Merck may Face Vioxx Probe

posted on:
April 13, 2006

author:
Staff

It sounds daunting to consider the New Jersey Attorney General will consider a criminal probe of drugmaker Merck because a jury decided it misled federal regulators about the dangers of painkiller Vioxx.

But in reality, court officials and analysts said there is no telling when—or if—Merck will face a state criminal probe.

The Attorney General’s office and the New Jersey court administrative office gave a collective shrug to the automatic referral of the case of John McDarby, a 77-year-old Park Ridge man awarded $13.5 million in punitive and compensatory damages.

“That’s really a matter for the judiciary to respond to,” said Lee Moore, spokesman for the Attorney General Zulima Farber. “As far as the time frame, that is something that should be addressed to the court.”
Tammy Kendig, a spokeswoman at the Office of the Administrator of Courts, simply read back the law, and added: “There is no deadline set out.”

Anthony Coley, a spokesman for Gov. Jon Corzine, directed questions to Moore. By a 7-to-1 vote Tuesday, jurors in Atlantic City found Whitehouse Station-based Merck knowingly withheld information from the Food
and Drug Administration and the company’s misconduct was “wanton and willful.” The jury ordered the company to pay $9 million in punitive damages.

The verdict was the first time a New Jersey jury awarded damages against a drug company under the Punitive Damages Act, a statute passed 11 years ago as part of a tort reform effort. The jury finding triggered the law that says “any action in which punitive damages have been awarded” shall be referred for investigation of a possible “criminal act” by the defendant by state and Atlantic County officials.

Kenneth Frazier, Merck’s general counsel, said in a conference call with reporters Tuesday that the company would appeal the jury’s decisions based on the belief that Judge Carol Higbee inappropriately restricted testimony and evidence in the trial, which combined the case of McDarby, 77, and Thomas Cona, 60, of Cherry Hill.

While Merck stock has been battered by potential Vioxx liability, shares prices showed only minor declines in the wake of the verdict and Wall Street analysts seem unconcerned about the latest news. Jami Rubin, a Morgan Stan ley analyst, in a research note predicted the punitive award—and any state criminal probe—would be overturned on appeal because the case “makes a mockery of the whole jury system.”

Both McDarby and Cona said they were long-term users of Vioxx. The jury had rejected Cona’s claim Vioxx triggered his heart attack.

In addition to the mixed results in Cona’s case, Merck has won two and lost two other Vioxx trials. Another case is under way in federal court in Texas and thousands more are pending.

Merck withdrew Vioxx from the market after a study linked the painkiller to heart attacks and strokes after prolonged use—18 months or more. Vioxx was taken by an estimated 20 million Americans from 1999 to 2004.

While federal prosecutors have been investigating the company’s marketing of the drug, a probe by officials in the drugmaker’s home state is no small matter, said Victor Schwartz, general counsel for the American Tort Reform Association.

“It’s tough enough to face a plaintiff lawyer. To face a plaintiff lawyer and state attorney general could make your life difficult,” said Schwartz, whose Washington, D.C.- based group is funded, in part, by drugmakers. “A reasonable attor ney general would see these were not the type of violations the law contemplated.”

New Jersey’s Punitive Damages Act was born of an attempt by companies to restrict the amount that could be awarded in a trial. They succeeded in having punitive damages limited to five times any compensatory damages. To discourage companies from considering a punitive damage award as a cost of business, the American Trial Lawyers Association managed to have a referral for a criminal investigation added to the law, according to Chris Placi tella, an attorney who helped draft the law and also has many Vioxx cases.

“That part of the statute is necessary if we’re to prevent compa nies from placing profits over lives,” said Placitella, who said he quickly wrote the original wording on a dinner napkin during a late-night negotiation.
Merck has another motive for appealing the McDarby verdict: Punitive damages aren’t covered by insurance.

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