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Big Pharma’s Bitter Pill

2 minute read
Daren Fonda

It was bad enough for Merck shareholders that the firm’s top drugs, Zocor and Fosamax, are going off patent over the next three years and that the pipeline looks thin. Now investors may have to stomach another bitter pill. A Texas jury last week awarded $253.5 million to the widow of a man who died after taking the painkiller Vioxx. In the first verdict reached in more than 4,000 liability cases involving the drug–which Merck recalled last year after studies indicated a possible link to heart failure–the award cast doubt on Merck’s strategy of fighting each case individually rather than seeking to have them rolled up in a class action. It is also likely to embolden members of the 1-800-Sue-Merck bar and may spawn more suits against Pfizer, the maker of a similar drug, Celebrex, still on the market.

If nothing else, analysts say, the verdict constitutes a stern rebuke to Big Pharma. Jurors heard plenty from the plaintiff’s lawyers about Merck’s aggressive sales and marketing tactics and about a corporate culture that, they claimed, prizes profits over honest science. Merck, however, is hardly alone in being accused of such things. Wyeth, for one, has set aside $21 billion to pay for claims stemming from fen-phen, its faulty diet-drug combo. Analysts estimate that Merck could be on the hook for more than $18 billion in Vioxx damages.

Merck investors may take comfort in the fact that jackpot jury awards are often reduced on appeal. Texas law caps punitive damages, and the final award probably won’t exceed $26.1 million. Merck not only plans to appeal in Texas but also has vowed to continue fighting each Vioxx claim individually. Ailing as it is, the firm is expected to generate $3.5 billion in cash this year. In other words, Merck isn’t going bankrupt tomorrow. Which is just what the trial lawyers like to hear. –By Daren Fonda

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