New Jersey Supreme Court Rejects
Class Action Over Merck's Vioxx
By HEATHER WON TESORIERO
September 6, 2007 4:04 p.m.
The New Jersey Supreme Court removed the biggest financial threat Merck & Co. faced from litigation over its Vioxx painkiller by ruling that health insurers' lawsuits against the company can't be consolidated into a nationwide class action, which limits the scope of potential damages against the pharmaceutical maker.
In reversing a lower-court decision, the state Supreme Court said class-action status for the plaintiffs, which consisted of all nongovernmental health plans that paid for members' Vioxx prescriptions, would be inappropriate because "common questions of fact or law do not predominate" in the claims.
The ruling doesn't address the merits of the underlying suit, which sought reimbursement for as much as $9.6 billion of Vioxx purchases. But investors reacted positively, as the stock rose 94 cents, or 2%, in New York Stock Exchange trading following the decision Thursday afternoon.
Since Merck withdrew the painkiller from the market three years ago following a study that linked the drug to an increased risk of heart attacks and strokes, some 28,000 lawsuits have been filed against the Whitehouse Station, N.J., company. Merck has won 10 cases and lost five. All these suits were brought by or on behalf of individuals allegedly injured by the drug.
The complaint at issue Thursday was filed by the International Union of Operating Engineers Local 68 Welfare Fund, which supplies union members with health-care benefits. The fund was supported 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 Local 68 union's case, which can still proceed to trial in state court, is brought under New Jersey's consumer-fraud act, which makes losing parties liable for treble damages.
Merck outside defense counsel John Beisner of O'Melveny and Myers said the company is "quite pleased" with the ruling. "I think it's a quite a significant victory. It's consistent with the company's position to defend all issues quite vigorously," Mr. Beisner said.
Attorney Chris Seeger, who represents the union fund, said, "Merck may not have to face all these damages in one class case, but we're not going away."
The ruling drew mixed reactions from drug industry analysts. In a note to investors, Jami Rubin of Morgan Stanley called the decision "an enormous victory for Merck, as we have always maintained that the consumer fraud class action suits [rather than individual cases] represent the biggest risk to Vioxx liability, and one that the Street has been less focused on."
C. Anthony Butler of Lehman Brothers wrote, "This is a positive for Merck, but we believe the outcome should not be thought of as a proxy as to whether or not Merck should, would, might alter litigation reserves."
To date, Merck has spent $1.04 billion on Vioxx legal fees and has set aside an additional $810 million in reserves to pay for additional costs. These figures do not include any payouts to plaintiffs. |
