Merck Escapes Class Action Suit

Whitehouse Station, N.J., based pharmaceutical giant Merck and Company won a major legal victory on Thursday, with the New Jersey Supreme Court refusing to admit a class action lawsuit against it. The lawsuit was over Vioxx, a pain killer drug Merck has withdrawn from the market.

Vioxx users have claimed the drug, which was prescribed widely for arthritis, also caused heart attacks and strokes. The New Jersey Supreme Court gave its ruling after reversing the decisions handed down by two lower courts. The Supreme Court ruled there was not enough to give the case the status of a national-level class.

A union health plan, the International Union of Operating Engineers Local 68, West Caldwell, N.J., filed the suit, representing insurance carriers that had plans supporting payment for Vioxx prescriptions. That would have been one big suit, considering it accounted for about 80 percent of all Vioxx prescriptions.

The lawsuit could have been potentially damaging for Merck, and cost it around $15 to $18 billion, considering consumer fraud laws in New Jersey allowed three times the original amount as damages. Take into account the fact that Merck’s annual revenues for 2006 were $22.6 billion and you have a fair idea about how much the company had to be happy about.

The suit, if allowed, also would have disrupted Merck’s designated strategy of fighting each lawsuit individually. Even though there are a total of 27,000 individual Vioxx-related lawsuits against it, the company’s preference seems to be to tackle each lawsuit individually.

The reason for this is immediately apparent. Of the individual lawsuits against Merck, the company has won nine and lost five. One case went to retrial, while in two other cases, the verdict was a mistrial.

The verdict reflected on the share market as well, with Merck prices going up by 2 percent and ending at $50.47 Thursday. John Beisner, the lawyer who fought Merck’s case, said the company was pleased with the verdict.

The lawyer leading the suit for International Union said he would now follow individual suits for each of the health plans, stating it was still possible to have the triple damages rule apply in these cases. His comments were to the extent that the reprieve for Merck was only temporary.