Litigation strategy leads Merck to $4.85 billion Vioxx settlement

Michelle Massey, East Texas Bureau Nov. 15, 2007, 6:44am

Merck & Company has agreed to pay a $4.85 billion settlement for claims its arthritis drug Vioxx caused heart attacks or strokes. The agreement does not admit causation or fault.

"This is an opportunity to end a long and difficult litigation that has stretched on from more than three years," said Russ Herman, the chair of plaintiffs' negotiating committee.

The settlement announcement came on Nov.9 after negotiations between Merck and plaintiffs' representatives that included a multi-district litigation executive committee, a six-member negotiating committee with representatives of plaintiffs' counsel in coordinating state cases and a member of the multi-district steering committee.

The negotiators spent over 11 months seeking a resolution for most of the nationwide product liability claims involving Merck's drug Vioxx.

Merck voluntarily withdrew Vioxx from the market on Sept. 30, 2004, after some studies indicated the painkiller doubled the risk of heart attacks and strokes. Merck denied the findings, and maintained that the drug could actually provide protection from cardio-vascular diseases. The FDA reapproved Vioxx two years later with additional label warnings.

How plaintiffs can qualify

Although taken by an estimated 20 million people, the settlement agreement applies only to those who have previously filed heart attack or stroke claims against Vioxx. Before qualifying for a share of the settlement, these plaintiffs must show documented medical proof of myocardial infarction or ischemic stroke, receipt of at least 30 Vioxx pills, and be able to show they took Vioxx medication within 14 days of the claimed injury. Each qualifying participate will be evaluated individually on a point schedule to determine their portion of the total settlement.

In addition to the qualifying process, the agreement includes a clause that prevents accepted plaintiffs from opting out at a later date or returning to court with a Vioxx claim.

The payment agreement only goes into effect if 85 percent of plaintiffs with pending Vioxx claims agree to the settlement.

Of the approximately 60,000 claims filed against Vioxx, Merck is expecting 45,000 to 50,000 to become part of the settlement. If the 85 percent criteria is not met, Merck can walk away from the settlement agreement and continue fighting each case individually.

Merck's senior vice president and general counsel, Bruce Kuhlik said, "We've shown what we're able to do in court and we're prepared to continue defending these cases."

Although depending on the point schedule by length of Vioxx use and severity of injuries, Texas plaintiffs' attorney, Mark Lanier believes the average plaintiff should receive between $150,000 and $200,000 before attorney fees and expenses. Those attorneys who worked on the case on behalf of plaintiffs, will receive somewhere from $1.6 billion to over $2 billion, depending on contingency fee agreements with their respective clients.

The Vioxx multi-district litigation court in New Orleans includes hundreds of cases first filed in federal court in the Beaumont Division of the Eastern District of Texas or in Jefferson County District Courts.

Merck's executive vice president Ken Frazier states the agreement is consistent with Merck's defense strategy that "establishes a process for rigorous and objective review of each claim on an individual basis."

Merck CEO and President Richard Clark described the settlement by stating, "The agreement is structured to provide a significant degree of certainty toward resolving the majority of the outstanding Vioxx product liability claims in the United States for a fixed amount."

Why now?

Merck states it is the right time for the agreement due to several factors. With Merck's Vioxx defense costing more than $1.9 billion since 2004, the settlement provides a significant opportunity to cut future litigation expenses. Merck's aggressive early "no-settlement" strategy provided it the opportunity to test foundations of its defense argument.

Although the first case reaching a jury resulted in a $253 million verdict against Merck, the defense has been overwhelming successful with the other cases reaching trial.

During trials, Merck successfully explained that while plaintiffs may have taken Vioxx, other health or genetic factors most likely caused the heart attacks of strokes. According to Merck's press release, juries have decided for Merck 12 times and only in favor of the plaintiffs five times. The court has set aside one verdict that has not been retried. Another verdict was set aside with retrial in favor of the plaintiff. Two mistrials remain unresolved.

Texas' statute of limitations

Federal District Judge Eldon E. Fallon, who oversees the Vioxx multi-district litigation out of New Orleans, denied a Texas group's allegations under the statute of limitations in an order on Nov 8.

Texas has a two-year limitation period for personal injury claims and the time period starts when the plaintiff knows or at least should have known of the wrongful injury. At the very latest, the judge ruled the limitations period began to run on Sept. 30, 2004 – the day of VIoxx's recall.

For breach of warranty claims, Texas has a four year statute of limitations. The Texas group also claimed Merck committed fraud, misrepresentation, and/or suppression. Ruling in the group's favor, Judge Fallon said the four-year Texas limitations, at the latest, would have started on the day of Vioxx's recall (allowing until Sept. 30, 2008).

Further, the judge said that although timely, the group would have a difficult challenge with causation proof and recoverable damages.

Last, the order argues Texas law does not recognize class action tolling and does not explicitly adopt cross-jurisdictional tolling. Tolling is the suspension of the statute of limitations during specific circumstances when a plaintiff is prevented from initiating an action.

"Because there have been no Vioxx personal injury class actions filed in the Texas state courts, the plaintiffs cannot rely on Texas' limited class action tolling doctrine," Judge Fallon wrote.

Judge Fallon issued similar rulings on other jurisdictions that tested various statutes of limitations.

Future of Merck

The drug manufacturer will continue to defend all claims not included within the settlement.

During a conference call detailing the agreement, Clark concluded by stating, "We will continue to defend this company because the science is on our side. And that is a line in the sand that will not be withdrawn no matter what the success of the company in the future."

Although the settlement is one of the largest in civil litigation history, the amount is less than a year's profit for the third largest US drug manufacturer.

On the day of the settlement announcement, Merck's shares were up 2 percent or $1.13 to $55.90. Analysts do not predict share price to drop.

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