Merck’s $4.85 Billion Vioxx Accord Outlines Paydays

posted on:
November 10, 2007

author:
Staff

By David Voreacos and Laurel Brubaker Calkins
Bloomberg

Merck & Co.'s agreement to pay $4.85 billion to resolve lawsuits over its Vioxx painkiller offers certainty of a payday to thousands of plaintiffs who no longer must prove the drug caused their heart attacks or strokes.

Merck, the No. 3 U.S. drugmaker, spent $1.2 billion fighting 26,500 lawsuits over claims Vioxx caused cardiovascular injuries before the company withdrew it in 2004. Merck battled each case that went to trial since 2005, winning 11 of 16 and refusing to pay on those it lost while appealing the verdicts.

By agreeing today to pay as much as $4 billion to heart attack victims and $850 million to stroke victims, Merck reached a truce and agreed to start writing checks. The company also succeeded in limiting its potential legal liability, which analysts once estimated as high as $20 billion.

"Merck is gaining certainty, and plaintiffs are gaining reasonable compensation, "said plaintiffs' attorney Andy Birchfield, who helped negotiate an accord struck at 4:45 a.m. today. "Merck has clearly shown that they could win trials involving people who took Vioxx and had heart attacks."

The company, based in Whitehouse Station, New Jersey, will record a fourth-quarter 2007 pretax charge of $4.85 billion to cover the agreement. Merck had $4.4 billion in profit last year.

"Merck followed a very sensible strategy, "said Calvert Crary, an analyst at Litigationnotes.com in Westport, Connecticut. Its decision "not to settle but to put every plaintiff individually to his proof, a kind of tobacco-style defense, is what kept the numbers within reason."

Secret Negotiations

The settlement followed 11 months of secret negotiations prompted by a federal judge in New Orleans and state court judges in New Jersey, California and Texas who are overseeing the cases.

Lawyers said that about 29,000 heart attacks patients and 17,000 stroke victims who blamed their injuries on Vioxx are eligible to seek compensation. The agreement outlines a three-step system for how Brown Greer, a law firm in Richmond, Virginia, will evaluate injuries.

Plaintiffs must prove they actually had a heart attack or stroke, that they took at least 30 Vioxx pills and that they took the medicine within 14 days of their injury. If they pass those three tests, they enter either the $4 billion heart attack pool or the $850 million stroke fund for further evaluation.

"They do have to come forward with specific evidence to show they suffered the injury,"said Ted Mayer, a Merck attorney at Hughes Hubbard & Reed who helped broker the accord. "They don't have to prove specific causation. That's something that's a real benefit to the plaintiffs."

Specific Causation

Russ Herman, chairman of the plaintiffs' negotiating committee, said, "Specific causation has been a very difficult issue." He added, "If you get through the gates, you will get paid."

After passing through those gates, plaintiffs will be "scored" on a point system that begins with the age of a patient, severity of injury and duration of Vioxx use.

Points will be deducted for such risk factors as obesity, cholesterol, family history and hypertension.

Plaintiffs also will be evaluated based on whether they took Vioxx before or after a 2000 study, known as Vigor, linking the drug to five times as many heart attacks as another painkiller, naproxen. Patients will score lower if they took Vioxx after a label was introduced in 2002 that carried a warning reflecting the Vigor data.

The value of the points cannot be determined until it is clear how many plaintiffs are eligible, lawyers said.

Based on Trials

"People took everything they gleaned from these many trials, including what type of plaintiffs are the strongest, and factored that into the point system to try to arrive at a fair distribution," plaintiffs' attorney David Buchanan said.

Under the agreement, plaintiffs' lawyers must urge their clients to apply for compensation. If 85 percent of the plaintiffs don't sign up, Merck has the right to back out of the agreement. Plaintiffs can still pursue their own lawsuits.

The six lawyers who negotiated on behalf of the plaintiffs were Birchfield, Herman, Edward Blizzard, Thomas Girardi, Arnold Levin and Christopher Seeger. The lawyers who negotiated for Merck included Doug Marvin and Mayer.

During their secret negotiations, the lawyers met two dozen times in cities including New Orleans, Washington, Atlanta and Memphis, Mayer said.

Merck rose $1.13 to $55.90 in New York Stock Exchange composite trading after touching $57.32. The stock has gained 31 percent this year, making it the top performer in the 14-member Standard & Poor's 500 Pharmaceutical Index.

Merck trails Pfizer Inc. and Johnson & Johnson, the largest and second-largest drug companies.

The case is In re Vioxx Products Liability Litigation, MDL 1657, U.S. District Court, Eastern District of Louisiana (New Orleans).

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