A Wall Street analysis suggests the Vioxx recall may cost Merck as much as $18 billion over the next decade.
The staggering sum reflects the possibility more than 50,000 Vioxx users suffered heart attacks or strokes, and that each patient will file a successful lawsuit against the beleaguered drug maker, according to the report by Merrill Lynch.
The estimate assumes jury awards or settlements would require Merck to pay anywhere from $100,000 to $300,000 for each lawsuit, and that Merck might also pay another $1 billion to $2 billion in suits by Vioxx users who claim some other harm.
However, “investors should note that our estimate could prove low if Merck ends up being liable for materially higher punitive damages than expected,” wrote Merrill Lynch analyst David Risinger, who covers the pharmaceutical industry.
The popular painkiller, which was prescribed to 20 million Americans, was withdrawn Sept. 30, after being linked to cardiovascular problems. Since then, anxious investors have driven Merck shares down about 40 percent over fears that litigation costs will skyrocket.
Those fears rose further after recent reports suggested Merck attempted to downplay the cardiovascular risks before Vioxx was launched in 1999, and continued to do so even after researchers and physicians questioned the drug’s safety.
Already, about 300 hundred lawsuits have been filed against Merck and hundreds more are expected. Some lawsuits seek damages, while others want the company to pay for medical monitoring in the event a heart attack or stroke occurs later.
Merck spokeswoman Anita Larsen said the Whitehouse Station company will vigorously defend against the lawsuits but can’t predict the outcome or reasonably estimate the possible loss. No reserves have been established, she said.
To arrive at his estimate, Risinger relied on an FDA review of Kaiser Permanente HMO members who took Vioxx. The agency found the painkiller may have contributed to more than 26,700 heart attacks and strokes and that Vioxx was associated with 68 serious cases.
Based on that data, Risinger extrapolated the number of likely serious heart attacks and strokes from among the 20 million U.S. Vioxx patients and determined 0.25 percent may have been harmed. That works out to slightly more than 50,000 potential lawsuits. But this does not include lawsuits filed by Vioxx users who were not seriously harmed.
“Given the large number of Vioxx users, the publicity surrounding the recall, the types of litigation such attention typically generates, and Merck’s ‘deep pockets,’ we believe the number of claims filed that do not involve serious cardiovascular events could” be surprising, he wrote.
Risinger also said some Vioxx users may file a lawsuit even if they had taken the pill for less than 18 months. When Vioxx was withdrawn, Merck noted heart attacks and strokes did not appear among patients who took the medicine for a shorter period of time.
On the other hand, Risinger also believes Vioxx users may have a more difficult time proving their case than people who claim they were harmed by the fen-phen diet pills or the Baycol cholesterol drug. That’s because there are many potential causes of a heart attack or stroke among the typical Voixx user, who was often believed to be an older person.
To date, Merck has indicated it has about $630 million in liability insurance, which Risinger assumes is an amount that is available annually.