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Latest Vioxx win justifies Merck strategy

Merck & Co.'s victory in the latest Vioxx trial justifies its strategy of fighting lawsuits, but with lawsuits mounting past 16,000, the company must broach a global settlement at some point, experts said Friday.
/ Source: The Associated Press

Merck & Co.'s victory Thursday in the latest Vioxx trial buttresses its strategy of fighting lawsuits over the withdrawn painkiller one by one, but with lawsuits mounting past 16,000, the company must broach a global settlement at some point, experts said Friday.

Thursday's win in Atlantic City was expected by many observers because the plaintiff, 68-year-old Elaine Doherty, had several risk factors for a heart attack, as did many arthritis sufferers who took Vioxx.

"To us, this (victory) really just reinforces the importance of looking at cases individually," Merck legal spokesman Jim Fitzpatrick said Friday. "We believe that we're going to see a very high percentage of cases by plaintiffs that have a lot of risk factors because those are the people that are likely to have (heart attacks)."

Some analysts, though, see settlement discussions possibly coming after the statute of limitations, the time limit on filing lawsuits, expires. For plaintiffs in most states, that will be Sept. 30, the two-year anniversary of Whitehouse Station, N.J.-based Merck pulling the drug from the market after its research showed Vioxx use increased risk of heart attack and stroke.

That deadline likely will bring a surge of last-minute lawsuits, given that many plaintiff firms with Vioxx cases say they are reviewing hundreds more potential suits.

Pharmaceuticals analyst Albert Rauch of A.G. Edwards & Sons Inc., which owns Merck stock, said a plausible Merck strategy is to let the deadline pass to prevent a flood of fraudulent claims. Bogus claims dogged cross-state rival Wyeth when it set up a global settlement several years ago to end litigation over its former diet drugs, Pondimin and Redux.

"They (Merck) wait till people can't get in too easily and then they go to a class action" settlement, Rauch said.

Steve Brozak, pharmaceuticals analyst at WBB Securities, said that before Merck starts talking settlement, it must wear down the resolve of plaintiffs' lawyers, who take cases on contingency and must bear huge upfront costs they might not recoup.

"They've got to position this so that they (Merck) are in control of the financial aspects of the settlement, and the best way to do that is to continually chalk up victories," discouraging the weaker lawsuits, said Brozak, adding that resolving litigation is in the best interest of shareholders.

Barbara Ryan, pharmaceuticals analyst at Deutsche Bank North America, said drug companies learned a lot from Wyeth's litigation over fen-phen, which has run up a $21 billion tab so far, so she expects Merck to delay settling for quite a while.

"The minute that you try to settle with these lawyers, it just never ends," said Ryan, whose company owns Merck stock. "It's going to be a long marathon."

St. John's University law professor Anthony Sabino said the Doherty case shows that each varies with the injuries and prior health of the plaintiff, making Merck's strategy workable. He expects Merck to analyze which types of cases it's most likely to win or lose, then try to resolve the losers or gray cases by offering individual settlements, "something below $1 million."

"It's going to take years, but time is on Merck's side," Sabino said.

Meanwhile, recent revelations that Vioxx increased risk of heart attack with just a few months' use — not the 18-month minimum on which Merck has built its legal strategy — are likely to become a big part of trials where the plaintiff took the drug for a short time. The first such trial is under way now in Los Angeles.

"We certainly do expect that plaintiffs will raise arguments" based on that data, Fitzpatrick said, adding that possibly more than half of all Vioxx suits involve patients who took the drug for less than 18 months.

The new data could help "short-term-use" plaintiffs, some of the experts said, but others were unsure.

One thing they agree on: Relatives of dead plaintiffs stand the best chance of winning, due to jury sympathy. Merck's three losses in the seven verdicts to date all involved plaintiffs who died or were incapacitated by a heart attack.

"When there's very little injury, Merck has an edge," Sabino said.