Merck & Co.’s Pandora’s box has been opened wide, affecting much more than just the 20 million users of Vioxx.
Company officials shocked the world Sept. 30 with its immediate withdrawal of Vioxx, a Cox-2 inhibitor, from the world market citing patient concern. The arthritis and acute pain drug was the company’s best selling product, generating $2.5 billion sales in 2003, 11 percent of Merck’s total revenues
Merck removed Vioxx after a three-year study revealed patients taking Vioxx more than 18 months increased their risk for heart attacks and strokes. And the stunning decision could well have shaken the faith and trust of its shareholders, investors and employees, analysts say.
David P. Berlein owned Merck stock for barely 10 months before he saw his investment drop 27 percent practically overnight. The Philadelphia law firm, Bernard M. Gross, P.C., has filed a class-action lawsuit on Berlein’s behalf and that of other shareholders, claiming the Whitehouse Station-based company violated the federal security law.
A Merck employee for more than three years, Zeph Ugwuneri is serving as the lead plaintiff for a class- action lawsuit filed by Scott & Scott LLC and Cohn Lifland Pearlman Herrman & Knopf LLP, on behalf of all of Merck’s employees and its retirees participating in the Employee Savings and Security Plan. Depending upon which plan an employee participates in—union or non-union—Merck matches the contribution with its stock.
According to this specific complaint, the company’s plan held more than $1.1 billion in Merck common stock as of Dec. 31, 2003, accounting for approximately 39 percent of the total assets held by the plans, and more than $1.6 billion in Merck stock as of Dec. 31, 2002, or about 53 percent of the plan’s total assets.
Merck’s stock has lost about 40 percent of its equity over the last month. Merck has lost more than $28 billion in shareholder value. Media outlets and analysts speculate Merck’s lawsuit liability could be about $16 billion over the next decade.
Attorney Neil Rothstein of Scott & Scott LLC contends Merck’s actions have changed the lives of those who depended upon its stock for their retirement and paying their children’s college education. He noted that Merck’s stock for decades has been a staple in many investor portfolios.
“The problems drug companies have is they live in a capitalistic society where it is weighted down by its own financial worth and its duties to its shareholders. (Company) officials must weigh the factors of helping a patient versus making money,” Rothstein said.
Rothstein, who is lead counsel in a Halliburton and a Shell Oil lawsuit, said the first case to go to trial will be closely watched by other attorneys. The outcome of the first case will establish a pattern for future cases favoring either the plaintiff or defendant.
Pressure is mounting from Wall Street investors for Merck officials to find a successor quickly to Chairman and Chief Executive Officer Ray Gilmartin. Investors and analysts are scrutinizing the company as it handles the Vioxx matter and its stocks spirals downward, its credit rating hanging in the balance.
Merck’s credibility is on the line, market analysts say. Known for its mission to serve the medical community, Merck’s stature in the business community and its brand names are tarnished. The company must convince its consumers and investors it can be trusted, analysts say.
Consumers have trusted the pharmaceutical giant to provide drugs that help patients. Investors and shareholders trust the company is being managed effectively while maintaining a healthy bottom line. And the employees trust the company when utilizing the services offered to help them when they retire.
“This is a defining moment in Merck’s history,” said Dan McGinn, president and chief executive officer of the McGinn Group. “This will redefine the history of the company.”
McGinn, a public affairs and trends analyst, said Merck, in its attempt to do the right thing by pulling Vioxx off the market, is facing a public that is both anxious and angry
”(Merck) can weather this storm,” McGinn said. “There are cases where companies have come back from devastating circumstances and are stronger than ever.”
Products taken off the market and having faced numerous lawsuits include Bayer AG’s cholesterol drug Baycol, Wyeth’s diet drug cocktail Fen-Phen and Tylenol
“Our employees are immensely talented people and have a strong commitment to the mission and the values of the company,” said Tony Plohoros, public affairs spokesman for Merck.
Due to company policy, Plohoros could not comment on the Merck’s legal strategy as it faces more than 300 lawsuits. He said Merck’s staff has come together and is resolved to addressing the Vioxx issue and continue to do the right thing.
“They are determined to make the company stronger,” he said.
Beginning on the day Merck announced the withdrawal of Vioxx, the company has made every effort to be transparent and accessible to the media and to those who have questions. And questions are continuing to arise concerning Merck’s actions regarding the development, marketing and subsequent removal of Vioxx.
Attorney Andy Birchfield contends Merck should come clean. Birchfield is handling the Vioxx litigation for the firm of Beasley, Allen, Crow, Methvin, Portis & Miles P.C. in Montgomery, Ala. Birchfield has 58 cases filed already against Merck in New Jersey, Virginia, Mississippi, Alabama, Georgia and Florida.
“Each of the cases involves either stroke or heart attack as a result of ingesting Vioxx,” Birchfield said.
Having filed his first case in 2001. Birchfield said his law firm has gained a body of knowledge regarding Vioxx. Examining the data for his cases, Birchfield said his team has found several red flags that allude to problems may occur sooner than Merck said.
When Merck removed Vioxx, a rofecoxib, part of the Cox-2 inhibitor class of drugs, it was based upon a new, three-year APPROVe (Adenomatous Polyp Prevention) study that revealed patients taking Vioxx more than 18 months increased their risk for heart attacks and strokes.
At the heart of every lawsuit that will be debated in court is what Merck knew about those risks, and when it knew it.
That burden of proof in all the suits is on the plaintiff, said Bill Janssen, partner and chair of the Life Sciences practice at Saul Ewing, LLP in Philadelphia. Janssen, who is watching the case closely, said proving the science is key to the case. Unlike asbestos or Fen-Phen, which had a signature footprint that could be identified on the body, Vioxx apparently does not
Janssen said that the plaintiff will have to prove on a case-by-case basis whether Vioxx did cause a heart attack or a stroke. He noted that because other factors cause heart attacks or strokes, plaintiffs have a more difficult time proving their case.
After three years of investigation and discovery, Birchfield said he is ready to go to trial on Dec. 13. The case involves William Cook, a retired miner, who took Vioxx for a year before suffering a heart attack in 2000. But Birchfield is unsure if Cook will have his day in court sometime soon, since Merck has filed a Judicial Panel on Multi-district Litigation motion to consolidate all of the cases before one federal judge in Washington, D.C.