The New York Times
April 12, 2006
By ALEX BERENSON
Merck's legal morass just got a whole lot stickier. A jury in Atlantic City yesterday found that Merck had misled the Food and Drug Administration about the dangers of its painkiller Vioxx and acted with wanton disregard for patients taking the drug.
By a vote of 7 to 1, the jury awarded $9 million in punitive damages to John McDarby, 77, who had a heart attack in 2004 after taking Vioxx for four years, and his wife, Irma. Last week, it gave the McDarbys $4.5 million in compensatory damages.
"They're responsible for people taking that medication and putting it in their bodies," Timothy Kile, the jury foreman, said of Merck, the nation's third-largest drug company. "To not put information out there about public safety that I feel you have a responsibility to put out there, that's willful and wanton."
As a result, Mr. Kile said, Merck's conduct met the legal standard for imposing punitive damages. The verdict was the first time a New Jersey jury has awarded punitive damages against a drug company and automatically causes the case to be referred to the state attorney general for a possible criminal investigation of Merck's conduct. Federal prosecutors have been investigating the company's marketing of Vioxx.
Merck's legal problems do not end there, for it has now lost two of the four Vioxx cases that have gone to trial.
Merck has promised to defend each of the thousands of other Vioxx lawsuits it faces, a strategy that Wall Street analysts and investors have applauded so far. The company reiterated that plan yesterday and promised to appeal the verdict. Its stock price dropped only slightly, about 1 percent, after the verdict was announced.
But in the courtroom, Merck's strategy is not working as well. In the two cases it has won, both involved plaintiffs who could not prove that they had taken Vioxx for more than a few weeks.
When there has been no question about whether a patient took the drug, the jury has blamed Merck.
The company is now liable for a total of about $40 million in damages, plus fees for plaintiffs' lawyers that could total millions more. That works out to about $10 million for each case that has gone to a jury, a price unsustainable for any company, even one like Merck that had $6 billion in profit last year.
As of Dec. 31, Merck faced 9,650 suits over Vioxx, with 19,000 plaintiffs. Yesterday's award will prompt several thousand more suits, lawyers predict. And because the Atlantic City case was videotaped, plaintiffs' lawyers nationwide can study how Mr. McDarby's lawyers — W. Mark Lanier, Robert Gordon and Jerry Kristal — tried the case.
"If they keep losing, more people file, the plaintiffs' bar pursues those cases more aggressively, and the ultimate price tag goes up," said Thomas E. L. Dewey, a defense lawyer at Dewey Pegno & Kramarsky, who has represented drug makers but is not involved in Vioxx lawsuits.
The pool of potential plaintiffs is vast. About 20 million Americans took Vioxx from 1999 to 2004, when Merck stopped selling the drug after a clinical trial showed it raised the risk of heart attacks and strokes when taken for more than 18 months. Epidemiologists estimate Vioxx may have caused 100,000 heart attacks.
In Texas, where it lost the first Vioxx case last summer, Merck may be on friendly ground in a promised appeal, with courts that tend to be pro-business. But appellate courts are reluctant to overturn jury verdicts without evidence of serious legal errors, limiting Merck's chances that verdicts will be reversed.
A reason plaintiffs' lawyers and independent legal analysts say the New Jersey outcome could lead to many more lawsuits is that Merck, at the outset, seemed to have a strong defense in this case. Besides Mr. McDarby's advanced age, he had many other risk factors for a heart attack, including diabetes.
And Merck is based in Whitehouse Station, N.J., less than 100 miles from the Atlantic City courtroom, and has 10,000 employees in New Jersey. The state's law sets a high bar for punitive damage awards against drug companies, allowing juries to issue them only if they find that drug makers knowingly misrepresented facts to the F.D.A.
But Merck did not seem to benefit from any home-court advantage in Atlantic City. Jurors focused on the company's conduct, not on Mr. McDarby's risk factors, Mr. Kile, the foreman, said. And lawyers for Mr. McDarby persuaded the jury that Merck should pay punitive damages because it had kept some of its analyses of Vioxx's dangers from the F.D.A., even though it disclosed the underlying data.
"This is huge," Mr. Lanier, the lead plaintiffs' lawyer in the case, said. "Merck thought they were bulletproof in New Jersey. They just got hit with $13.5 million in damages."
Merck may continue to face an uphill legal battle unless it can find a way to explain away e-mail messages showing that its scientists were concerned about potential heart risks even before the company began selling Vioxx, as well as e-mail from its former top scientist that said Vioxx heart risks were "clearly there." Plaintiffs lawyers can also draw on marketing documents that show Merck encouraging employees to treat their questions about Vioxx's risks as "obstacles" to sales.
After its loss last summer, in a state court in Angleton, Tex., Merck persuaded many analysts and investors, none of whom saw the trial in person, that the $253.5 million verdict came from a runaway jury in a plaintiff-friendly jurisdiction. (Texas law will automatically reduce that verdict to $26.1 million, and Merck says it will appeal.)
That theory will be harder to sustain this time, considering that the Atlantic City jury deliberated for more than 20 hours over three days and drew clear distinctions by not awarding any compensatory damages to Thomas Cona, the other plaintiff in the case.
The jurors did find that Merck had committed consumer fraud against Mr. Cona by not publicizing Vioxx's potential risks. But because Mr. Cona said he had taken Vioxx for 22 months and yet had only three prescriptions covering seven months, the jurors were not sure that he had taken the drug as long as he said, according to Mr. Kile.
Benjamin Zipursky, a law professor at Fordham University, said the jury's award to Mr. McDarby but not to Mr. Cona would make it hard for Merck to argue that jurors had not carefully considered their decision. "A jury that's this selective still comes out in favor of the plaintiff," he said. "It's not good for Merck."
The verdict is another big victory for Mr. Lanier, who was the winning lawyer in the Texas case. He handled the bulk of the arguments in this trial, including questioning of Raymond V. Gilmartin, Merck's former chief executive, last Thursday.
Before the punitive damages phase of the case began, Merck tried to prevent Mr. Lanier from taking part. In a hearing last week, Merck argued that Mr. Lanier had represented only Mr. Cona, and that because Mr. Cona was not awarded compensatory damages, he was ineligible for punitive damages.
But Mr. Gordon, Mr. McDarby's lawyer, responded that Mr. Lanier had handled questions about Merck's liability for both plaintiffs throughout the case and was the only lawyer prepared to cross-examine Merck's witnesses in the punitive phase. The judge agreed and allowed Mr. Lanier to participate.