When is losing $4.85 billion considered a victory?
When you’re the pharmaceuticals giant Merck, now facing 27,000 lawsuits related to its product Vioxx.
Recall that in 2004 a study found that the widely prescribed and hugely profitable painkiller could elevate the risk of heart attacks. Worse, internal communications revealed that Merck was itself worried about such a possibility. The company quickly pulled the pill off the market – but too late.
At no point, it must be stressed, was Merck’s good faith called into question; that is, no one accused it of cutting corners in the development of the drug or of a coverup when questions were raised.
Neverthless, the trial lawyers pounced, recruiting 47,000 potential plaintiffs. Estimates of Merck’s potential liability ranged as high as $50 billion.
But Merck was steadfast, vowing to fight each and every suit.
And the strategy’s largely worked:
After losing a $253 million verdict in its initial case, Merck has since won most of the follow-on cases. “Moreover,” The Wall Street Journal notes, “Merck ha[s] won four of the five cases considered to be bellwether suits for future trials.”
Litigants have generally been unable to prove the painkiller’s cardiac risk was any greater than standard, over-the-counter medicine.
Sensing that the pots of gold they’d envisioned might be turning to lead, trial lawyers have thus agreed to settle for just a fraction of their predicted payouts.
Litigants’ compensation will be determined by the length of time they took Vioxx, and after attorneys’ fees, it could average as little as $50,000.
Resolving this helps clear up Merck’s legal bills – now averaging $600 million a year. But a $5 billion hit does have its consequences.
For starters, $5 billion is about what Merck spends each year on research and development. This means potentially less medical innovation and, ultimately, less life-saving technology.
For another, these litigation costs could find their way into the prices of existing drugs, thus driving health-care costs higher.
It’s also important to remember that Vioxx helped many more than it hurt. More than a few arthritis victims have complained that Vioxx’s replacement, Celebrex, is less effective.
But with 27,000 litigation lotto tickets in circulation, it could have been worse.
Much worse.