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Tuesday, August 21, 2007

Like getting blood out of a stone - The Merck Scandal

Source: New York Times

August 21, 2007
Plaintiffs Find Payday Elusive in Vioxx Cases
By ALEX BERENSON

In Carol Ernst’s eyes, two years ago she won a measure of justice.

On Aug. 19, 2005, a Texas jury awarded Mrs. Ernst $253.5 million after concluding that Merck & Company and its painkiller Vioxx had caused the death of her husband, Robert, in 2001. At a news conference after the verdict, Mrs. Ernst said she was pleased that jurors had punished Merck for hiding Vioxx’s heart risks. “This has been a long road,” she said. “I just know that it was a road that I had to run and I had to finish.”

But her comfort was premature. Merck, the third-largest American drug maker, appealed the verdict — which Texas laws on punitive damages automatically reduced to $26.1 million. Until higher courts rule on the appeal, Merck is not obligated to pay. So Mrs. Ernst, 62, has yet to receive any money.

In fact, none of the 45,000 people who have sued Merck, contending that they or their loved ones suffered heart attacks or strokes after taking Vioxx, have received payments from the company. The lawsuits continue, for now in a state of legal limbo, with little prospect of resolution.

In combating the litigation, Merck has made an aggressive, and so far successful, bet that forcing plaintiffs to trial will reduce the number of Vioxx lawsuits and, ultimately, its liability.

Promising to contest every case, Merck has spent more than $1 billion over the last three years in legal fees. It has refused, at least publicly, to consider even the possibility of an overall settlement to resolve all the lawsuits at once.

The strategy’s successes, from the view of Merck and its shareholders, are clear. In the last year, the company has won most of Vioxx cases that have reached juries. Though its stock plunged immediately after the Robert Ernst verdict, it has since risen 80 percent, easily outpacing those of other big drug makers. And estimates of Merck’s ultimate liability, once as high as $25 billion, are now closer to $5 billion, said C. Anthony Butler of Lehman Brothers.

The Merck executive most closely associated with the company’s strategy, Kenneth Frazier, its general counsel, has prospered. In July, Mr. Frazier was promoted to president of the global human health division, where he oversees the marketing and sales forces, half of Merck’s 60,000 employees.

FULL STORY HERE
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