Merck’s Vioxx Probe won’t Hide Facts Says Judge

posted on:
December 9, 2004

author:
David Voreacos

Merck & co.’s internal investigation of the withdrawal of its Vioxx painkiller will take months to complete and won’t hide any facts, said John Martin Jr., a retired federal judge hired to conduct the probe.

Martin and outside directors will examine events leading to the withdrawal of the rug on Sept. 10, when Merck said Vioxx doubled the risk of heart attacks and strokes in users who took it for 18 months. Merck faces hundreds of lawsuits claiming it hid health risks of Vioxx, which had $2.5 billion in 2003 sales.

“We are charged by the special committee to uncover the facts, which is what we will do,” Martin said in an interview. “I don’t think you will find anything hidden here. These are people who are committed to finding out what happened.”

Outside lawyers hired by companies to do independent inquiries often advise boards to fire or discipline employees, reform governance or practices and give the results of their inquiries to prosecutors or regulators.

“I will have no idea what we will recommend until I know the facts,” Martin said. “I don’t know at this point what form the report will take.”

Shares of Merck, the No. 2 U.S. drug maker, have fallen 38 percent this year. The U.S. justice Department and Securities and Exchange Commission are investigating. Martin said that he and a committee led by William G. Bowen, president of the Andrew W. Mellon Foundation, won’t whitewash Merck’s actions.

Martin said he is not charges with handling Mark’s response to prosecutors to the SEC.

“I’m sure as we go along and as we finish our work, those agencies will be anxious to know what the independent review has discovered,” he said. “I’m sure once we complete that process, there are –people who will want to talk to us.”

Martin’s Background

Martin spent 13 years as a federal judge in Manhattan before retiring in September 2003 and joining the New York law firm Debevoise & Plimpton. Many lawyers at the firm will help him review documents and interview workers at Merck which is based in Whitehouse Station, New Jersey, he said.

“I’ll be going back over the documentary record and talking to all the people involved to make sure that everything was done appropriately,” Martin said. “We’ve got to be as thorough as we can. It could take months to complete.”

Attorney Christopher Seeger, who filed dozens of lawsuits against Merck, said Martin is “beyond reproach.”

“I hope it’s not an attempt to whitewash what’s going on,” said Seeger. “I would doubt it is. It looks like a serious committee. There’s always a question about the true independence of such committees.”

Committee

The committee, announced Dec. 7, will include Lawrence Bossidy, a former Honeywell International Inc. chairman; William N. Kelley, who was chief executive officer of the University of Pennsylvania Health System; Rochelle B. Lazarus, chairwoman and chief executive office of the advertising and marketing firm Ogilvy & Mather Worldwide; Samuel O. Their, former chief executive of Partners HealthCare System Inc.; and Peter C. Wendell, chairman of Princeton University Investment Co.

Merck is defending product-liability suits alleging Vioxx injured or killed patients after its launch in May 1999. They claim Merck ignored red flags in clinical trials and spent hundreds of millions of dollars falsely marketing Vioxx because it needed a blockbuster product to maintain revenue. Shareholder lawsuits also claim that Merck defrauded investors by concealing the drug’s risks.

Merck denied wrongdoing in court papers, saying Vioxx didn’t cause injuries. Chief Executive Officer Raymond Gilmartin said in interviews and congressional testimony on Nov. 18 that Merck properly investigated the risk of Vioxx and disclosed data to the U.S. Food and Drug Administration. He said Merck withdrew Vioxx after getting long-term clinical trial results on Sept. 23.

Civil Trials

Andy Birchfield, a lawyer in Montgomery, Alabama, who has filed dozens of suits against Merck, said he distrusts the committee Martin is advising. Only a trial before a civil jury, he said, will allow a full airing of the facts.

“A civil jury is the best way to weigh the evidence where we can show what Merck knew, when they knew it and the actions that Merck took and failed to take,” he said. “The jury members are truly an independent committee not paid by either side.”

Merrill Lynch & Co. Inc. estimated Merck may face up to $18 billion in liability for Vioxx, an arthritis drug. Merck, which has $630 billion in product liability insurance, hasn’t set aside any reserves to deal with the lawsuits, spokesman Tony Plohoros said Nov. 30.

Martin, who preceded Rudolph Guiliani as the U.S. attorney in Manhattan, handled many high-profile cases as a judge. He presided over litigation on how much insurers owed to rebuild the World Trade Center and the criminal trial of Patrick Bennett, who swindled investors out of $700 million in a Ponzi scheme.

Career After the Bench

Martin left his lifetime judicial appointment after saying he was disgusted with mandatory sentencing ruled that he said gave little discretion to judges.

At Debeviose, he helped New York City coordinate its response to a criminal investigation into the Staten Island Ferry crash that killed 11 passengers in 2003.

He said his broad experience since leaving Columbia Law School in 1961 will help him in the Merck case.

“The years of experience on the bench can help me in dealing with people, making credibility judgments and resolving factual disputes,” he said.

Shares of Merck rose 3 cents to $28.72 at 2:00 p.m. in New York Stock Exchange composite trading.

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