To settle claims that it concealed the health risks of Vioxx, a painkiller, Merck & Co. has agreed to pay $4.85 billion. This should deal with approximately 95% of all the lawsuits related to Vioxx, says the company. The money will be divided into a settlement fund of $4 billion for patients who suffered a heart attack while receiving Vioxx, and $850 million for those who had strokes.
Many business analysts are surprised at this move by Merck. The company had been fighting each lawsuit on a case by case basis – a strategy that seemed to be working. Even though the company was having to pay out huge amounts of money each time it lost a case, it was also winning some – lawyers don’t like taking on a case if it looks as though they might not win. Merck had won 11 of 16 cases that had gone to a jury.
Merck said that if certain conditions under the agreement are met, the company will pay a fixed amount of $4.85 billion into a settlement fund for qualifying claims that enter into the resolution process. The company stressed that this is not a class-action settlement – claims will be evaluated on an individual basis. Only those claimants who filed/toled cases on or before November 8, 2007 will be eligible.
Richard T. Clark, Chairman, President and CEO (chief executive officer) of Merck, said “This is a good and responsible agreement that will allow the Company to concentrate even more fully on its mission of discovering, developing and delivering novel medicines and vaccines. The agreement is structured to provide a significant degree of certainty toward resolving the majority of the outstanding VIOXX product liability claims in the United States for a fixed amount.”
To qualify, claimants will have to pass three gates׃
1. An Injury Gate
Objective medical proof of MI (myocardial infarction) or ischemic stroke
2. A Duration Gate
Documented receipt of at least 30 Vioxx pills
3. A Proximity Gate
Requiring receipt of pills in sufficient number and proximity to the event to support a presumption of ingestion of Vioxx within 14 days before the claimed injury.
The agreement provides that Merck does not admit causation or fault. Merck says this agreement applies only to U.S. legal residents and those who allege that their MI or ischemic stroke occurred in the USA.
Merck expects to record a fourth-quarter 2007 pre-tax charge in the amount of $4.85 billion to cover the cost of the agreement.
Bruce N. Kuhlik, senior vice president and general counsel of Merck, said “This agreement is the product of our defense strategy in the United States during the past three years and is consistent with our commitment to defend each claim individually through rigorous scientific scrutiny. Under the agreement, there will be an orderly, documented and objective process to examine individual claims to determine if they qualify for payment. This agreement also makes sense for the Company because since 2004, we have reserved approximately $1.9 billion for defending VIOXX litigation and, absent this agreement, could anticipate that the litigation might stretch on for years.”
Russ Herman, Liaison Counsel in the federal multidistrict VIOXX litigation and Chair of the Plaintiffs’ Negotiating Committee said “Creating a process to look at individual claims is the fairest way to efficiently and quickly provide payment to qualified claimants. Specific causation has been a very difficult issue. This is an opportunity to end a long and difficult litigation that has stretched on for more than three years. A fair resolution is in everybody’s best interest. This agreement would only apply to claims already filed or tolled.”
— Vioxx settlement documents (when you get to the page scroll down to the bottom)
Written by׃ Christian Nordqvist