Vioxx maker Merck will spend $4.85 billion to settle a significant number of lawsuits filed against it for injuries caused by the painkiller. Under the agreement, which was announced late yesterday, Merck will set up two separate settlement funds to cover heart attack and stroke claims filed over Vioxx. The development is a surprising one, considering that until very recently Merck had vowed to fight every one of the 27,000 cases filed against Vioxx individually.
In order to be eligible for the settlement, Vioxx claimants will have to enter into a resolution process. Merck will set up a $4 billion fund for people who claim they suffered heart attacks as a result of Vioxx, and another $850 million fund for those who suffered ischemic strokes. The settlements will be awarded on an individual bases, and the amount of money each plaintiff ultimately receives will vary. Merck said that at this time, it has not determined how many former Vioxx users might be covered by the agreement.
Vioxx was approved for use in 1999, and quickly became a blockbuster for Merck, with annual sales of $2.5 billion. The Food & Drug Administration (FDA) ordered Vioxx off the market in 2004 after studies showed that people who took the drug had a higher risk for heart attack. The recall came after an analysis of patients using Vioxx linked the defective drug to more than 27,000 heart attacks or sudden cardiac deaths in the U.S. from 1999 through 2003. Since then, Vioxx the subject of 27,000 law suits filed by 47,000 plaintiffs as the result of Vioxx side effects. In addition, the company also faced 265 potential Vioxx class action lawsuits, and it has also been sued by several states in an effort to recoup the money state health programs spent on Vioxx prescriptions.
Merck had vowed to fight every Vioxx lawsuit individually, and it was having some mixed success. Of 11 Vioxx cases that have gone to trial so far, Merck had lost five. But the legal costs of defending so many Vioxx lawsuits have been substantial. Merck spent $160 million just in the third quarter to fight Vioxx lawsuits. The company also took several charges against its earnings to cover current and future Vioxx litigations costs, and it has set aside $720 million to cover the legal costs associated with these lawsuits. However, that amount did not cover any potential damage payments to Vioxx victims.
Under the new Vioxx agreement, Merck will make no admission of fault. The company has also said that it will continue to vigorously defend against individual Vioxx lawsuits that are not included in the new Vioxx settlement agreement.