Based on the way the Vioxx litigation is developing, the Superior Court in Atlantic County, New Jersey, may turn out to be the 2005 equivalent of Waterloo, Yorktown, and Gettysburg all rolled into one for Merck & Co.
Angleton, Texas was the opening battle of the war and it went badly for Merck. It was supposed to be the toughest case to prove since the death involved was caused by an arrhythmia, or irregular heartbeat and not a heart attack. It was a lone widow against the third largest pharmaceutical company in the world. It was a relatively unknown plaintiffs’ lawyer against a high-powered legal team.
In a simple verdict, the seven men and five women found Merck negligent in the death of Robert Ernst, a 59-year-old triathlete. The jury awarded his widow, Carol, $24 million in actual damages, plus $229 million in "exemplary," or punitive damages, for a total of around $253 million.
While Texas law will require the total amount of the verdict to be substantially reduced, the jury had knocked the swagger right out of Merck.
The company’s threat that it would never settle and would defend each of the cases against it was no longer as intimidating as it once was. In fact, within days of the verdict, Merck’s attorneys were hinting at the possibility of settling some of the almost 5,000 cases that were now pending.
As the dust was still settling from the first trial, New Jersey Superior Court Judge Carol A. Higbee, who is presiding over some 2,475 Vioxx cases filed in New Jersey, refused to grant Merck an adjournment of the trial now scheduled to start on September 12.
Very little favors Merck this time around and the downside risks are far greater than they were in Texas. Another loss would make it virtually impossible for Merck to “scare” any plaintiff into a small settlement and it would be boost the confidence of every plaintiff’s attorney immeasurably.
Merck cannot force the New Jersey cases into the friendlier confines of federal court because suing the company in its home state prevented Merck from doing just that. In addition, Atlantic County jurors are quite likely to resemble the Angleton, Texas jurors in a number of ways. They will be ethnically diverse and from a low- to middle-income households.
They, too, may not care very much about all of the complicated scientific and medical proof when it is weighed against the mountain of evidence that points to a willful pattern of deception (at worst) or denial (at best) concerning Merck’s handling of the scientific data concerning the heart-related dangers associated with Vioxx.
There are several additional factors, however, that make this trial a huge gamble for Merck (and, how appropriate that the trial will take place in Atlantic City). These include:
•The plaintiff is an ex-Marine, who received two Purple Hearts for battle injuries received in Vietnam, who was taking Vioxx for knee pain related to one of those wounds.
•The plaintiff suffered a myocardial infarction (heart attack) which is precisely the injury Vioxx use was linked to.
•Judge Higbee has certified a national class-action covering every private third-party payer that allowed members of its health benefits plan to buy Vioxx. Thus, Merck could face a judgment of billions of dollars if it loses the case brought by the International Union of Operating Engineers Local 68 Welfare Fund. Most Vioxx purchases were made through health plans run by insurance companies and health maintenance organizations and the union’s case could therefore encompass millions of consumers who took the popular painkiller that’s been linked to increase risk of heart attack and stroke. Unlike the individual personal injury cases, Local 68 lawyers do not have to prove any physical injury.
Under state law, all that needs to be shown is that third-party payers were influenced by unconscionable Merck business practices, such as deceptive marketing and promotion of Vioxx (and is there plenty of that). If the union wins, all third-party payers nationwide can recoup payments to Merck as well as treble damages and attorney fees. These money damages could run as high as $10 billion or more.
•Although Merck would have been able to remove the case to federal court under the Class Action Fairness Act of 2005, the case was filed before the law was passed.
In addition to the problems Merck faces in New Jersey, Texas is still not finished with the company since the state itself has brought charging Merck defrauded it out of hundreds of millions of dollars in Medicaid payments by misrepresenting the safety of Vioxx for several years. While Texas is the first state to do this, it probably will not be the last.
In addition to $168 million in damages, the state is seeking additional civil penalties. Texas Attorney General Greg Abbot believes the state can prove total damages in excess of $250 million including treble (triple) reimbursement of $56 million (or $168 million) for five years of filled Vioxx prescriptions.
It is estimated that 700,000 Vioxx prescriptions were filled through Medicaid during those five years in Texas alone. Abbot sees these prescriptions as part of a willful misrepresentation on Merck’s part as to the safety of the drug.
To him, the entire affair represents nothing more than “a prime example of a company’s drive for profit steamrolling its duty to be safe.”
Merck has made a motion to remove the Texas case from state to federal court. Attorney General Abbott has sharply criticized Merck for attempting an end-run around the state’s lawsuit accusing it of misrepresenting the safety of Vioxx.
“Merck may try to run from the Texas courts, but they will not be able to hide from their scheme to misrepresent the safety of Vioxx to Texans,” said Abbott. “The company is clearly trying to evade justice by using these delay tactics.”
“This is a major disappointment to the taxpayers of Texas, who deserve to be reimbursed for the company’s wrongful scheme to defraud Medicaid. I urge Merck to stop evading their obligations. A Texas jury deserves to hear evidence of fraud in a Texas district court.”
Abbott has filed a request that the case be remanded to state court telling U.S. District Judge Lee Yeakel that no federal issue exists to warrant a change of venue.
It seems unlikely, however, that a federal judge is going to embroil himself in the Vioxx debacle simply to satisfy Merck’s desire to “get out of town” so it does not have to deal with another potentially unsympathetic Texas jury.
Clearly, as Merck’s legal problems mount, the outcome of the next trial will be critical. A loss may make manageable personal injury settlements impossible and virtually guarantee the success of the types of actions brought by Local 68 and the state of Texas. This could spell financial ruin for Merck.
Finally, if Merck is found to have knowingly, or even carelessly, engaged in conduct which forces the company into Chapter 11 or otherwise destroys its once enormous profitability, disgruntled and very angry shareholders will no doubt explore the possibility of commencing a stockholders derivative suit to recoup their investment losses.