Merck & Co., the fourth-largest drugmaker, suffered two legal setbacks today after a jury said the company must pay $51 million to a retiree who claimed its Vioxx painkiller caused his heart attack and a judge ordered a new trial for a man who lost his case over the drug last year.
Merck stock fell more than 5 percent on the news, its biggest decline in a year.
A former FBI agent, Gerald Barnett, 62, claimed Vioxx caused his 2002 heart attack in a suit tried in New Orleans federal court. Merck lawyers said Barnett’s history of heart disease explained the attack. Merck pulled Vioxx from the market in 2004 after a study showed an increased risk of heart attacks and strokes in some patients.
The verdict may make it harder for Merck, based in Whitehouse Station, New Jersey, to fight every one of more than 16,000 lawsuits it still faces, as it said it plans to do. More suits may be filed in the coming weeks before a September deadline for such litigation expires. The company has set aside nothing for liability and about $1 billion for legal costs.
"I do think it’s going to go into their tactics,” said Michael P. Kelly, an attorney at McCarter & English in Wilmington, Delaware, who represents drugmakers. "The magnitude of the compensatory-damages award is what scares me the most here. It sounds like the jury either loved the plaintiff or hated Merck.”
Jurors, who calculated Barnett’s actual damages at $50 million, added $1 million more in punitive damages, which are awarded for bad conduct. Jurors found Merck was negligent in not warning Barnett’s doctors adequately about the dangers of Vioxx and that the company had "knowingly misrepresented or failed to disclose a material fact” about the drug to the physicians.
They also concluded Vioxx caused Barnett’s heart attack.
"The $50 million seems pretty high considering the patient is still alive, but they were spared on punitive damages ,” Jon Paul LeCroy, an analyst with Natexis Bleichroeder in New York said in an interview. "It’s a slightly worse than average scenario for a loss.”
Barnett’s lawyer Mark Robinson asked the jury after the initial verdict to impose $25 million in punitive damages. Merck lawyer Phil Beck argued that $50 million was enough to compensate Barnett. Beck said the company would appeal both verdicts and seek reduction of the damages.
"Both the finding and the amount of damages were totally uncalled for in this case because Merck acted appropriately in providing information to the medical, scientific and regulatory communities,” Merck General Counsel Kenneth C. Frazier said in a statement today. "While this is not the outcome we had hoped for, our commitment to defending these cases one at a time remains the same.”
Merck has lost four trial verdicts in cases linking Vioxx to heart attacks, while winning five. This is Merck’s first loss in federal court. In the first Vioxx case, a Texas jury a year ago awarded $253 million, which will be reduced to $26 million under state limits on damages. Today’s verdict will be the largest so far in Vioxx litigation after the Texas award is cut.
In a related matter, the New Jersey judge in charge of Frederick Humeston’s Vioxx case ordered a new trial today on the basis of new evidence. A jury ruled against Humeston, 60, a postal worker, in November.
Merck shares fell $2.15 or 5.2 percent to $39.03 at 2:05 p.m. in composite trading on the New York Stock Exchange. The stock is up more than 20 percent this year.
Mark Lanier, whose client won the $253 million verdict, said the New Orleans award is a portent of what is to come.”
"Merck is in serious trouble," he said. For every four cases they try, they’ll lose three. Wall Street has made a huge mistake. The analysts who think that Merck’s strategy of trying every case is correct are just dead wrong, and they are in serious trouble.
Lawyers for Barnett, who said he was "very happy" with the verdict, argued during the trial that the company ignored Vioxx known risks as it marketed the profitable painkiller. The drug generated $2.5 billion in sales in 2004, about 11 percent of Merck’s revenue.
Barnett, a Federal Bureau of Investigation agent for 27 years, took Vioxx for about three years before his attack and two years afterward. He experienced a decline in energy and activity levels since his heart attack, his lawyers said. His wife, Corinne, sought damages for the loss of his companionship.
This is the third federal court trial over the drug. The first ended in a mistrial, and Merck won the retrial of the case. Before today’s jury award, the Merck had lost three verdicts in state courts and was ordered to pay plaintiffs a total of $298 million, which will drop to $48 million because of state limits on punitive damages.
With today’s verdict, total damages are $349 million.
Phil Beck of the Chicago law firm Bartlit Beck Herman Palenchar & Scott, who represented Merck, also was a lawyer for the company in the federal trial it won in February.
Merck is scheduled this year to face four Vioxx trials in federal court in New Orleans, two in state court in Alabama, and one each in state courts in California, Illinois and Texas.
U.S. District Judge Eldon Fallon, who presided over the Barnett trial, is overseeing 5,968 Vioxx cases. He will next hear a case that had been scheduled for trial in August by a tribal court of Mississippi’s Choctaw tribe.
The case is Barnett v. Merck, 06-485, U.S. District Court, Eastern District of Louisiana (New Orleans).