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High Court Says Lawsuits Over Merck Drug Can Proceed

The Supreme Court said Tuesday that investors who lost millions when Merck pulled its blockbuster pain drug Vioxx off the market can go ahead with a lawsuit against the pharmaceutical giant.

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The high court agreed with a federal appeals court's decision to allow a class-action securities lawsuit. The suit was over whether the drugmaker provided adequate information about the risks of its former blockbuster painkiller Vioxx before it was pulled from the market.

Investors lost tens of billions of dollars in shareholder value overnight after Merck withdrew Vioxx.

The Whitehouse Station, N.J.-based company pulled the drug on Sept. 30, 2004, because it doubled the risks of heart attack, stroke and death.

Investors have two years to sue a company accused of defrauding investors. Merck argued that the two-year clock began when the first hint of Vioxx trouble was made public in September 2001. Investors argued that the two-year time limit should not have been started in 2001.

Justice Stephen Breyer, writing a unanimous judgment for the court, agreed with the investors. "The plaintiff's suit is timely," he said.

After it pulled Vioxx from the market, Merck was sued by shareholders, patients and survivors claiming Vioxx caused heart attacks and strokes, and from insurance plans seeking reimbursement for their costs for covering Vioxx prescriptions.

Merck says the investors should have known from public information that there could be problems with the drug because the regulatory Food and Drug Administration had issued warnings to Merck about Vioxx risks late in September 2001.

A federal judge agreed and dismissed the November 2003 lawsuit, ruling it was filed after the two-year statute of limitations expired.

But the Philadelphia-based 3rd U.S. Circuit Court of Appeals reversed that decision, allowing the many shareholder lawsuits, now consolidated in federal court, to proceed.

The appeals court said the investors could not have known more than two years ahead of time of the possible wrongdoing.

Merck has not proved otherwise, said Justice Antonin Scalia in a separate opinion. "Merck has not shown that respondents actually discovered (possible wrongdoing) more than two years before bringing suit," said Scalia, who was joined in his separate opinion by Justice Clarence Thomas.