Rossputin.com Rational Thinking About Our World

see "Merck Told to Pay $253 Million in Vioxx User's Death" (Bloomberg News, 8/19/05)
http://www.bloomberg.com/apps/news?pid=10000087&sid=aVKhvQfHI_fY

There's no real way to make today's court ruling against Merck sound like good news for the company, with the verdict and penalties coming in harsher than almost any analyst predicted.

The only solace Merck can take tonight is that the Texas Supreme Court will almost certainly lower the penalties. But that solace won't last long. The fact that Merck could lose a case which should probably not even have been allowed to take place must give them serious cause for concern given the several thousand other known plaintiffs out there and the many, many more still unknown.

When I say this case should not have been allowed, it is because the Vioxx issue is increased risk of heart attacks. But the man who died, Robert Ernst, did not die of a heart attack. He died of an arrhythmia, an irregular heartbeat, which might or might not have been caused by heart damage from a heart attack. Any connection to a heart attack was certainly not proven in this case and there is no evidence of Vioxx causing arrhythmia.

In fact, Mr. Ernst also had atherosclerosis, hardening of the arteries, which could easily have been the cause of a heart attack or heart damage leading to arrhythmia and death.

Bottom line: If this were a criminal case where guilt needed to be proven beyond a reasonable doubt, Merck would likely have won. But in a civil case where jurors see a corporation as a big wallet, all bets are off.

News outlets are making a big deal of the jury being primarily Republican, meaning that they came down "hard on crime" instead of going after the evil capitalist corporation. But no matter what their political position, their desire to "send a message" to Merck simply should not be allowed on the basis of the facts in this case.

Given what I have read I believe Merck does have some serious liability given their actions following learning that Vioxx could increase the risk of heart attacks. They at least appear to have gone out of their way to avoid disclosure of the information. In fact, the extra risk of heart attack while noticeable in percentage terms was still an incredibly small number. I don't have the numbers in front of me, but let me give you an example: if the number of Vioxx users who had heart attacks was 3 in 10,000 and the control group was 1 in 10,000 then the rate of heart attacks was 3 times higher in Vioxx users...but still only .03%.

Given the true size of the risk, it would have been much smarter for Merck to come forward early on with this information and let people make their own decisions. As it is, they have put themselves in a terrible legal position, likely costing their shareholders billions of dollars over the next decade. And when Merck tries to argue that the risks of Vioxx were still incredibly low compared to its massive benefits for many users, nobody will listen because people now think they (Merck, not Vioxx users) are liars.

I believe Merck will have substantial success appealing this particular case but that they will lose many other cases which will have less basis for appeal. I wouldn't want to own this stock for many years to come.

But, for the record, I still take Vioxx. I bought a ton of it while it was on the market because I have a kind of arthritis for which no prior medicine had brought me adequate relief. For me Vioxx is a wonder drug and I have no fear about its possible coronary risks, in large part because I have no other risk factors.

I'm sure many others would have felt the same way, had Merck only given them the chance.