck has been hit by more than 9,650 lawsuits from patients and their relatives alleging that Vioxx caused their heart attacks, strokes or deaths. So far, in a series of trials in state and federal courts, Merck has won two cases and lost one. One trial is currently under way before Judge Higbee, and another in state court in Texas.
The class-action plaintiffs could have an advantage in a trial because they won't have to prove that Vioxx was responsible for injuries -- which has been the toughest hurdle for personal-injury plaintiffs in the trials so far, given the frequency of heart attacks and strokes. Plaintiffs' attorneys in all of the trials so far have presented a series of internal documents to attempt to show that Merck knew as far back as 1996 that Vioxx increased cardiovascular risks.
"I think Merck is in a weaker position," following the ruling, Edward Sherman, professor at Tulane Law School, said. "I think it's an easier case for the plaintiffs on behalf of third-party payors."
Merck wants each benefits provider to "prove that the alleged misrepresentation caused harm to the third-party payor," said Ted Mayer, an outside lawyer for Merck.
Christopher Seeger, lead attorney for the plaintiffs, said he estimates that his lawsuit will demand $8 billion to $9.6 billion from Merck, based on calculations of the value of Vioxx sales while it was on the market and that about 80% of its cost was reimbursed through health plans. In addition, New Jersey's tough consumer-protection act stipulates that awards in such cases are automatically tripled as a deterrent to companies to engage in future wrongdoing.
"The numbers could dwarf what's paid in personal injury cases," said Mr. Seeger, who tried one Vioxx case before Judge Higbee last fall and lost.
Analysts and legal experts say that, while the magnitude of the potential damages could spur Merck to consider a settlement, at least in this case, Merck could continue to litigate the personal-injury claims, which it has proven it can win.
"There's motive to settle given the fact that you don't want almost $30 billion in liability riding on one verdict," said Richard Evans, a drug-industry analyst with Sanford C. Bernstein. A settlement for a few billion dollars wouldn't change the company's health, he said, whereas a loss in the case -- even if unlikely -- would be damaging.
But a decision to settle part of the litigation would conflict with Merck's stated intention to fight every case. Merck, of Whitehouse Station, N.J., isn't discussing the possibility of settling for now. "We're really looking at this as an issue that should be heard by the New Jersey Supreme Court. Our focus is on that now," Mr. Mayer said. "We think our defenses are meritorious because our conduct was appropriate."
The New Jersey appellate court's decision to uphold the third-party payors' class certification comes at a time of growing hostility in the U.S. legal system toward class-actions suits. Last February, President Bush signed the Class Action Fairness Act into law, which moves most large, interstate class-actions into federal courts, in an effort to clamp down on lawyers ability to "jurisdiction shop," or file cases in venues viewed as plaintiff-friendly. The Vioxx third-party-payor suit was filed in 2003 and can't be moved to federal court.
Lawyers in the current trial in Atlantic City will present closing arguments on Monday. Two men who took Vioxx are suing Merck over their heart attacks. The cases are being closely watched because the plaintiffs allege they took Vioxx for more than 18 months, the period of time that Merck acknowledges the drug can increase the risk of heart attacks and strokes. |
