Out of court settlement of Vioxx lawsuits by Merck likely
Since the day Merck recalled Vioxx last year, it has chosen to take a very aggressive tone. It has treated former Vioxx users like criminals, refused to entertain any ideas about out-of-court settlement, refused to take any responsibility for almost 60,000 deaths, and even worse, continued to abide by the safety of the drug (including announcement of bringing the drug back on the market) despite overwhelming evidence to the contrary.
This is what any company that is out of touch with reality is likely to do. However, this week’s verdict by a jury in Texas that bought none of the stories told by Merck attorneys was a serious blow to Merck. While the award will be reduced eventually on appeal, it seems that Merck’s strategy is not going to work. Already there are talks about Merck filing for bankruptcy.
That brings us to the topic of Merck’s Vioxx liabilities. Since this number can only be estimated, since the drug was recalled, several analysts have tried to estimate it. In December last year, it was estimated to be $38 billion. Guerry Thornton tried to analyze what the liability dynamics is going to be though he did not come up with a number. Merrill Lynch came up with an an $18 billion estimate. Some optimistic experts have come up with a number in single digits. In other words, no one has a clue.
Now there is another estimate today. An analyst at A.G. Edwards think Merck’s liability could be as much $50 billion. If one pays attention to the preparation going on worldwide to sue Merck and the ease with which Mark Lanier was able to implicate Merck, this seems like a reasonable number. To complicate things even further, Merck has done a great favor to the attorneys by leaving an excellent paper trail. Plus, the arrogance of the company did not go very well with the jury in Texas and that is likely to happen during other trials. After its loss in Angleton in the Carol Ernst case, instead of admitting its mistakes in selling a dangerous drug or for conducting a poor defense during the trial, the company went on an offensive again vowing to appeal and criticizing what many experts thought was a fair trial.
“If I were advising the company, I would tell them to settle this fast, ” Robert Zito, a partner at New York-based law firm Schiff Hardin tells Bloomberg. “This is not going to get any better,” he added. Merck’s Cynthia Smith responded by repeating its well-rehearsed line of fighting each victim one by one. But business analysts believe that such statements are merely made to discourage attorneys and plaintiffs. It is very likely that the discussion in the boardroom has already started about settling the lawsuits.
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