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Vioxx Legal Saga Just Beginning


On Friday, the stock price for the pharmaceutical giant Merck dropped 7.7 percent after a Texas jury handed down a $253 million award against the company. The penalty came after the jury found that Merck was liable in the death of a man who had taken the painkiller Vioxx, which was one of the company's largest moneymakers. NPR's Snigdha Prakash has been covering the story and joins us from Angleton, Texas.

Snigdha, it's not surprising to see a stock price take a big hit following a well-publicized bad news story, but take it in the longer view. How bad, really, is this for Merck?


Liane, the short answer is we don't know. The case in Angleton, Texas, was the first of several Vioxx cases that are coming up for trial in the next few months. So investors are worried that if this case in Texas went badly for Merck, those other ones will be, too. As you know, Merck withdrew Vioxx from the market last year after a study showed that the painkiller caused heart attacks. And at last count, Merck has more than 4,000 cases filed in state and federal court--Vioxx cases--and potentially 120 class-action suits. That's a lot of cases and a lot of class actions.

The company has said it'll fight each case one at a time, that it won't settle. But if several of these cases go badly, it may have to reassess, and investors are worried that Merck will have to pay literally billions of dollars to settle the cases. They're also worried that if the early cases go badly for Merck, more plaintiffs will file suit against the company as they realize that their chances of prevailing against Merck are pretty good.

HANSEN: Merck has said it will appeal the decision in Texas and the penalty, so the company is going to face that legal battle. But please walk us through what some of the other cases will be.

PRAKASH: The next big case, Liane, is in New Jersey in early September. The facts are said to be better for the plaintiff in that case than in this case in Texas because it involves a heart attack that the plaintiff alleges was caused by Vioxx, and the scientific evidence linking Vioxx to heart attacks is strong.

There are additional cases coming up in Texas, and then the week after Thanksgiving, the first federal case will be tried in New Orleans. As juries hand verdicts in each of these cases, we can expect that investors will react. They'll push Merck's stock price up or down. And so it's going to be months and more likely years, really, before we know if this first verdict in Texas was an aberration or if it was an early indicator that Merck's Vioxx liability is huge.

HANSEN: So as you said, the stock price can be expected to rise or fall depending on how each one of those cases goes, but I mean, how is business for the company otherwise? For example, are the drugs helping to make up for the pain that Vioxx is causing?

PRAKASH: Yes and no, Liane. Merck is a large, financially strong company. Its problems with Vioxx are a huge setback. When the company pulled Vioxx from the market last year, billions of dollars of sales from one of its best-sellers just evaporated. And obviously, the company still doesn't know what Vioxx will ultimately end up costing it, but here's the bright side. Merck has a huge buffer of cash. It generates lots of cash, it has cash on hand, it's repatriated billions of dollars in profits from its operations overseas under a tax holiday that the Bush administration enacted.

Like a lot of drug companies today, Merck's problem is that the best-sellers it's been selling for some time are aging. Its top drug, Zocor--that's a statin--lost, or will lose, patent protection next year. That means Merck's Zocor sales--which will be around $4 billion this year--will dry up next year, and Merck needs new drugs to put in its pipeline. Its most promising candidates are a vaccine for human papillomavirus and a diabetes drug that it's developing in partnership with Bristol-Meyers.

HANSEN: NPR's Snigdha Prakash in Angleton, Texas. Snigdha, thank you very much.

PRAKASH: Thanks, Liane. Transcript provided by NPR, Copyright NPR.

Snigdha Prakash
Pieces by National Desk reporter Snigdha Prakash can be heard on NPR's All Things Considered and Morning Edition. The majority of Snigdha's past reports have focused on topics related to entrepreneurship, business, banking and the economy.