IMAGE: Christopher A. Seeger
Mary Godleski  /  AP
Attorney Christopher A. Seeger makes his closing arguments Tuesday, Nov. 1, 2005, in Atlantic City, N.J. New Jersey's Supreme Court rejected a class-action lawsuit against Merck & Co. over its withdrawn painkiller Vioxx.
updated 9/6/2007 3:36:28 PM ET 2007-09-06T19:36:28

New Jersey's Supreme Court on Thursday rejected a class-action lawsuit against Merck & Co. over its withdrawn painkiller Vioxx.

The ruling is a huge legal victory for the drugmaker, which faces nearly 27,000 individual lawsuits from people claiming Vioxx, once a widely used arthritis treatment, caused heart attacks and strokes.

The state's highest court, reversing two lower-court decisions, ruled that a nationwide class was not appropriate for the lawsuit. The suit had been brought by a union health plan on behalf of all insurance plans that paid for Vioxx prescriptions — roughly 80 percent of all Vioxx sold.

A lawyer for the New Jersey union said because New Jersey's consumer fraud law allows for triple damages, the case could have cost Merck $15 billion to $18 billion. The company's annual revenues last year were $22.6 billion.

Had the class action been allowed to proceed, it also would have been a major setback to the company's strategy of fighting the thousands of Vioxx lawsuits individually. Of the cases that have reached verdicts, Merck has won nine and lost five; a new trial was ordered in another case and two others ended in mistrials this year.

Shares of Whitehouse Station, N.J.-based Merck rose 94 cents, nearly 2 percent, to $50.34 in midday trading Thursday.

"We were thrilled with the decision," said lawyer John Beisner, who argued the case for Merck.

Chris Seeger, lead attorney for the West Caldwell, N.J.-based union that sued, International Union of Operating Engineers Local 68, said that given the ruling, he will now pursue separate claims on behalf of individual health plans. He noted the high court did not rule that the state's consumer fraud law cannot be applied to health plans from other states, so those claims can still be pursued in New Jersey, with triple-damage provisions in play.

"Merck temporarily dodged a bullet. Merck didn't totally dodge the bullet," he said. "We already have a number of funds (health plans) that have contacted us that represent close to $1 billion in claims."

Seeger said he expects more health plans to sign on with him for individual lawsuits because his legal team has already amassed needed documents and made other trial preparations.

Vioxx was Merck's No. 2 drug, with about $2.5 billion in annual sales, when the company pulled it from the market three years ago after research showed it doubled risk of heart attacks and strokes.

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Seeger sued the drugmaker on behalf of the union in October 2003, arguing that if Merck had disclosed those risks earlier, prescription plans would have favored other painkillers.

A state judge and then an appeals court approved the class action, but Merck appealed to the New Jersey Supreme Court.

The high court ruled that a nationwide class action is not the best way to handle the cases because while Merck ran a uniform marketing campaign for Vioxx, insurance plans made individual decisions about covering the drug.

The judges also wrote that the engineers' union and the other third-party payers "are well-organized institutional entities with considerable resources," and that it was unlikely their claims were too small to pursue individually.

Five judges heard oral arguments on a case in March, and all five sided with Merck.

Beisner, the Merck lawyer, said the drugmaker has "very good" prospects for winning any individual lawsuits filed by health plans because they had adequate information about the drug. He added that even after the engineers union sued, it continued to pay for members' Vioxx prescriptions.

So far, Merck has set aside more than $1.8 billion in its Vioxx defense fund but has not paid any jury awards because it is appealing all its losses.

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