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Merck's victory steels its resolve

Plaintiff Frederick ``Mike'' Humeston and his wife react on Thursday after they lost to Merck & Co in a battle over its Vioxx painkiller. A jury found that the drugmaker properly warned consumers about the risks of the medication, which means Merck won't be held liable for the 2001 heart attack Humeston suffered while taking Vioxx. PHOTO: AP

Merck & Co's first victory in the massive litigation over its painkiller Vioxx gives the pharmaceutical company a psychological lift and a short-term stock boost -- and also plenty of uncertainty as it still faces thousands of future lawsuits.

What is certain, given Merck's repeated assertions that it will fight the thousands of Vioxx suits one by one, is that the world's fifth-biggest drug maker will spend hundreds of millions of dollars to defend itself as legal costs mount.

After deliberating for less than eight hours over three days, a New Jersey state jury on Thursday cleared the nation's No. 5 pharmaceutical company of allegations it failed to warn consumers about the drug's risks and engaged in "unconscionable commercial practices" in marketing it to doctors and their patients.

Much of the seven-week New Jersey trial, eagerly watched by lawyers and plaintiffs from around the country, relied on the testimony of medical experts. Witnesses for Merck testified the company believed Vioxx was safe for the heart before the drug was pulled from the market in response to a study that showed it doubled risk of heart attacks and strokes when taken for at least 18 months.

Barbara Ryan, pharmaceuticals analyst at Deutsche Bank North America, estimated the New Jersey-based company's liability over Vioxx at US$15 billion to US$30 billion on Thursday.

"I do think that Merck has a good defense in the litigation," she said. "It's still going to be a marathon."

Merck was clearly elated by its victory.

"We feel very much vindicated," Merck general counsel Kenneth Frazier said. "The jury found in our favor, we believe, because the evidence showed that Merck acted responsibly."

Frazier said Merck will fight each lawsuit individually, adding that mass settlements aren't appropriate because facts in each case differ.

"There's an awful lot at stake, not just for Merck," but for the pharmaceutical industry and patients, he said, claiming floods of lawsuits can discourage scientific research and keep needed drugs off the market.

Merck's stock rose US$1.07, or 3.8 percent, to US$29.48 after the verdict. More than 32 million shares changed hands in barely two hours on the New York Stock Exchange -- about four times the stock's normal daily volume.

The verdict came 2 1/2 months after Merck loss a Vioxx case in Texas. The split verdicts mean it will likely take at least several more cases before lawyers can determine if there are any precedents to be followed in future litigation.

The first federal Vioxx trial is scheduled to start Nov. 28 in Houston.

Ryan and some other analysts said Merck's win might discourage some future lawsuits by former Vioxx users who had cases similar to Frederick "Mike" Humeston, a Boise, Idaho, postal worker.

That would include people who survived and who took the drug for less than 18 months, the point at which Merck's own research shows Vioxx use doubled risk of heart attack and stroke.

Merck general counsel Kenneth Frazier told reporters in a conference call he believes most of the cases filed so far -- more than 7,000, with half filed in New Jersey state court -- involve plaintiffs who took Vioxx for less than 18 months.

Independent health-care analyst Hemant Shah of HKS & Co in Warren, New Jersey, said Thursday's verdict was more a psychological boost than anything else for Merck.

"I don't think it's going to have any immediate impact" on the number of new suits filed, he said. "There are attorneys who are looking for work," and plaintiffs don't have to front any of the legal costs.
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