Already wounded by the withdrawal of its Vioxx pain reliever from the market, Merck & Co. must now contend with hundreds of lawsuits over the drug’s side effects – lawsuits that threaten to further damage the company’s finances and reputation.
Wall Street analysts are concerned about Merck’s potential legal liability. This week,
Standard & Poor’s Corp. warned that it might downgrade its ratings on Merck’s
debt because of the huge payouts the company might be forced to make.
Merck withdrew Vioxx from the market Sept. 30 because the drug doubled the risk
of heart attacks and strokes in patients taking it longer than 18 months. Merck’s stock plunged nearly 27 percent and the company lost $28 billion in shareholder value after the announcement – partly in response to the loss of revenue from Merck’s second best-selling drug, but also because of the lawsuits, said Richard Evans, an analyst at Sanford C. Bernstein Research. He estimates Merck’s legal costs could reach $12 billion.
If plaintiffs win, and prove their allegation that Merck put profits before patients’ welfare, the company’s reputation will also suffer.
A new analysis by Merrill Lynch concludes Merck’s liability could be as high as $17.6
billion over the next decade or so. The estimate is based on the possibility of nearly 51,000 successful lawsuits with jury awards or settlements of $100,000 to $300,000 for patients claiming heart attacks or strokes, plus another $1 billion to $2 billion for nuisance lawsuits. That would be slightly offset by Merck’s liability insurance of $650 million.
"This has a credibility cost. Merck’s brand and stature are tarnished by this," said
David Moskowitz, an analyst at Friedman, Billings, Ramsey.
Plaintiffs’ lawyers said there have been at least 700 Vioxx-related lawsuits filed against Merck so far and one analyst estimated the number at over 1,000. Merck says 300 suits have been filed. Legal experts said lawyers suing Merck must prove two primary assertions: The company understood Vioxx’s risks and downplayed them, and that the drug played a role in causing heart attacks or strokes.
A new analysis published online Thursday by the British journal The Lancet could help fuel the lawsuits. Swiss researchers led by Dr. Peter Juni of the University of Bern pooled results from 29 studies of Vioxx and found that people who took it had more than double the risk of heart attack than those given dummy pills or other painkillers.
The drug "should have been withdrawn several years earlier," the researchers
"The unacceptable cardiovascular risks of Vioxx were evident as early as 2000," Lancet editor Dr. Richard Horton wrote in a commentary. He faulted Merck for "astonishing failures" in monitoring the safety of its drugs and the U.S. Food and Drug Administration for "lethal weaknesses" in oversight.
Merck issued a statement Thursday saying that it had acted responsibly and that the Lancet analysis did not include two studies more favorable to Vioxx.
A federal judge in Alabama has ruled that Merck needed to be ready for trial
after Dec. 13 in a case brought by William Cook, a retired miner who had been taking Vioxx for about a year when he suffered a heart attack in 2000. The case was filed before Merck pulled Vioxx from the market. However, Merck filed a motion with the Judicial Panel on Multidistrict Litigation in Washington, D.C., to consolidate all the federal cases’ which could delay Cook’s trial, according to his lawyer, Andy Birchfield
Cook declined to be interviewed.
The case that goes to trial first will be closely watched by other plaintiffs and their lawyers, who are hoping for a precedent that could set a pattern for future lawsuits. Fordham University law professor Benjamin Zipursky suggested the perfect patient for plaintiff lawyers would be a young person who took Vioxx for 18 months and had no other-conditions that might-trigger-a heart attack or stroke. That would make it easier to prove Vioxx caused the plaintiff’s illness and a big settlement might push Merck to settle more cases.
However, many patients taking Vioxx for arthritis were older people who are generally more prone to heart attacks and strokes, so establishing the connection between their illnesses and the drug could be difficult.
"The more common the adverse effect, the more difficult the case could be to win," said Frank McClellan, a law professor at the Beasley School of Law at Temple University in Philadelphia.
It’s not clear how helpful Cook’s case will be to either side. Cook, who is 50, had a sedentary lifestyle before his heart attack due to a back injury. Doctors consider a sedentary lifestyle to be a contributor to heart disease.
Other drugs that were taken off the market and the Subject of numerous lawsuits, such as Bayer AG’s cholesterol drug Baycol and Wyeth’s diet drugs Pondimin and Redux, caused uncommon injuries that made proving liability easier.
Wyeth took its drugs off the market in 1997 and has paid out $13.6 billion in legal fees and settlements of its $16.6 billion reserve – believed to be the biggest amount ever paid by a pharmaceutical company over a problem drug.
Baycol was withdrawn in 2001 and Bayer has paid out $1.09 billion so far.
Only 6 million individuals took Wyeth’s diet drugs while 20 million Americans took Vioxx. That has led some observers to believe Vioxx’s payout could be larger.
" I’m pretty confident we can show Vioxx caused my client’s heart attack,” said Birchfield, a partner at Beasley, Allen, Crow, Methvin, Portis & Miles in Montgomery, Ala. “There is a population that really shouldn’t have been prescribed Vioxx especially because it was more likely to cause heart attacks and strokes.
Merck general counsel Kenneth C. Frazier said heart attacks happen frequently in the general population and there are numerous factors, including obesity and age, that increase the risk.
"These cases are not a slam dunk," said Frazier. He said when all the facts are before a judge it will be clear that "Merck acted responsibly every step of the way."
"It would be pretty callous of Merck to say these are old people and they were going to get heart attacks and strokes anyway. That is not going win them any points with a jury," said Arnold Levin, senior partner at Levin, Fishbein, Sedran & Berman in Philadelphia, which has filed two cases against Merck and is preparing another 38.
Plaintiffs’ lawyers must also prove that Merck knew Vioxx could cause heart attacks and strokes but minimized the drug’s side effects while marketing it. They might find support for their case in documents that have come to light recently.
Birchfield and other lawyers said they have documents that prove Merck knew about Vioxx’s problems long before they became public and that the company engaged in a campaign to mute the risks once they began emerging.
The Wall Street Journal reported this week that sealed court documents suggest Merck understood Vioxx’s dangers at an early stage. According to the newspaper, in a Feb. 25, 1997, e-mail Merck official Briggs Morrison said patients taking Vioxx in a clinical trial should also take aspirin, which has cardioprotective powers, because otherwise "you will get more thrombotic events" – blood clots. In another e-mail, Merck’s research chief Edward Schonick wrote to colleagues on March 9, 2000, saying the cardiovascular events "are clearly there."
Frazier said the documents were taken out of context, and don’t reflect the evolution of thought on Vioxx as more data became available.
One central, public element to the plaintiffs’ case is a 2000 study known as Vigor, in which patients taking Vioxx had five times the rate of heart attacks than those taking an older pain reliever, naproxen. Merck claimed Vioxx did not cause heart attacks and the company al
so contended that naproxen had cardioprotective benefits that prevented users from suffering heart problems. Plaintiffs’ lawyers said this contention was an attempt to downplay Vioxx’s risks.
Another key piece of evidence is a 2001 warning letter the FDA wrote to Merck which said a promotional campaign for Vioxx "minimizes the potentially serious cardiovascular findings" observed in the Vigor study and that it "misrepresents the safety profile for Vioxx."
The letter said Merck failed to disclose that its explanation about naproxen was a hypothesis with no adequate studies to support it and that another reasonable explanation for the increased heart attacks is that Vioxx may help cause blood clots.
On Tuesday, the FDA released a study that said Vioxx may have contributed to an additional 27,785 heart attacks or deaths from 1999 to 2003 that might have been avoided if patients were taking Pfizer Inc.’s Celebrex. The study analyzed medical records of 1.4 million adult members of Kaiser Permanente, the nation’s largest HMO. Preliminary findings were released in August.
The report also found that naproxen had no cardioprotective effects, disputing Merck’s contention.
The estimates in the Merrill Lynch report are based on data from the Kaiser Permanente study.
Doctors interviewed for this story also had complaints about Merck, saying the company tried to squelch negative opinions on Vioxx’s safety and downplay the drug’s risks.
Stanford University medical professor Dr. James Fries said a high-ranking Merck official, Dr. Louis Sherwood, tried to intimidate several doctors who expressed concerns about Vioxx’s safety. Fries said Sherwood made charges to these doctors’ superiors that the physicians were biased against the drug.
Fries said he received such a call about one of his doctors and learned it was part of a pattern. He said he wrote Merck chairman Raymond Gilmartin protesting the company’s attempt to suppress academic discussions.
"I think Merck went over the line," Fries said. "Their approach was to try to get people fired for saying things they (Merck) didn’t agree with." Fries said the calls stopped after his letter, which he said was sent in 2000 or 2001.
In a statement, Sherwood said he disagreed with Fries’ version of events.
"As a former academic chairman and a long-time member of the medical scientific community myself, I am deeply committed to open scientific debate and academic freedom and have never sought to do anything to impinge on either of these principles," Sherwood said. "In rare circumstances, where I have been made aware of unfair or unbalanced scientific presentations, I have taken appropriate action to express my own views in response to what I viewed as misinformation and to ensure that open and fair scientific debate remains the touchstone."
Frazier said Merck has never had a policy of retaliating against doctors but has the right to "set the record straight" if it feels its products are being misrepresented.
Physicians including Dr. Eric Matteson of the Mayo Clinic said Merck should have acted more swiftly to determine Vioxx’s cardiovascular safety profile after Vigor. Frazier said subsequent Vioxx trials were all designed to look at that profile and that as soon as the risk was established, the drug was withdrawn. He noted the Vigor study was widely publicized so doctors should have known the heart attack information.
"Any claim that Merck did not seek to fully understand the cardiovascular profile of Vioxx is contradicted by the facts," said Dr. Peter Kim, president of Merck Research Labs, at an earlier press conference.
Vioxx’s label was changed in 2002 to reflect the Vigor study but lawyers maintain it wasn’t strong enough and that the company continued to downplay the drug’s risks. The Cook lawsuit charged that Merck had at least three programs to train sales representatives "to misstate and misrepresent the truly dangerous nature of Vioxx to prescribing physicians."
The materials are under court-ordered seal.
"There is no question the sales force downplayed the risk," said Matteson, a professor of medicine and a consultant to the rheumatology department at the Mayo Clinic in Rochester, Minn.
Matteson said salespeople would discuss Vioxx’s other side effects such as high blood pressure but said that when it came to heart attack risks, they would switch to talking about how the 2000 data were analyzed.