Merck Makes Settlement One Month After Consumer Help Web Predicts
After New Jersey's highest court refused last month to grant consumers class action status in a suit against Merck (NYSE: MRK) over its painkiller Vioxx, we predicted the Merck lawsuits would end, actually using the phrase in October that they would "dry up".
Just one month later, Merck is making that happen with a reported settlement of $4.5 billion. The company fought a brilliant strategy, using surgical precision in the media, steering clear of anything bombastic and finally proving two things:
1. Merck could cast enough doubt in individual cases to win the majority of them.
2. There would be no class action and dream team of litigators seeking to carve up the pie.
Not being doctors, we can't speak to whether Vioxx is good or bad, but we can say that Merck played this consumer affairs disaster better than any company in recent memory. The company said they would fight each case individually, a tactic seen by some as stalling, especially after the first big verdict.
But then the wins started piling up, and Merck was suddenly more in control of the situation. The company still showed restraint and soldiered forward.
Today was the bombshell -- $4.5 billion for 27,000 cases. After fighting off enough cases to prove it could win more often than not and survive a class action designation, Merck made a big chunk of the other 27,000 go away.
The money sounds big, but it isn't. One simple piece of division shows the offer at about $180,000 per suit before legal fees. That is such a small amount relative to the size of Merck that the company's shares are actually up in early trading before the market officially opens. And now someone who wants to continue on has to convince a court why this amount is insufficient, which is undoubtedly the next step for many.
But win, lose or draw, we saw the pattern last month after following this story for years. Is this good for consumers? That's a marcro-economic debate for another time. Is it good for individual consumers? That's also a debate for another time, but do consider how many of the company's 60,000 employees would lose their jobs if there was a class action or a bigger settlement. And consider that Merck's Gardasil is said to be a blockbuster that will save women from cervical cancer just as its Junavia is one of diabetes' most promising medicines just at that disease reaches epidemic scale.
If there was a smoking gun, some hint of deliberate wrongdoing by Merck, we would be the first to urge juries to shatter the company through big verdicts and and throw them on the scrap heap with Enron. But no one ever managed to prove that. That's an ugly, clinical way to look at the world, but ultimately, without tort reform, we run the risk of individual cases have massive, national economic repercussions.
The proper way is likely somewhere in between.
Friday, November 09, 2007
Thursday, October 11, 2007
Could The Vioxx Lawsuits Dry Up?
The New Jersey Supreme Court denied a motion that would have created a class action against Merck last month. Pundits and armchair lawyers who enjoy Boston Legal questioned Merck's strategy for the four plus years the Vioxx issue has been in the courts.
Now the company has won its first case in Florida, and on October 5, another case in New Jersey. Those wins may have pundits singing a different tune. Rolling up the issue into class action and paying a penalty to be distributed may have been conventional wisdom, but Merck fought for reputation, much like Dan Rather is fighting now against CBS, and appears to be winning a consensus.
We won't argue whether Vioxx is a bad medicine with unintended side effects. What we will say is that Merck has won and lost a lot, and interestingly enough, won much more than it has lost. Of the 16 trials concluded as of today, Merck has successfully defended itself eleven times. That is not a function of a powerful corporation beating up a local lawyer because this is not a John Grisham novel. Good firms have taken on Merck and lost.
But what does all this mean for consumers? The issues has certainly brought to light the impact of a steady regimen of NSAIDs (painkillers) over time. That may have changed medical recommendations for years to come. More importantly, Merck's decision may have actually helped consumers in the long run. By refusing to cave and settle, Merck started the dialogue on tort reform.
That helps consumers from rising prices everywhere because of frivolous lawsuits that get rolled into a class action and scare a company into settling. Basic finance theory holds that the profit margin won't typically take a long-term hit so prices rise over time. That ends up costing all consumers.
Victims of corporate wrongdoing must be protected and compensated. But with precious few exceptions, the result of this compensation is typically a higher price or lower quality product passed to the entire consumer market, not a long-term company financial shortfall.
The New Jersey Supreme Court denied a motion that would have created a class action against Merck last month. Pundits and armchair lawyers who enjoy Boston Legal questioned Merck's strategy for the four plus years the Vioxx issue has been in the courts.
Now the company has won its first case in Florida, and on October 5, another case in New Jersey. Those wins may have pundits singing a different tune. Rolling up the issue into class action and paying a penalty to be distributed may have been conventional wisdom, but Merck fought for reputation, much like Dan Rather is fighting now against CBS, and appears to be winning a consensus.
We won't argue whether Vioxx is a bad medicine with unintended side effects. What we will say is that Merck has won and lost a lot, and interestingly enough, won much more than it has lost. Of the 16 trials concluded as of today, Merck has successfully defended itself eleven times. That is not a function of a powerful corporation beating up a local lawyer because this is not a John Grisham novel. Good firms have taken on Merck and lost.
But what does all this mean for consumers? The issues has certainly brought to light the impact of a steady regimen of NSAIDs (painkillers) over time. That may have changed medical recommendations for years to come. More importantly, Merck's decision may have actually helped consumers in the long run. By refusing to cave and settle, Merck started the dialogue on tort reform.
That helps consumers from rising prices everywhere because of frivolous lawsuits that get rolled into a class action and scare a company into settling. Basic finance theory holds that the profit margin won't typically take a long-term hit so prices rise over time. That ends up costing all consumers.
Victims of corporate wrongdoing must be protected and compensated. But with precious few exceptions, the result of this compensation is typically a higher price or lower quality product passed to the entire consumer market, not a long-term company financial shortfall.
Friday, September 07, 2007
No Vioxx Class Action Says NJ Supreme Court
Merck's legal strategy surrounding claims against its Vioxx medication appears to continue to be successful. The company chose to fight each claim individually. Now the New Jersey Supreme Court has refused to consolidate multiple filings as a class action, giving the big pharma manufacturer another victory.
"Arguing each case individually is ideal for the company," says Consumer Help Web President Joan Bounacos. "They can continue to address each plaintiff's issues individually, allow multiple juries to hear the facts and point to multiple successful defenses. The strategy will drag the company through courts for years, but is proving successful."
Consumer Help Web produced a checklist for potential Vioxx plaintiffs nearly two years ago. "After the first verdict came in so high, we saw spikes in consumers lining up to file suit," Bounacos said. "Our goal was to ensure that consumers made smart choices when choosing their legal team."
Meanwhile, the New Jersey's court's order that all related cases be assigned to Superior Court Judge Carol Higbee remains in effect. Judge Higbee issued her first case management order regarding Vioxx four years ago.
Merck's legal strategy surrounding claims against its Vioxx medication appears to continue to be successful. The company chose to fight each claim individually. Now the New Jersey Supreme Court has refused to consolidate multiple filings as a class action, giving the big pharma manufacturer another victory.
"Arguing each case individually is ideal for the company," says Consumer Help Web President Joan Bounacos. "They can continue to address each plaintiff's issues individually, allow multiple juries to hear the facts and point to multiple successful defenses. The strategy will drag the company through courts for years, but is proving successful."
Consumer Help Web produced a checklist for potential Vioxx plaintiffs nearly two years ago. "After the first verdict came in so high, we saw spikes in consumers lining up to file suit," Bounacos said. "Our goal was to ensure that consumers made smart choices when choosing their legal team."
Meanwhile, the New Jersey's court's order that all related cases be assigned to Superior Court Judge Carol Higbee remains in effect. Judge Higbee issued her first case management order regarding Vioxx four years ago.
Labels: Carol Higbee, Merck, New Jersey, Vioxx
Thursday, June 07, 2007
Vioxx Award Overturned As Avandia Cases Heat Up
Remember our quote telling consumer that the "blood is in the water" regarding lawsuits over Merck drug Vioxx?
That's what we said two years ago on the heels of a $50 million plus verdict against the drug's maker. Juries were apparently buying the argument that using the drug contributed to cardiac difficulties. Merck, makers of Vioxx, has consistently stood by its product and taken the cases one by one, winning more than losing. And even when losing, Merck has used judicial remedies to manage their liability.
That strategy has paid off now that U.S. District Judge Eldon Fallon has proposed a $1.6 million settlement in lieu of a $50 million cash award. If the plaintiff, a retired FBI agent, does not accept the proposed settlement, the circus starts over again later this year. If the offer is accepted, Merck still lost, but priced down its liability from $50 million to less than $2 million.
Next up? Diabetes drug Avandia.
Traditional media outlets jumped all over GSK today when a highly respected physician said he was pressured into remaining quiet about his suspicions that the drug was also involved in cardiac issues. This case is even stickier according to various legal pundits because of the increased cardiac risks diabetics already have. Despite that, the drugmaker is spending big bucks on full page ads in major newspapers to stand by its product as the attorneys and plaintiffs begin lining up for a whack at another drug's alleged side effects
Remember our quote telling consumer that the "blood is in the water" regarding lawsuits over Merck drug Vioxx?
That's what we said two years ago on the heels of a $50 million plus verdict against the drug's maker. Juries were apparently buying the argument that using the drug contributed to cardiac difficulties. Merck, makers of Vioxx, has consistently stood by its product and taken the cases one by one, winning more than losing. And even when losing, Merck has used judicial remedies to manage their liability.
That strategy has paid off now that U.S. District Judge Eldon Fallon has proposed a $1.6 million settlement in lieu of a $50 million cash award. If the plaintiff, a retired FBI agent, does not accept the proposed settlement, the circus starts over again later this year. If the offer is accepted, Merck still lost, but priced down its liability from $50 million to less than $2 million.
Next up? Diabetes drug Avandia.
Traditional media outlets jumped all over GSK today when a highly respected physician said he was pressured into remaining quiet about his suspicions that the drug was also involved in cardiac issues. This case is even stickier according to various legal pundits because of the increased cardiac risks diabetics already have. Despite that, the drugmaker is spending big bucks on full page ads in major newspapers to stand by its product as the attorneys and plaintiffs begin lining up for a whack at another drug's alleged side effects
Labels: Avandia, diabetes, Vioxx
