Merck Settles Vioxx Claims for $4.85 Billion

Merck has agreed to pay $4.85 billion to settle claims that it misled state officials regarding the safety of its painkiller Vioxx.  Merck agreed to pay an undisclosed sum to Florida, New York and South Carolina to resolve suits alleging they failed to disclose the risks of Vioxx adequately before stopping sales in 2004. (Similar settlements have already been reached in lawsuits from Alaska, Kentucky, Mississippi, Montana, Oklahoma and Utah).

Merck recalled the popular painkiller, Vioxx, in September 2004, after a study showed it doubled the risk of heart attack and strokes in patients taking it for more than 18 months.  Former Vioxx users also criticized Merck for downplaying the drugs’ health risks and manipulating studies in order to help promote sales.  Despite the fact that Merck officials countered that Vioxx was not the cause of users’ heart attacks, strokes and other cardiovascular side effects, and that they had properly warned doctors and consumers about its risks, Merck paid $4.85 billion to resolve more than 27,000 lawsuits over their drug. Pretty costly mistake, if you ask me!

New York governor, Andrew Cuomo, who was the state’s attorney general in 2007, sued Merck, seeking tens of millions of dollars in restitution for money spent on Vioxx prescriptions through state health-care programs.  The following year, Bill McCollum, Florida’s attorney general at the time, followed with a similar suit, seeking $80 million in reimbursements.

The state officials claim that Merck’s misleading statements about Vioxx’s safety lead doctors to write thousands of prescriptions for the drug and state Medicare and Medicaid programs into paying for them.

Merck announced this month that it agreed to pay $49.5 million to settle suits filed on behalf of former and current employees of Merck over losses to their retirement funds tied to the company’s handling of Vioxx. Merck said in filings with the U.S. Securities and Exchange Commission that it paid the money to resolve allegations of executives violating legal duties by making false and misleading statements about Vioxx. Yet if these were just allegations about false statements, do you really think they’d agree to cough up nearly $5 billion?!

Merck said it would still defend all claims not included in the settlement. Since the withdrawal of Vioxx, Merck has won 11 court cases over the drug and lost five.

Conover, an analyst at Morningstar, estimates Merck could be facing 1,000 to 2,000 outstanding claims and could face more than $1 billion in additional costs.  It has been noted that litigation over Wyeth’s Phen-Fen diet drug is now only slowly coming to a close after ten years in the courts and more than $21 billion in settlement costs.

So many plaintiffs will want to address Merck on an individual basis in hopes of seeking higher compensation.  Even with the major litigation drag, their stock has outperformed their peers on the American Stock Exchange pharmaceutical index this year, rising 25%.

Even though Merck has agreed to pay such a large settlement in this major legal battle, this is only a third of its market value in 2004!  These pharmaceutical companies care about one thing and one thing only: their profit.  So many men and women lost their lives and many of the “lucky” ones were left with chronic, debilitating cardiac ailments.  Maybe the large settlements will set an example for other pharmaceutical companies and they will be more conscientious about safety and not just their pocketbooks. But then again, if companies like Merck are willing to pay millions (or, in this case, billions) of dollars to “resolve false allegations”, then what lesson does this really teach them? It seems as though billions in court fees and settlements are merely pocket change to the “bad guys.” Is this justice?

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