November 3, 2005: 12:42 PM EST
By Aaron Smith, CNN/Money staff writer
NEW YORK (CNN/Money) – Merck & Co. was found not liable by a New Jersey jury Thursday in the second lawsuit over its former blockbuster painkiller and arthritis drug Vioxx.
The jury found that Merck did not fail to warn consumers about the safety of Vioxx, was not guilty of fraud, did not misrepresent the cardiovascular risks of Vioxx while marketing it to physicians, and did not conceal information about the drug.
“Merck is satisfied with the jury verdict,” said Kenneth Frazier, senior vice president and general counsel for Merck. “There will be other Vioxx trials and we will vigorously defend them one by one over the coming years.”
Plaintiff Frederick Humeston, a 60-year-old Vietnam veteran and postal carrier from Boise, Idaho, suffered a heart attack in 2001. Humeston, who was taking Vioxx for a work injury to his right knee and a wartime shrapnel wound in his left knee, blamed Vioxx for causing the blood clot that led to his heart attack.
Humeston, represented by attorney Chris Seeger, sued Merck in New Jersey Superior Court in Atlantic City. Judge Carol Higbee presided. Merck is based in Whitehouse Station, N.J., and about 2,750 of the cases against the company have been filed in its home state.
Seeger was not immediately available for comment. Jim McHugh, a lawyer from the Beasely Firm who is representing about 400 of the New Jersey plaintiffs, accused Merck of escaping liability by treating Humeston as if was lying on the stand and by presenting a witness, Briggs Morrison, vice president of Merck Research Labs, who changed his testimony.
“The only reason that the jury could come back with this not liable verdict is because of the dirty tactics used by Merck,” said McHugh, who plans to file a total of 2,000 cases against Merck by next year. “They impuned this plaintiff’s character. They attacked [Humeston] as if he was a political candidate.”
The verdict in New Jersey Superior Court in Atlantic City is the first Vioxx-related victory for Merck (up $1.23 to $29.64, Research), the nation’s second-largest drug maker. The drug giant was found liable in its first case, a wrongful death suit in Superior Court in Angleton, Texas.
The plaintiff in that case, Carol Ernst, was awarded $253 million by the jury for the 2001 death of her husband, a Vioxx patient — though her lawyer, Mark Lanier, said she will probably receive $26 million plus interest because the jury award exceeded what is allowed by Texas law.
Merck faces about 6,400 lawsuits over the arthritis painkiller that it pulled from the market in September 2004 after a study showed an increased risk of heart attacks and strokes in patients who used Vioxx for at least 18 months.
About 2,900 of the other cases have been consolidated in federal court under Judge Eldon Fallon. Litigation in those cases will begin Nov. 28. The federal trials were originally slated for New Orleans, but after the city was ravaged by Hurricane Katrina, they were moved to Houston.
No strategy change seen
Merck had more to lose than gain from the Humeston trial, analysts said, though the drug maker was considered unlikely to change its legal strategy even in the event of a second loss. The company and its lawyers have insisted that Vioxx never caused anyone’s heart attack and denied accusations that Merck concealed negative information about the drug.
“I would say that Merck’s been so adamant in its position that I would be extremely surprised if they change their position after only two cases,” said Barbara Ryan, analyst for Deutsche Bank North America, prior to the verdict.
Ryan said the victory would be a “modest positive for the stock, modest because they have 6,000 cases behind this one.”
David Moskowitz, analyst for Friedman, Billings & Ramsey, also projected, in a report published prior to the verdict, that a positive verdict for Merck would result in a modest rise in stock price.
“We believe this decision is only worth $1 to $2 in upside to Merck, as this case was known to be relatively weak,” wrote Moskowitz on Wednesday, referring to the possibility of a “not liable” verdict.
Shares of Merck rose six percent in NYSE trading after the verdict.
Unless Merck decides to settle, which is has vowed not to do, the Vioxx battle is far from over. Back in May, Judge Fallon said the tally of federal lawsuits could eventually reach 100,000.
Based on this projection, Moskowitz, the analyst for Friedman, Billings, Ramsey & Co, estimated that total product liability from Vioxx could total $50 billion. This is largest damage estimate so far related to Vioxx.
Two other drug companies suffered multi-billion dollar damages when their products were held liable for serious health problems. In these cases, potential damages were dampened by bankruptcy or settlement:
Back in 1999, when drug maker Wyeth (up $0.67 to $44.74, Research) was called American Home Products, the company agreed to pay a $3.75 billion settlement. That sum went to thousands of people who used the company’s diet drugs before they were linked to heart disease and taken off the market in 1997.
Also in 1999, Dow Corning Corp. was ordered by a federal bankruptcy judge to pay $3.2 billion to 170,000 women who had health problems stemming from the company’s silicone breast implants. Dow was ordered to pay an additional $1.3 billion to settle claims from creditors and health care organizations.
