Healthy Skepticism Library item: 11972

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Publication type: news

Tesoriero HW.
Merck Is Expected to Announce Vioxx Settlement of $4.85 Billion
The Wall Street Journal 2007 Nov 9
http://online.wsj.com/article/SB119458553606887746.html?mod=djemalert

Full text:

NEW ORLEANS — Merck & Co. is expected to announce that it agreed to pay about $4.85 billion to settle a significant portion of the claims over injuries allegedly linked to its Vioxx painkiller, according to a person familiar with the situation, after insisting for years that it would fight all 27,000 cases filed rather than compromise.

An agreement is expected to be announced Friday morning in New Orleans, where a federal judge is overseeing the litigation.

“We’ve been asked by the judge to talk to the plaintiffs,” a Merck defense spokesman said. The company wouldn’t confirm the settlement figure, saying there is no finalized agreement.

Vioxx was approved for sale in 1999 and quickly became a popular drug, with annual sales reaching $2.5 billion before the Whitehouse Station, N.J., company pulled it from the market in September 2004 amid cardiovascular-safety concerns.

Since then, Merck has won 11 cases that have gone to trial and lost five. What’s more, the company won four of five cases considered to be bellwethers of how future cases would likely turn out, making the decision to settle somewhat surprising.

U.S. District Judge Elden E. Fallon, who oversees the litigation, had said following those test cases that he wanted the parties to meet to gauge where things stood.

The drug maker also got some other good omens of late. In September, New Jersey’s highest court ruled that health insurers’ lawsuits against Merck couldn’t be consolidated into a nationwide class action, removing the company’s greatest financial exposure from the Vioxx litigation. The suit sought reimbursement for as much as $9.6 billion of Vioxx purchases. And last April, a ruling by a Texas state court judge undercut the legal basis for the roughly 1,000 cases filed there.

Plaintiffs’ attorneys have long said they wanted to engage in settlement talks with Merck. It is expensive to bring cases to trial and even when plaintiffs prevail, it often takes years for the suits to wind their way through the appellate process.

Merck’s stock has rebounded significantly since the lows shortly after the company withdrew Vioxx. In late 2004, the stock fell to the high $20s. On Nov. 1, the stock hit a 52-week high of $58.36.

But the company has incurred considerable costs from the litigation. In its most recent earnings statement, Merck said it spent $160 million in the third quarter for world-wide Vioxx litigation costs. It also took a charge of $70 million to shore up its litigation coffers, and in the year-earlier period took a charge of $598 million. The company currently has set aside $720 million for its Vioxx legal defense costs, which doesn’t include any potential damages to plaintiffs.

Vioxx was approved to relieve arthritis and other types of pain, and was taken by an estimated 20 million Americans. Its withdrawal drew questions from critics and government regulators about safety issues and marketing practices in the drug industry. Vioxx was one of three painkillers in the class of so-called Cox-2 inhibitors. Only Pfizer Inc.‘s Celebrex remains on the market, and it now carries the Food and Drug Administration’s strongest warning label. Bextra, also made by Pfizer, was withdrawn from the market.

Earlier this year, a regulatory panel voted against the approval of Arcoxia, Merck’s follow-on Cox-2 inhibitor, which is sold abroad.