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Merck Wins Reversal of Vioxx Class-Action Status

Reuters
Thursday, 6 Sep 2007 | 12:27 PM ET

Merck said Thursday the New Jersey Supreme Court has reversed a lower court ruling that had granted nationwide class-action status to insurers seeking reimbursement for past spending on Vioxx, the drugmaker's withdrawn arthritis treatment.

Shares of Merck rose 2 percent Thursday on the news.

"The Supreme Court recognized that a class action was improper because each insurance company and HMO considered different types of information in deciding whether to reimburse patients for Vioxx, and they all went through varied processes with different experts in making those decisions," said Ted Mayer, outside counsel for Merck.

Merck faces tens of thousands of lawsuits filed by former users of Vioxx who claim to have been harmed by the drug. The insurance companies and HMOs were seeking instead to be reimbursed for their spending on the former $2.5 billion-a-year pill, which was withdrawn in 2004 after being linked to heart attacks and strokes among long-term users.

"We see this news as an enormous victory for Merck as we have always maintained that the consumer fraud class action suits [rather than individual cases] represent the biggest risk to Vioxx liability," Morgan Stanley analyst Jami Rubin said in a research note.

Had the court ruled the other way, Rubin said Merck would have had a much harder time defending itself, and might have felt compelled to agree to a costly group settlement.

She said the case was filed by a union, the International Union of Operating Engineers, on behalf of all its insurance plans.

Class-action lawsuits can significantly reduce the expense to plaintiffs and give them more clout, as prominent and expensive lawyers simultaneously represent them all.

Merck has said it is not interested in reaching a group settlement with the legions of Vioxx plaintiffs, but instead has vowed to fight them one by one in court.

Its strategy has proved surprisingly successful, according to industry analysts, and bolstered confidence in the company's future ability to withstand the litigation without paying out many billions of dollars in damages.

Merck noted that juries in Vioxx personal injury trials to date have decided in its favor 10 times, although one of the verdicts was recently set aside, and have sided with plaintiffs five times.

Shares of Merck rose $1.01 to $50.41 on the New York Stock Exchange.

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