By Carrie Johnson
Washington Post Staff Writer
Saturday, November 10, 2007
Merck & Co. agreed to pay $4.85 billion to settle thousands of cases brought by people who suffered heart attacks and strokes after taking its Vioxx painkiller, validating a forceful defense strategy in one of the nation's largest and most widely publicized drug recalls.
Vioxx, which averaged $2.5 billion in sales a year, was yanked from the market three years ago over widespread concern about its safety. The drug more than doubled the risks of heart attacks and strokes among patients who used it to ease arthritis pain, according to clinical studies. One scientist estimated that it had caused as many as 138,000 heart attacks and 55,000 deaths in the United States.
Merck sales teams for years played down the dangers of Vioxx, and a Food and Drug Administration official said he had been pressured to keep quiet about his concerns, according to congressional testimony.
Yesterday's deal represents a fraction of the $10 billion or more that analysts initially had predicted Merck would pay if it stuck to its plan to fight every lawsuit. But patients who took their cases to court have won only five victories to date, largely because judges have required them to present detailed medical evidence and expert opinions to prove the drug had caused their health problems.
In addition, judges had thrown out 5,000 lawsuits against the company and had determined that the time limit for filing new claims had expired in the overwhelming majority of states, said Kenneth C. Frazier, a Merck executive who served as the architect of its uncompromising legal strategy.
"Merck is paying a very large amount of money, but it is saving a lot more than analysts predicted two years ago. That sounds like a good business deal to me," said Richard Nagareda, a law professor at Vanderbilt University who studies such cases.
The agreement announced yesterday would put an end to as many as 50,000 cases that threatened to drain the company of billions of dollars in defense costs for years to come, Frazier said in a conference call with analysts. Merck had set aside $1.9 billion to cover legal expenses. The company did not admit fault as part of the settlement, reached with a consortium of plaintiff law firms at the urging of judges overseeing the massive docket.
Years in the making, the settlement could be a model not only for the pharmaceutical industry but also for companies that manufacture a wide range of products that are later deemed harmful or defective, according to legal experts. "It says to companies in the pharmaceutical industry and other areas of mass tort litigation that it really is worth your time of going through two or three or more years of cases," Nagareda said.
Sidney Wolfe of Public Citizen's Health Research Group pointed out that Merck's stock price rose after the deal was announced, hardly a penalty for the company. . "When the stock of a company goes up after a settlement, it is hardly to be confused with stiff punishment for a company," Wolfe said. "Given what Merck knew, how it misled doctors and others, I don't think this company has been adequately punished for what it did."
Merck continues to face civil and criminal investigations as well as lawsuits from states seeking to recover Medicare and Medicaid funds they used to purchase Vioxx.
Damien Conover, an analyst at Morningstar in Chicago, praised the company for attempting to clear the decks of "more marginal" lawsuits. But he said Merck could continue to face more than $1 billion in exposure from plaintiffs who choose not to settle and proceed in court with the strongest medical cases against the drug maker. One staggering Vioxx verdict from a Texas jury two years ago topped $250 million but later was reduced to $26 million. Merck is contesting that decision.
"It's a good deal for plaintiffs -- not a great deal, but a good deal," Houston lawyer W. Mark Lanier said of the settlement. Lanier has secured three jury verdicts for people suing Merck over health problems they blame on Vioxx, including the $26 million case.
Lanier said he would recommend the settlement to his remaining personal injury clients. His three court victories will not be covered by yesterday's agreement, he said.
Under the terms of the settlement, Merck could walk away from the deal if less than 85 percent of the plaintiffs with pending cases involving heart attack, stroke and death do not agree to shift their claims to a medical review panel. The review board will examine the underlying health problems of the plaintiffs, how long they used Vioxx and how long it took them to develop symptoms.
People whose claims are denied will be allowed to challenge the decision, but they cannot present new evidence to fortify their cases in response to a previous settlement by Wyeth involving the "fen-phen" weight loss drug. That deal swelled to seven times its original size after thousands more lawsuits alleging the medicine had caused heart damage came to light.
"This is an opportunity to end a long and difficult litigation that has stretched on for more than three years," said Russ Herman, a plaintiff lawyer who helped negotiate the Merck settlement. "A fair resolution is in everybody's best interest."
Merck's $4.85 billion cash pool includes fees to plaintiff lawyers, typically between 30 percent and 40 percent of an award. Initial payouts to victims could begin as early as August 2008, executives said.
"We have done everything we can to close the doors," said Bruce N. Kuhlik, Merck's general counsel, in the conference call.
Staff researcher Richard Drezen contributed to this report.