Merck to fund Vioxx settlement in August

posted on:
July 17, 2008

author:
Linda A. Johnson

TRENTON, N.J. – Merck & Co. will start cutting checks for former users of its withdrawn painkiller Vioxx next month after announcing Thursday that it will fund a $4.85 billion settlement expected to resolve roughly 50,000 lawsuits alleging harm from Vioxx.

The decision marks the beginning of the end of the four-year legal saga, which began when cardiovascular side effects forced Merck to pull Vioxx off the market in 2004, triggering tens of thousands of lawsuits, sullying its once-spotless reputation and forcing out its then-chief executive.

The Vioxx case has cost Merck at least $6.38 billion, including more than $1.53 billion through March 31 on legal costs for defense research and individual trials, most of which it has won.

Vioxx, which was launched in 1999, brought Merck revenues of $2.5 billion at its peak in 2003, and $1.3 billion in 2004. Merck has not been disclosing revenue from prior years.

On Thursday, Whitehouse Station, N.J.-based Merck said more than 97 percent of eligible claimants have enrolled in the settlement program, surpassing threshold levels the company required for the deal to proceed. Therefore, Merck said that on Aug. 4 it will waive its right to walk away from the $4.85 billion settlement deal reached with plaintiffs’ attorneys last fall.

“This is a great day for the plaintiffs injured by Vioxx who will within weeks begin to receive compensation for their injuries,” said lawyer Chris Seeger, a member of the plaintiffs steering committee coordinating the massive litigation. “On a personal and professional level, I couldn’t be happier for my clients.”

According to Merck, more than 48,500 of the roughly 50,000 individuals with registered, eligible injuries have enrolled in the settlement program. Nearly all have submitted papers releasing Merck from further liability and documenting their use of Vioxx and medical care received as a result.

“This is an important milestone that shows the resolution program is on track,” Bruce N. Kuhlik, Merck’s general counsel, said in a statement.

Former Vioxx users, or their relatives, are eligible for part of the settlement if the patient suffered a heart attack, stroke or death. They also must have had pending lawsuits or tolling agreements, which suspend the statute of limitations, as of Nov. 9, 2007, the date the settlement was reached.

To ensure that the settlement ended the bulk of the lawsuits against Merck, the company had required participation from at least 85 percent of eligible claimants in four groups: those who had used Vioxx for more than 12 months, had a heart attack, had an ischemic stroke or died. Merck also required lawyers participating in the settlement to recommend it to all their clients and to stop representing any who wanted to instead continued to pursue a lawsuit.

Merck will make total payments of $4.85 billion into the settlement fund, with the first $500 million payment scheduled for Aug. 6. The company took a charge for the full $4.85 billion last year.

Eligible claimants who enrolled by March 31 and allege a heart attack or sudden cardiac death could then receive an interim payment, which would be 40 percent of their estimated total payment. Those initial payments are expected to be made by the firm administering the claims by the end of August.

Interim payments to people alleging Vioxx caused an ischemic stroke are to begin in or after February 2009.

“Today is a very big day for Vioxx victims,” said Andy Birchfield, who served on the plaintiffs steering and negotiating committees. “The number of victims choosing to participate in the settlement program speaks loudly and clearly that the settlement is a very good agreement.”

Merck withdrew Vioxx from the market on Sept. 30, 2004, after its own research showed the once-blockbuster arthritis pill doubled the risk of heart attack and stroke.

In midday trading, shares were down 43 cents at $36.20.

This story appeared on Forbes.com

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