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Vioxx Investor Lawsuit Reinstated

Sep 10, 2008 | Parker Waichman LLP

Merck & Co. investors can sue the drug maker for losses they sustained when Vioxx was taken off the market because of safety problems, a federal appeals court has ruled.  The class action Vioxx securities fraud lawsuit, which was brought on behalf of investors, was originally dismissed by a federal judge in Newark, N.J in April 2007.  

Merck removed the Vioxx from the market in 2004 after a Food & Drug Administration (FDA) study estimated that Vioxx could have contributed to 27,785 heart attacks and sudden cardiac deaths between 1999 and 2003. The Vioxx recall spawned thousands of  product liability lawsuits.  Earlier this year, Merck agreed to settle most of those Vioxx claims for $4.85 billion.  However, investor lawsuits were not included in that settlement deal.

Merck shares plunged 27% -- a loss of about $30 billion for investors -- on the day of the Vioxx withdrawal and fell further in the ensuing months.  Investors allege that, prior to the recall, Merck failed to disclose the risks posed by the painkiller.

U.S. District Judge Stanley R. Chesler had dismissed the lawsuit last year, ruling that all the plaintiffs' claims were time-barred under the statute of limitation.  But a three-judge panel from the 3rd Circuit Court of Appeals voted 2-1 to reinstate the lawsuit.  In a 49-page ruling, the two judges who voted to reinstate the suit ruled that the plaintiffs filed within the legal time limit to do so because even when there were early signs of trouble with Vioxx, Merck was still reassuring investors about its safety.

Merck said in a statement it had presented the judicial panel with alternative grounds for dismissal, but they were not considered.  According to the statement, those grounds included arguments that the company could not have misstated Vioxx safety information because there was no strong data at the time linking the drug to heart attacks or stroke.  Merck also said that information that the plaintiffs claim was omitted or misstated was disclosed in public documents or widely debated in public.

Merck said it is considering an appeal of the ruling.  If the company chooses to follow that course, it could ask either the full Court of Appeals or the U.S. Supreme Court to review panel's decision.

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