Merck wins reversal of Vioxx class-action status
Last Updated: 2007-09-06 14:00:31 -0400 (Reuters Health)
By Ransdell Pierson
NEW YORK (Reuters) - Merck & Co Inc said on Thursday the New Jersey Supreme Court has reversed a lower court ruling that granted nationwide class-action status to insurers seeking reimbursement for past spending on Vioxx, the drugmaker's withdrawn arthritis treatment.
Merck shares rose 2.4 percent.
"The Supreme Court recognized that a class action was improper because each insurance company and HMO considered different types of information in deciding whether to reimburse patients for Vioxx, and they all went through varied processes with different experts in making those decisions," said Ted Mayer, outside counsel for Merck.
Merck faces tens of thousands of lawsuits filed by former users of Vioxx, who claim to have been harmed by the drug. The insurance companies and HMOs were seeking instead to be reimbursed for their spending on the former $2.5 billion-a-year pill, which was withdrawn in 2004 after being linked to heart attacks and strokes among long-term users.
"We see this news as an enormous victory for Merck as we have always maintained that the consumer fraud class action suits (rather than individual cases) represent the biggest risk to Vioxx liability," Morgan Stanley analyst Jami Rubin said in a research note.
Had the court ruled the other way, Rubin said Merck would have had a much harder time defending itself and might have felt compelled to agree to a costly group settlement.
She noted the case was filed by a union, the International Union of Operating Engineers, on behalf of all its insurance plans.
The court argued that class-action certification was not appropriate because the insurance companies and HMOs are well- funded institutions able to mount their own legal challenges to Merck without becoming a class.
It contrasted the case with another involving claims by a large number of individuals who would have been greatly disadvantaged by pursuing their claims individually against a large corporate defendant.
"The court finds no ground on which to conclude that the proposed nationwide class meets the test for superiority that the court has traditionally required," the justices wrote in a 33-page opinion.
Class-action lawsuits can significantly reduce the expense to plaintiffs and give them more clout, as prominent and expensive lawyers simultaneously represent them all.
Merck has said it is not interested in reaching a group settlement with the legions of Vioxx plaintiffs, but instead has vowed to fight them one by one in court.
Its strategy has proved surprisingly successful, according to industry analysts, and bolstered confidence in the company's future ability to withstand the litigation without paying out many billions of dollars in damages.
Merck noted that juries in Vioxx personal injury trials to date have decided in its favor 10 times, although one of the verdicts was recently set aside, and have sided with plaintiffs five times.
Merck shares rose $1.18 to $50.58 in afternoon trading on the New York Stock Exchange. (Additional reporting by Jon Hurdle)
