Merck & Co. to Pay $4.85 Billion Vioxx Settlement

posted on:
November 9, 2007

author:
Karl Stark

Merck & Co. today agreed to pay up to $4.85 billion to settle more than 26,000 cases involving the firm’s drug Vioxx.

The settlement was far below initial projections that the company would pay. Merck took a hard line on the litigation, threatening to fight every case individually.

"That strategy had an effect on settlement discussion", said David Jacoby of Anapol Schwartz, a Philadelphia law firm that participatied in the negotiations. Merck executives "should be commended for how they defended themselves in this litigation."They had a difficult case."

Asked who won, Jacoby said "We won. Merck won. It’s an ideal settlement when both parties got something of what they wanted."

Negotiating teams met more than 50 times in eight states and spoke hundreds of times over the telephone to hammer out the deal, according to attorneys.

"I’m very happy with it," Chris Seeger, one of the six plaintiff lawyers who helped negotiate the settlement, said Friday.

"It’s a tremendous way to resolve this litigation." Merck pulled Vioxx from the market Sept. 30, 2004 after its researchers determined the then-blockbuster painkiller doubled risk of heart attacks and strokes.

To qualify for a settlement, plaintiffs must have filed claims by Thursday and meet several criteria, including medical proof that they suffered a heart attack or stroke, that they received at least 30 Vioxx pills and that they received enough pills to support a presumption that they were ingested within two weeks before injury. That is a big concession by Merck, which has long claimed that Vioxx caused harm only after 18 months of use.

Those claims were dismissed by independent scientists and plaintiffs lawyers.

Merck stressed that the agreement is not a class action settlement and that it is not admitting fault.

Company executives and attorneys said as recently as last month that every case would be fought individually.

Analyst Steve Brozak of WBB Securities called Merck’s’ handling of the litigation "a Harvard casebook study of how to deal with a problematic product." Investors seemed to agree, as Merck shares jumped 3 percent, or $1.63, to $56.40 in pre-market trading.

Analysts predicted early on that liability could reach $50 billion, but after losing its first case in a $253 million verdict, Merck has won a string of civil cases.

Merck may now have put the uncertainty of millions of dollars in legal costs behind it, though it has been fairly successful fighting cases individually, winning 10 of 15 court verdicts to date.

The company said last month it had added $70 million to its reserves for defending lawsuits.

As of Sept. 30, Merck had reserved a total of $1.92 billion for legal expenses and spent a total of $1.2 billion.

The deal becomes binding only if 85 percent of the plaintiffs in about 26,600 lawsuits agree to drop their cases. It was finalized in the early morning hours after attorneys for Merck and the plaintiffs met with three of the four judges overseeing nearly all Vioxx claims.

Seeger said the deal was put in motion last December when three key judges pushed the parties to open out-of-court talks.

"Every claimant is going to be compensated" once their claim is validated, he said.

Seeger believes it is the largest settlement ever in the industry and said he will recommend that his 2,000 clients accept the deal.

Payments would vary, depending on severity of injuries and the length of time that Vioxx was used.

"The agreement is structured to provide a significant degree of certainty toward resolving the majority of the outstanding Vioxx product liability claims in the United States for a fixed amount," Richard T. Clark, chairman, president and chief executive officer of Merck, said in a statement.

Attorneys for both sides were to present the deal Friday morning to U.S. District Judge Eldon E. Fallon in New Orleans.

"In light of significant costs and delay that would result in protracted litigation, the settlement program will ensure that those who suffered injuries as a result of Vioxx are compensated fairly and efficiently," according to a statement from one of the lead plaintiffs law firms in the case, Beasley, Allen, Crow, Methvin, Portis & Miles of Montgomery, Ala.

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