Merck stands firm on vow to fight suits

posted on:
August 7, 2005

author:
Ed Silverman

The legal team at Merck doesn’t like the “s” word — as in settlement.

Since withdrawing Vioxx from the market last fall, the Whitehouse Station-based drugmaker has repeatedly vowed to fight every lawsuit, whether it involves patients claiming the pill caused heart attacks or a health plan charging it overpaid for a defective medicine.

The company’s stance, which Merck reiterated last week, could lead to courtroom squabbling for years to come, given that more than 4,200 lawsuits have, so far, been lodged in federal and state courts around the country. Still more are being considered by attorneys.

Despite a setback in the first trial, now under way in Texas, experts say Merck has little choice but to pursue a confrontational strategy and avoid settling, especially since it already conceded Vioxx was linked to heart attacks and strokes after 18 months of use.

“It might appear tempting to settle cases, but I really think this isn’t the right time,” said Benjamin Zipurslcy, a Fordham University Law School professor who specializes in mass torts and product liability. “It would be seen as a sign of weakness.”

To consider such a move now, he explained, would likely motivate attorneys to file countless additional lawsuits in hopes of walking away with a big payout without having to endure the time and expense of preparing for trial.

Moreover, experts say, it’s important for Merck to weather the first few trials, especially if a winning track record can be established. This would bolster Merck’s defense that Vioxx wasn’t to blame for every heart attack experienced by a patient who took the painkiller.

This may also dissuade attorneys from filing weaker lawsuits, in which a Vioxx patient had a medical history of heart trouble or other condition, such as high blood pressure, that may have contributed to a heart attack.

“There’s good reason for a no-holds barred stance,” said Robert Rabin, a product-liability expert at Stanford University Law School. “It’s not just posturing. Besides, you can always reassess later. But if they don’t do well at the outset, it’s also a sign of vulnerability.”

In the Texas case, which is expected to finish shortly, Vioxx is blamed for causing the death of Charles Robert Ernst, a 59-year-old Wal-Mart produce manager, who ran marathons and exercised regularly.

When the trial began, Merck hinged its defense on an autopsy report that indicated Ernst died of cardiac arrhythmia, or an irregular heartbeat, and not a heart attack. Moreover, Merck contended Ernst-suffered from a pre-existing condition — undiagnosed atherosclerosis.

But Merck didn’t expect the coroner to testify that it was possible Ernst died of a heart attack, after all, because a blood clot landed in a clogged artery. She added CPR may have dislodged the clot, leaving no time for heart damage to appear.

“Merck received a bad surprise,” said Mark Ravera of Strategic Pharma Consulting. “It really weakens their position. It would’ve been to their benefit if they could have waived the autopsy report in front of the jury and said there was no heart attack.”

In a worst-case scenario, Merck could lose the case and have to pay large damages to Ernst’s widow. In that case, legal experts say, any move to forge a settlement plan for other lawsuits may send a signal to patients and lawyers that a big payday is on the horizon.

“I don’t anticipate any quick settlements here,” said Jere Beasley, whose law fm will handle the first federal court case in New Orleans later this year. “They see no need. By dragging it out and threatening victims and lawyers with lengthy trials, they can scare them off.”

Merck must be careful not to repeat mistakes made by Wyeth, which yanked two diet pills in 1997. After losing high-profile cases, Wyeth tried to wrap up as much litigation as possible with a global settlement. But it was flawed by various “opt-out” clauses;

“They left too many loopholes,” said Stephen Sheller, a trial lawyer who was involved in the diet-pill litigation. “They didn’t offer to pay enough to the serious cases, and paid too much to people without serious injury. Both decisions only encouraged more lawsuits.”

To date, Wyeth has taken $21 billion in charges to cover ongoing litigation. Meanwhile, Wall Street estimates Merck faces anywhere from $4 billion to $30 billion in liability. So far, Merck has set aside $675 million for legal costs.

Even if Merck wanted to consider settling some cases sooner than later, experts say other important issues remain. For instance, Merck needs a negotiating partner who can speak for the many trial lawyers involved in Vioxx litigation around the country.

“There’s a practical reality here — who would they call? Who are the key lawyers?” said Richard Evans, a securities analyst at Sanford C. Bemstein. “I don’t think the bar is organized enough to negotiate a settlement just yet. Some are still beating the bushes for clients.”

He added that trial lawyers have their own reasons for not rushing into negotiations. Both the U.S. Department of Justice and Securities and Exchange Commission are investigating Merck’s handling of Vioxx, and could turn up additional evidence.

Said Barbara Ryan, an analyst at DeutscheBanc Securities: “I don’t think there’s any question that this will be anything but a marathon.”

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