Merck’s Gilmartin rejects claims Vioxx Risk Ignored

posted on:
November 15, 2004

author:
Nicole Ostrow

 Merck & Co. Chief Executive Officer Raymond Gilmartin said his first indication that the painkiller Vioxx carried a heart risk came on Sept. 23, and the company withdrew the medicine a week later. 

Gilmartin laid out Merck’s defense against mounting criticism from lawmakers, trial lawyers and doctors who say Merck should have known as early as 2000 that Vioxx was dangerous. He plans to appear at a Senate hearing this week as attorneys prepare lawsuits on behalf of thousands of people who say they or their relatives were hurt or killed by Vioxx.

“We did the right thing every step of the way,” Gilmartin, 63, said in an interview today in New York. “The question is not who is responsible, but did we act responsibly, and we did. Our record is impeccable.”

Merck, the No. 2 U.S. drugmaker, pulled Vioxx on Sept. 30 after a three-year company study found that patients taking it for more than 18 months faced twice the risk of heart attack and stroke as those getting a placebo. Since then, Merck’s market value has plummeted by almost $40 billion.

“It’s important to keep in mind that it was only after 18 months of continuous use on the drug that we even began to see a difference in cardiovascular risk,” Gilmartin said in today’s interview. “The risk for any one individual of having a heart attack or a stroke is very small. We will defend ourselves vigorously against these claims.”

Unheeded Signals

Vioxx generated $2.5 billion in sales for Merck last year, about 11 percent of total revenue. Gilmartin had been banking on Vioxx to help compensate for the loss of U.S. patent protection on the company’s biggest drug, the Zocor cholesterol pill, in June 2006. Zocor had $5.01 billion in worldwide sales last year.

Even if Merck acted quickly after getting the results of the latest study in September, the company dragged its feet in the preceding years, according to Andy Birchfield Jr., an attorney in Montgomery, Alabama. His firm, Beasley, Allen, Crow, Methvin, Portis & Miles has filed 61 suits alleging injuries caused by Vioxx and is reviewing thousands of other claims.

Court documents show that Merck was concerned about the potential for a heart risk before the drug was even approved, Birchfield said. The company had warnings from earlier studies that should have changed how it marketed the medicine, he said in an interview.

“All of those signals went unheeded and Merck continued a very significant marketing campaign, spending hundreds of millions of dollars in direct-to-consumer advertising,” Birchfield said. “Certainly, that is not the course of action of a responsible pharmaceutical company.”

Shares of Whitehouse Station, New Jersey-based Merck rose 64 cents, or 2.4 percent, to $27.09 at 4:01 p.m. in New York Stock Exchange composite trading.

Topol’s Claims

Dr. Eric Topol, the Cleveland Clinic’s chairman of cardiovascular medicine, told the CBS news program “60 Minutes” last night that data from a 1998 Merck clinical trial called “Study 090” found that serious cardiovascular events occurred about six times more often in patients taking Vioxx than in those taking other arthritis drugs or a placebo. The study was never published, Topol said.

The combination of “Study 090” with a larger trial performed a year later should have raised alarms at Merck in 2000, Topol told the show.

The doctor said that when he tried to express his concerns about Vioxx to top Merck officials, including Gilmartin, they refused to take his calls.

Gilmartin said today that he had no recollection of those calls. He also said the company reported the results of the “090” study to the U.S. Food and Drug Administration and to the medical community.

Staying on Course

U.S. regulators estimate that Vioxx may have contributed to 27,785 heart attacks and deaths before it was pulled in the biggest drug recall ever. Merck’s liabilities may range from $4 billion to $18 billion, Merrill Lynch has estimated.

Gilmartin, who has less than two years before reaching Merck’s mandatory retirement age of 65, said he has no plans to step down early and the company doesn’t need a merger to survive.

“We’ve been very clear that a large-scale merger doesn’t make sense,” Gilmartin said. “It doesn’t add to our pipeline and it doesn’t add to growth.”

Gilmartin has said Merck will rely on existing medicines to expand earnings and sales, specifically Singulair, for asthma and allergies; Fosamax, for osteoporosis; and Cozaar, for high blood pressure.

Context

“The real damage is not Gilmartin having to go to Capitol Hill or having to deal with trial lawyers,” said Lloyd Kurtz, portfolio manager at Nelson Capital Management, which manages $500 million has been reducing Merck shares in client portfolios. “The real threat to Merck is that innovation, the lifeblood of their company, the thing they need to get into the future, may be lost because of management distraction.”

The U.S. Justice Department has launched a criminal probe and the U.S. Securities and Exchange Commission has started an informal investigation, Merck said Nov. 8.

Gilmartin said the probes followed a Wall Street Journal report that was based on documents under court seal that were leaked “and deliberately represented out of context.” The Journal report suggested that Merck aggressively downplayed negative data from earlier Vioxx studies through sales tactics, lobbying and legal measures.

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A criminal probe isn’t worrying “when you do the right thing. That’s the thing to point to – we did the right thing every step of the way,” Gilmartin said today.

Gilmartin, the former head of syringe maker Becton, Dickinson Co., became Merck’s CEO in 1994, the first outsider to get the post in a century. The board has yet to name his successor.

Merck, a 117-year-old company that won top honors for corporate stewardship from the U.S. Commerce Department and the U.S. Chamber of Commerce last year, last week ran full-page newspaper advertisements in the Wall Street Journal and New York Times saying its integrity is being unfairly questioned.

In the ads, Gilmartin said Merck studied Vioxx extensively before regulators approved it, disclosed clinical trial data on the drug and did further studies when safety questions arose.

The ads and Gilmartin’s increased visibility in the past week are an effort to send a message to plaintiff’s lawyers, according to Deutsche Bank Securities analyst Barbara Ryan.

“The major issue is what did they know, and when did they know it. There is so much press from people outside of Merck on what they knew and when,” Ryan said in a telephone interview. “Obviously they believe there is another side of the story.”

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