The pharmaceutical powerhouse enjoys a shot in the arm to its stock after putting its Vioxx litigation to rest. Now it can focus on bringing new drugs to marketOn Nov. 9 pharmaceutical giant Merck (MRK) said it would pay $4.85 billion to settle 27,000 lawsuits over its drug Vioxx, a painkiller pulled from the market in 2004 after it was linked to heart attacks and strokes. The company had once vowed to fight each suit separately, but it's no surprise Merck opted for a settlement now. It had prevailed in an impressive 10 of 15 rulings so far, likely giving it leverage to negotiate with plaintiffs' lawyers. And this deal let Merck focus on an ongoing turnaround effort, without the cloud of perpetual Vioxx litigation.
Unlike the $3.75 billion settlement reached in 1999 for Fen-Phen, the American Home Products diet pill that was linked to heart-valve disease, the Vioxx arrangement largely shields Merck from future claims related to Vioxx. Plaintiffs wishing to dip into the $4.85 billion will have to prove they had strokes or heart attacks, and that those ailments occurred around the time they were taking Vioxx. Once they opt in, they can't decide to opt out later and bring separate suits against Merck. And Merck has the right to bring claimants to court if the company feels they haven't met the burden of proof. "They guarded themselves against future hemorrhaging," says Jami Rubin, an analyst for Morgan Stanley (MS). "I think this will set the new standard for how to handle product liability suits."
Transformation Effort
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