Vioxx – The Last Chapter?

The $4.8 billion settlement of Vioxx claims brings what will perhaps be the final steps towards Merck’s putting this issue to rest. This step has been welcomed by the market and plaintiffs’ lawyers and the company is moving cautiously following lessons from the past with a rigorous process for evaluating lawsuits.

Vioxx was pulled from the market in September 2004, after studies linked its long-term use to increased risk for heart attacks. What followed was a flood of lawsuits and it appeared that they would never end.

The risks associated with Vioxx meant that other drugs in the same class – Cox-2 inhibitors - were also subject to intense scrutiny and in April 2005, Bextra was withdrawn because of similar fears. Presently, Celebrex is the only Cox-2 inhibitor to be sold in the United States, and its label carries a black-box warning detailing potential heart risks.

From the time Vioxx was withdrawn from the market, Merck was determined to fight each of the lawsuits. This got the company some key victories which sent a signal to plaintiffs that the odds were against them.

The agreement being worked out by Merck and plaintiffs lawyers aims to resolve the most serious cases, those that resulted in heart attack or ischemic stroke.

However, a lot of questions remain, particularly on how the payments will be shared among the plaintiffs, their lawyers and insurers.

The settlement plan would work thus: Plaintiffs will have to show that Vioxx was taken for at least 30 days. The individual must have suffered a heart attack or ischemic stroke within 14 days of using the drug. The compensation will be lower if the person had cardiovascular risk factors prior to being treated with the drug. Plaintiffs' lawyers can only participate if they recommend the program to all their clients.

Merck will set up two funds, a $4 billion one for heart-attack claims and an $850 million one for stroke claims. The deal will go ahead provided 85% of eligible claims are enrolled.

Merck’s decision has triggered a positive among analysts and Barbara Ryan of Deutsche Bank commented that the company's "aggressive and successful defense strategy has given it a heavy hand in the bargaining process and produced a favorable outcome in the Vioxx settlement, at a cost that is clearly at the low end of general expectations."

Morgan Stanley analysts stated that the deal is "well below initial Street estimates that ranged from $20 billion to $30 billion. We see today's news as a clear positive for Merck as it removes management distraction and ongoing Vioxx-related legal costs."

All this certainly means good going for Merck. Hopefully this should mean that the nightmare that was Vioxx will be a thing of the past and the company can go on into the future without this burden.

- Roopa S.