Merck Appeals Potentially Costly Class Action Lawsuit

posted on:
March 19, 2007

author:
Staff

Merck & Co. made its latest case on Monday to decertify a class-action lawsuit involving pain drug Vioxx, which opposition attorneys said could cost the drug maker up to $27 billion.

Attorneys made oral arguments before the New Jersey Supreme Court after Merck had earlier failed to persuade a lower appeals court that the suit should not be allowed to go forward as a class action on behalf of health insurers and others who paid for people to use Vioxx.

Merck withdrew its once $2.5-billion-a-year drug from the market in September of 2004 after a study found it doubled the risk of heart attack and stroke in long-term users. The company is facing more than 27,000 lawsuits from people who claim to have been harmed by the arthritis medicine.

Chris Seeger, an attorney for plaintiff the International Union of Operating Engineers Local 68 Welfare Fund, said insurers and other third parties paid between $8 billion and $9 billion to Vioxx users during the five years it was on the market.

Under New Jersey’s Consumer Fraud Act, a court must award three times the amount spent on any product whose maker is found to have violated the law.

The plaintiffs in the class-action suit claim that Merck misrepresented Vioxx and concealed facts about its heart risks, which led the payers to reimburse users for the drug.

MERCK SAYS IRRATIONAL

Merck attorney John Beisner argued that allowing the third-party payers to launch a joint legal action under the New Jersey Consumer Fraud Act would subject the payers to New Jersey law regardless of the state in which they do business. Consumer protection laws vary widely from state to state, he said.

“This is not a rational system of consumer protection,” Beisner said.

But Seeger argued that New Jersey law is appropriate for the class action, because Merck is a New Jersey-based company that made the alleged misrepresentations that led to the Vioxx reimbursements while doing business in the state.

“That wrong is so closely linked to New Jersey,” said Seeger, who also has represented individual plaintiffs who blame Vioxx for heart attacks. He discussed Merck’s potential liability with reporters following the oral arguments.

Analysts said Merck faces potentially significant penalties if the court allows the class-action certification to stand.

“The risks from this single case would be very large and could compel a change of strategy from Merck, at least for the class action,” JP Morgan analyst Chris Shibutani said in a research note.

Merck has insisted it will fight each Vioxx lawsuit on a case-by-case basis rather than consider entering into a broad settlement.

It was not immediately known when the New Jersey Supreme Court’s ruling on the class-action certification may come down.

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