Is Merck Winning or Losing in the Vioxx Trials?
(FORTUNE Magazine) - The lawsuits over its anti-inflammatory drug Vioxx keep piling up. So far, Merck has faced six plaintiffs claiming cardiovascular damage and prevailed against three--that leaves 11,500 cases to go.
1. Merck just had a $32 million judgment against it in Texas. Isn't that a bad loss? Not really. Under Texas law the punitive damages will get reduced to $7.75 million, and Starr County, Texas, is notoriously plaintiff-friendly. Merck plans to appeal the decision along with its two other losses.
2. Is the fight-every-plaintiff strategy really working? Yes. That Merck's lawyers have won three times indicates that jurors are willing to listen. Eventually Merck will settle. In the meantime, the drugmaker is betting that its steely resolve will scare off plaintiffs who are pursuing frivolous claims.
3. Why not settle now? Merck needs to determine what dollar value jurors put on valid claims and how they weed out plaintiffs whose heart attacks they believe weren't caused by Vioxx. That'll help narrow the field of plaintiffs and arrive at a reasonable per-plaintiff award. But no settlement will happen until the statute of limitations expires in most states on Oct.1.
4. How much will this cost Merck? Experts estimate that the trials have so far cost roughly $70 million each in fees and damages. Most analysts place Merck's ultimate liability for Vioxx at around $10 billion, but that's a manageable figure considering Merck's large cash reserves.