Merck Wins in 2nd Trial over Vioxx

posted on:
November 4, 2005

author:
Staff

A New Jersey jury granted a reprieve to beleaguered drug maker Merck on Thursday, finding it blameless in the nation’s second trial over the once-popular painkiller Vioxx.

It was welcome news for the company, which is appealing a $253-million verdict in August that held it responsible for the death of a Texas man the first Vioxx case to reach a jury.

“The jury understood the company behaved responsibly in regard to developing this drug and in marketing this drug,” said Kenneth Frazier, Merck’s general counsel. “We feel very vindicated.”

But New Jersey-based Merck & Co. still faces 6,500 suits from plaintiffs who blame the drug for heart attacks, strokes and deaths. And analysts stood by earlier estimates that the cases could eventually cost Merck up to $50 billion.

“This means that they can win some of these cases, but they can also lose some,” said Columbia University law professor John Coffee. “But there will be thousands of them the plaintiffs’ bar will be willing to try.”

Merck pulled the drug off the market in September 2004. That is when, the company says, it first had data clearly showing that long-term Vioxx use doubled the risk of heart attacks and strokes after 18 months of continuous use.

Now the company is in talks with regulators about the possibility of bringing Vioxx back because, it says, subsequent studies have shown other pain relievers have comparable risks.

Wall Street greeted Thursday’s verdict with relief, sending Merck’s stock up nearly 9% in the minutes after the news. Share prices ebbed later in the day, ending up nearly 4% at $29.48.

The plaintiff was 60-year-old Frederick Humeston, a postal worker from Idaho, who used Vioxx intermittently for about two months to control pain in his knee from a Vietnam War injury.

Experts said Humeston’s case was weaker than the Texas suit in several ways. To begin with, the Texas plaintiff had taken Vioxx for eight months. Also, Humeston had a history of medical problems that could have caused his heart attack.

“I thought he had way too many health issues” to win the case, juror Vickie Heintz told Associated Press. “If you looked at his medical records over the past 20 years it was riddled with a history of medications and health problems. Stress absolutely played a role.”

Legal experts also pointed to other differences between the two cases. Among them: Humeston faced a jury in Merck’s home state a jury with just nine members, unlike the 12 who heard the Texas case.

“The smaller the jury, the more variance you get just from the play of the numbers,” said Marc Galanter, a University of Wisconsin law professor.

Legal experts said the Merck win could dissuade plaintiffs’ lawyers from going forward with cases where Vioxx was used for a similarly short period or where the individual’s health was complicated by other problems.

Although Merck still vows to fight each Vioxx suit individually, the case could strengthen its bargaining position in any future mass settlement. But legal experts said they expected the company to try many more cases before considering such a move.

“All parties are trying to feel their way around and that includes how juries will react to their cases,” said Peter Bicks, a corporate defense lawyer with Orrick, Herrington & Sutcliffe who is not involved in the Vioxx litigation. “It’s only after you have a track record that you can really refine your strategy.”

The next case is set for trial Nov. 28 in Houston. Merck said three more cases were set for trial, one each month, beginning in February. In California, about 1,000 cases have been consolidated in a Los Angeles court, which is expected to hold the state’s first Vioxx trial in June.

Tom Girardi, one of the lead plaintiffs’ lawyers in the Los Angeles litigation, said the New Jersey verdict would help separate the weak cases from the strong.

“In the California cases, I don’t think there would be one or two that have this short [a period] of use,” he said.

Plaintiffs’ lawyers said they were troubled by Merck’s approach to the plaintiff in the New Jersey trial.

“We saw a shift in Merck’s strategy,” said Andy Birchfield, a Montgomery, Ala., lawyer representing the plaintiff in the upcoming Houston trial. “They attacked the victim with a vengeance. We have to expect they will continue that strategy.”

Indeed, Merck’s Frazier said the company intended to continue what he characterized as truth-seeking.

“Our goal is never to attack individuals, but it’s always to try to elicit the truth,” he said. “We’re entitled to cross-examine people. We’re entitled to challenge people on the witness stand. To the extent that they represent information that is untruthful or unreliable, we intend to do that.”

Analysts said it was too early to assess the long-term financial effect of the Vioxx litigation.

Moody’s affirmed Merck’s Aa3/Prime-1 rating, calling the verdict “an important positive development.” But the ratings service said the outlook for the company was negative, “primarily because of concerns that Vioxx litigation costs may be extremely high.”

Jason Napodano, a senior pharmaceutical analyst with Zach’s Investment Research, said he didn’t expect the verdict to have a long-term effect on Merck’s stock price or its liability for Vioxx because the home-state win wasn’t a big surprise.

“New Jersey is a much more pharma-friendly environment than Texas,” he said. “Putting an oil company on trial in Texas is like putting a pharmaceutical company on trial in New Jersey.

“This was a trial they should have won,” he added.

Albert Rauch, a pharmaceutical analyst with A.G. Edwards & Sons Inc., said the stock would probably remain volatile.

“Each time they win, the stock will go up and each time they lose, it will go down,” Rauch said. “But this verdict shows that Merck’s strategy of using solid science and medical information to defend themselves can work in certain situations.”

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