Wednesday, December 12, 2007
An article on cnn.com -- Merck recalls kids' vaccine -- discusses Merck's recall of 1.2 million doses of child Hib vaccine, because of contamination risks and possibility of infection. The article also summarizes Merck's status in light of the proposed Vioxx settlement:
While the company took a black eye with its September 2004 withdrawal of the painkiller Vioxx due to increased risk of heart attacks and strokes, Merck has been performing well recently. On Tuesday, it gave an upbeat assessment in its annual briefing for analysts.
Five weeks ago, Merck reached a deal to settle up to 50,000 Vioxx lawsuits for $4.85 billion, an amount expected to save the company millions in trial costs.
Its stock price has more than recovered from its post-Vioxx slump, a two-year-old restructuring plan is going well and profits are up. For example, Merck posted a 62 percent increase in its third-quarter profit as revenues jumped by double digits
Tuesday, December 4, 2007
Jennifer Wolsing, an associate at Blackwell Sanders in St. Louis, has posted a working paper to SSRN -- The Vioxx Litigation: Disincenting Good Corporate Citizenship Through Misdirected Tort Rules. Here's the abstract:
Though many believe that the tort system incents manufacturers to promote and manufacture their products safely, the Vioxx litigation proves that, in fact, the tort system functions as a disincentive against manufacturer transparency, scientific curiosity, and public safety. This Article examines the differences between Merck's liability for the pain reliever Vioxx and Pfizer's liability for its competing pain reliever, Celebrex. It concludes that the reason for Merck's increased product liability arises from its diligent efforts to protect the public. When Merck published studies examining Vioxx's cardiovascular safety, Merck provided plaintiffs with a wealth of data. By voluntarily withdrawing Vioxx, Merck alerted lawyers and potential plaintiffs to Vioxx's potential for harm. This Article examines several solutions to these perverse incentives, including FDA preemption at the state and federal level, the pending FDA Revitalization Act and FACT Act, Wagner's Burden-Shifting Proposal, and two market-based solutions. The Article concludes with its own market-based solution, which encourages the rapid release of study data and attempts to mitigate the red flag effect that occurs when a manufacturer voluntarily withdraws a potentially dangerous product.
Monday, December 3, 2007
Today’s National Law Journal reports "Vioxx Pact Isn’t the End—It’s a Beginning," (subscription required) and notes the number of foreign suits in Germany, Israel, and London. Here’s an excerpt:
While touted AS a virtual end to Vioxx litigation, the recent $4.85 billion settlement struck by Merck & Co. Inc. to resolve products liability claims does not get the pharmaceutical giant out of the woods. In reality, a number of lawsuits are still pending against Merck in both state and federal courts around the country. Other pending Vioxx actions include: suits brought by attorneys general in four states to recover Medicaid funds they paid for the drug; third-payor lawsuits filed by insurance companies; securities class actions brought against the directors on behalf of shareholders; and stock loss class actions on behalf of Merck's employees and unions. Houston-based plaintiffs' attorney Mark Lanier -- who has tried three major Vioxx cases in the United States -- noted that there are also foreign cases being filed in Germany, Israel and London. Lanier, of the W. Mark Lanier Law Firm in Houston, is a consultant on the German cases and estimates there could be several thousand.
If that wasn't enough, the settlement, which includes attorney fees, must be approved by 85% of stroke and heart attack victims -- and that's hardly a done deal.
Tuesday, November 20, 2007
Excellent FindLaw column today by Tony Sebok and Ben Zipursky -- Getting With the Program: The Vioxx Settlement Agreement. One of their central points is that Vioxx plaintiffs need advice to decide whether to accept the Merck settlement offer, but it is hard for clients to trust their lawyers' advice when the lawyers have already agreed to recommend the settlement to every client.
Friday, November 16, 2007
Article in the Wall Street Journal -- Vioxx Plaintiffs' Choice: Settle or Lose Their Lawyer, by Nathan Koppel. Here's an excerpt:
Plaintiffs in litigation over the painkiller Vioxx are supposed to be able to decide whether to enroll in the übersettlement announced last week or take their cases to court. But due in part to what lawyers say is an unusual provision in the settlement agreement, many plaintiffs in effect may have little choice but to accept the deal.
The provision, agreed to by Merck & Co. and the lead lawyers in the case, requires that if one client of an attorney enrolls in the settlement, then the attorney must recommend the deal to all other clients. If a client decides not to take part in the settlement, then the lawyer, according to the deal, must take "all necessary steps" to withdraw from representing that client. It is relatively rare for a settlement to require lawyers to cut ties with clients, but it appears to be happening more often, lawyers say.
Some find the development problematic. The provision improperly "stacks the choice for the client," says Deborah Rhode, an ethics professor at Stanford Law School. "If the price of exercising what should be their right to reject the settlement means they have to forfeit their representation from the lawyer actually familiar with the case, it's not exactly an uncoerced choice."
Merck pulled the widely used painkiller Vioxx from the market in September 2004 because it was tied to a higher risk of heart attack and stroke. Thousands of lawsuits ensued, and after three years, Merck and the lead plaintiffs lawyers negotiated a $4.85 billion settlement, announced Friday.
Tuesday, November 13, 2007
That was fast. Mealey's is hosting a conference on the Vioxx settlement at the Ritz-Carlton in New Orleans on Dec. 10-11, 2007. Plaintiffs' lawyers only. According to the Mealey's marketing e-mail, the speakers include a number of the plaintiff-side negotiators and other key players, including Andy Birchfield, Edward Blizzard, Thomas Girardi, Mark Lanier, Arnold Levin, and Chris Seeger.
You can bet plaintiffs' lawyers deciding whether to recommend the Merck settlement to their clients will ask a lot of questions about claimant eligibility and compensation, as well as about their own legal fees. I hope that some of them push hard, as well, on the professional responsibility issues raised by the deal, such as how to provide clients with enough information to obtain informed consent as required by the aggregate settlement rule, and whether it would be ethical to abandon any client at this point in the litigation if the client chooses -- as is each client's absolute right -- to decline the settlement offer. Comments on legal ethics issues raised by the deal may be found in my earlier post on implications of the Vioxx settlement, as well as at the WSJ Law Blog, Pharmalot, and Point of Law.
Saturday, November 10, 2007
What does the Vioxx settlement tell us about mass tort strategy, procedure, and ethics? Merck's mass aggregate settlement, which weighs in at $4.85 billion and up to 47,000 plaintiffs, matters not only to its many participants, but also to anyone interested in understanding how mass tort litigation works.
THE PARTICIPANTS. Before turning to the deal's broader implications, let's talk about its significance to the five major sets of participants -- Merck, plaintiffs, plaintiffs' counsel, judges, and defense counsel. Assuming the settlement goes through (the deal is subject to several conditions, including an 85% walkaway clause), it's happy news for most of them.
- For Merck, the settlement allows the company to take its hit, slash its litigation expenses, limit its remaining exposure, and get back to business. That's why Merck's stock was up sharply yesterday despite a down day in the market. The first time I saw a stock price go up after a company announced a massive settlement, I found it odd (this is, after all, a multi-billion dollar expense); now I expect it.
- For most plaintiffs, the settlement provides compensation rather than the delay and uncertainty of litigation. Many participating plaintiffs will be disappointed with the amount of compensation they receive, but that's the nature of settlement. It's a compromise.
- For participating plaintiffs' counsel, the settlement offers a signficant payday after several years of unpaid Vioxx work and significant expenditure of resources. It also offers lawyers the chance to get out of Vioxx and to move on to the next mass tort or other litigation opportunity. And for the lawyers involved in negotiating the deal, such as Russ Herman, Chris Seeger, Andy Birchfield, and Arnold Levin, yesterday's announcement represents a satisfying accomplishment and the sort of attention-generating event that cannot be bad for business.
- For the judges -- particularly Judges Eldon Fallon (overseeing the MDL in E.D. La.), Carol Higbee (NJ), Victoria Chaney (CA), and Randy Wilson (TX) -- the settlement clears away a huge number of docket-clogging cases. For some of the judges, the settlement also reflect a personal victory, a professional accomplishment, and, one hopes, a sense of getting justice done. Judge Fallon, in particular, had announced early on in the litigation his desire to drive the parties toward a large-scale settlement. To whatever extent he may have experienced Merck's ongoing refusal to settle as a source of frustration and embarrassment, yesterday's announcement surely brought relief, satisfaction, and some vindication of his handling of the litigation.
- Of the major participants, the only apparent losers are Merck's outside counsel, who lose an important revenue stream. But that's taking an unnecessarily grudging view of defense counsel's position. For lead counsel Theodore Mayer of Hughes Hubbard & Reed, a settlement like this caps an overall successful defense strategy, and for other lawyers involved in negotiating the deal, including Doug Marvin of Williams & Connolly, John Beisner of O'Melveny & Myers, and Adam Hoeflich of Bartlitt Beck, the deal represents a professional accomplishment and a business-generating news event. A satisfied client is always good news. Except perhaps for local defense counsel, who experience a loss in revenue from upcoming trials that won't happen, but who may get little attention or client gratitude.
STRATEGY. Nearly all the commentary on the settlement emphasizes the success of Merck's defense strategy in the VIoxx litigation, with lots of comments suggesting that future mass tort defendants should take a page from Merck's playbook. I agree that the settlement reflects the culmination of a successful strategy for Merck, but before assuming the same thing will work for other defendants, you have to look at the confluence of factors that made the strategy work in Vioxx.
Merck took an aggressive approach, fighting each case individually. This strategy had three main components: refusing to settle either wholesale or retail, opposing trial aggregation, and pouring resources into litigating each individual case on the merits. Although early on Merck suggested that it would settle cases involving over 18 months exposure, it quickly backed off and pursued a strong no-settlement strategy. On aggregation, Merck accepted and even embraced aggregated pretrial handling (MDL and statewide consolidations), but staunchly resisted class certification and any form of joint trial. And in each plaintiff's case, Merck fought hard on specific causation and every other contestable issue. Merck could have settled many of those cases more cheaply than going to trial, but by refusing to settle Merck sent a powerful message to plaintiffs' counsel: there's no easy money to be had here.
The no-settlement, individual-trial strategy worked in the Vioxx litigation because several critical factors came together:
- First, Vioxx was off the market. This is often the case, as product recalls are a common triggering event for mass tort litigation, but not always. Plenty of mass tort litigation involves products that remain available. Think Zyprexa, Oxycontin, tobacco, guns. And lots of other mass tort litigation involves products that, while no longer on the market, present an ongoing risk of exposure -- lead paint, asbestos, certain medical devices. Because Vioxx was no longer available, Merck did not have to worry about a never-ending stream of potential plaintiffs, and could get some finality with a mass aggregate settlement. Also, with the product off the market, Merck could focus on litigation strategy without worrying about protecting the Vioxx brand and its ongoing prescribability by physicians, in contrast with, for example, Eli Lilly's position on Zyprexa.
- Second, Vioxx did not raise significant problems of latent disease. In some mass torts, such as asbestos and tobacco, latency creates enormous settlement difficulties. How can a defendant get peace without binding future claimants? This was the driving factor behind the Amchem and Ortiz asbestos settlement class actions, and an important cause of their failure. It was the primary reason for the multiple back-end opt-outs in the fen-phen nationwide settlement class action, which later proved so problematic. When I worked on the American College of Trial Lawyers Mass Tort Litigation Manual, asbestos and fen-phen were front and center, and we took time-dispersed disease manifestation as a defining characteristic of mass torts. So did Richard Nagareda in Mass Torts in a World of Settlement. Vioxx, by contrast, did not involve such significant latency problems. Latency was a disputed issue in the litigation, but the settlement reflects a willingness on the part of plaintiffs' counsel to let go of claims by persons who experience heart attacks or strokes long after their exposure to Vioxx. This, combined with the fact that Vioxx was off the market, and the statute of limitations, allowed Merck to seek peace in the litigation without worrying much about future claimants.
- Third, Merck had stronger individual defenses than general defenses. Like tobacco defendants, who always try to focus attention on the individual smoker, Merck focused on each individual plaintiff. In the case of tobacco, it's more about personal responsibility; with Vioxx, it's all about individual causation. Compare this with Bendectin, silicone gel breast implants, or Agent Orange, where the defendants had strong scientific defenses on general causation. In Bendectin, Merrell favored (and won) a mass aggregated trial in which it could present its scientific argument on general causation without the jury hearing from individual plaintiffs. Merck did not think it had a strong enough chance to defeat liability on a wholesale basis to be worth the risk, so it preferred to take a series of wins and losses in individual trials.
- Fourth, the issues were sufficiently individualized that Merck was able to defeat efforts at class certification and mass trials. On class certification, Vioxx is no different from most other mass tort personal injury cases (and post-CAFA, defendants have even greater confidence that mass tort class cert will usually be denied), but it differs markedly from other types of mass litigation. Aside from class cert, Merck was able to avoid large-scale joint trials. Even Judge Higbee's relatively modest effort at a ten-plaintiff consolidated trial in New Jersey fizzled. In other mass torts, even if defendants defeat class cert, they won't always have Merck's success at avoiding large multi-plaintiff trials.
- Fifth, and most important, Merck mostly won. That's because individual causation was hard for Vioxx plaintiffs to prove. Heart attacks and strokes are common. They are especially common among older people, who were Vioxx's primary consumers. So it's hard to show by a preponderance of the evidence that a particular person's heart attack or stroke was caused by Vioxx. Compare this with mesothelioma and asbestos, or PPH and fen-phen, or lung cancer and tobacco, or rhabdo and Baycol. Because of the difficulty establishing specific causation, Merck was able to win most of the individual cases that went to trial. Defense wins drive down settlement values, pure and simple. Had Merck lost several more of the individual trials, it would have cost a lot more than $4.85 billion to settle this.
Without this confluence of factors, Merck's no-settlement, no-aggregation, try-every-case strategy could easily have backfired. That's why in the future some mass tort defendants will continue to settle cases individually, others will seek early wholesale settlements whether by settlement class action or by non-class aggregate settlement, and others may even seek mass adjudication.
PROCEDURE. The Vioxx litigation shows the successful use of informal bellwether trials to drive a mass aggregate settlement. As a matter of procedural policy, the Vioxx litigation and settlement show mass tort litigation functioning reasonably well, as Byron Stier points out. There have, of course, been enormous litigation costs, unpredictable and inconsistent results along the way, and a fair amount of unseemly forum-shopping and forum-fighting, but that's par for the course in mass tort litigation. More significantly, look at what worked. The vast majority of cases were consolidated, at least for pretrial handling, in a small number of courts. Most of the cases were before Judge Higbee in New Jersey (cases were filed disproportionately in Merck's home state to make them non-removable under 28 U.S.C. 1441(b)); many others were before Judge Fallon in the multidistrict litigation, as well as in large statewide consolidations in California and Texas. Class certification was appropriately rejected; these cases are too individualized to be suitable for representative litigation that binds non-parties. Nor did courts employ formal bellwethers, in the sense of trials from which binding results could be extrapolated for other parties. Rather, Judges Fallon, Higbee and others used informal bellwether trials. That is, they scheduled cases for trial on steady basis, trying to get a range of representative cases, with the goal not only of resolving those particular actions but of providing enough data points to allow the parties to reach a widespread settlement. It worked.
ETHICS. Despite viewing the settlement mostly as good news for the participants and the litigation system, I have some concerns. Mass aggregate settlements always raise troubling ethical issues, and this one is no exception.
Here's the good news, ethically speaking. The parties seem to understand clearly that acceptance of the settlement is up to the clients, not the lawyers, and that any participating plaintiff must give informed consent after adequate disclosure. Also, the parties were wise to include a walkaway provision. The deal is conditioned upon acceptance by 85% of the plaintiffs (actually, 85% of each of a number of plaintiff groups). This provides Merck with adequate assurance of peace, while providing a safety valve so that not every plaintiff need accept the deal. As I've commented before, all-or-nothing settlements are much more troubling than those with walkaway provisions.
Now the bad news. The deal contains a term that requires each participating lawyer to recommend the settlement to 100% of the lawyer's eligible clients (paragraph 220.127.116.11 of the Settlement Agreement). That's troubling. A lawyer's duty of loyalty to each client cannot be bargained away to an adverse party. Some Vioxx plaintiffs' lawyers represent hundreds or thousands of clients, and even if the lawyer thinks the settlement's terms are generally fair, that does not necessarily mean that acceptance is the right decision for each individual client.
Worse, the deal requires that any participating lawyer withdraw from representing any client who declines the settlement (paragraph 18.104.22.168) . That's really troubling. It makes it nearly impossible for a client to say no. The paragraph tries to avoid ethical impropriety by adding "to the extent permitted by the equivalents to Rules 1.16 and 5.6 of the ABA Model Rules of Professional Conduct." Withdrawing from the representation of clients under these circumstances may well violate both RPC 1.16 and RPC 5.6, but with this term in the Settlement Agreement, it is unrealistic to expect any of the plaintiffs' lawyers to continue representing Vioxx claimants.
In a mass settlement, lawyers ideally should be able to say to their clients: "Here's the settlement we negotiated with the defendant. Here are all the terms and conditions of the deal, and here's where you fit in. I think it's a good deal, and I recommend that you accept it. But you're the client, and it's your call. And if you decide not to accept the settlement, I'll be right by your side and continue to represent you."
Compromise is one thing. The lawyer-client relationship is another. The problem, of course, is that in mass aggregate settlements, the interests of the defendant, plaintiffs' counsel, and judges align, and don't necessarily correspond with the interests of individual plaintiffs. Merck, with its $4.85 billion, expects to buy not only peace from tens of thousands of plaintiffs, but also peace from the law firms that have been the biggest thorns in its side. The challenge, which the Vioxx settlement only partly surmounts, is to craft a settlement that accommodates the interests of the parties without unduly interfering with the lawyer's core duty of loyalty.
Friday, November 9, 2007
According to an article by Aaron Smith on cnn.com, Merck has agreed to settle pending Vioxx claims for a total of $4.85 billion. The settlement is being accomplished not as a class action, but as merely an offer of settlement to individual plaintiffs, provided they can show "1) objective medical proof of either a heart attack of ischemic stroke; (2) documented receipt of at least 30 Vioxx pills; and (3) receipt of pills in sufficient number and proximity to the event to support a presumption that the patient was still taking the pills within 14 days before the heart attack or stroke." See Legal Pad with Roger Parloff. If 85% of the plaintiffs in each of the strongest categories do not accept the settlement, then the offer is void.
In my opinion, this is how mass tort litigation should work. Science triggers the lawsuits. The litigants fight individual cases and in so doing establish a market for the value of claims. That narrows litigants expectations about how much their claims are worth, and makes easier the resolution of claims by far-reaching settlement. Along the way, tort and procedural goals are satisfied -- multiple juries provide a better assessment of claim value than any one potentially outlier jury in a class action could do; both plaintiffs and defendants are able to present all of their individualized arguments in cases (unlike a class action); litigants retain their autonomy to either press to trial (day in court) or seek settlement; and ultimately the far-reaching settlement leads to vastly reduced transaction costs for society and a lessening of the burdens for courts.
Here, Merck's $4.85 billion settlement, large as it seems, is far less than the threat of bankruptcy that was discussed when Vioxx was taken off the market. (Cnn.com reports that some analysts put the Vioxx damages at $30 billion.) Indeed, Merck's shares rose today. All of this is because Merck went to the individual cases and was successful in winning, thus driving down the value of all pending claims. It also waited to settle until the statute of limitations had run after its withdrawal of Vioxx (there is no long latency period alleged for the injuries), thus avoiding the flood of claims that can be triggered when word gets around that a defendant is settling.
Of course, we'll have to see if 85% of plaintiffs do in fact sign up for this settlement. But likely Merck negotiated this settlement behind the scenes with the top plaintiffs lawyers who represent the majority of claimants. (The difficult ethics of the plaintiffs' lawyers in negotiating such mass settlements for differently situated Vioxx clients is a topic for another day.)
It appears to be a tour de force performance for Merck throughout the litigation, which Merck seemed to recognize in July when it promoted its general counsel Ken Frazier to president for global human health.
Sunday, October 7, 2007
Drug and Device Law Blog has posts on Tort Reform Works in Texas; Notes from the Scientific Underground; Preemption Scorecards; The Vanishing Trial; and Riegel Survives.
Food Law Prof Blog has posts on Cargill meat recall based on e.coli; Bush signs FDA Amendments Act of 2007; More on the Recall Process; CRS Report on Recall Authority; Roberts on Role of Regulation in Minimizing; Thinking About Recalls; and Yet another meat recall -- this one enough for one picnic.
Point of Law has posts on Refik Kozic v. Merck; Absurd RI lead abatement plan developed;
"Defendants See a Case of Diagnosing for Dollars"; and Zyprexa protective order enforcement VI: Egilman settlement.
Torts Prof Blog has posts on Topps Meat Recall: Let the Filing Begin; 9/11 Opt-Outers Settle; Lead Everywhere; Stent Safety and Patents; USSC Denies Cert In Engle (Tobacco) Case; FDA Warns Against Use of Cold Meds by Toddlers; and Sebok's Part II on NJ Supreme Court's Vioxx Ruling.
October 7, 2007 in 9/11, Class Actions, E Coli, FDA, Lead Paint, Mass Tort Scholarship, Medical Devices - Misc., Pharmaceuticals - Misc., Tobacco, Vioxx, Zyprexa | Permalink | Comments (0) | TrackBack (0)
Sunday, September 30, 2007
Civil Procedure Law Prof has a post on Jennifer Wolsing's article, Daubert's Erie Problem.
Food Law Prof Blog has a post on meat recalls increasing (with link to Marlerblog).
Health Law Prof Blog has a post on the FDA and Clinical Trials.
Products Liability Prof Blog has several interesting posts: Senators Brown and Casey Introduce the Food and Product Responsibility Act of 2007; CPSC Announces Massive Crib Recall with Simplicity, Inc.; Mattel Issues Apology to China Over Recalls; and Rhode Island Wants $2.4 Billion for Lead Paint Cleanup.
Tuesday, September 18, 2007
Article in the Wall Street Journal -- New York Sues Merck Over Vioxx: State and City Bring Suit, Seek Restitution of Funds Spent Through Medicaid, by Heather Won Tesoriero. Here's an excerpt:
New York state and New York City have jointly sued Merck & Co. for allegedly concealing safety information about Vioxx, joining a half-dozen states that have sued the drug maker since it withdrew the painkiller three years ago amid concerns about dangerous side effects.
The complaint, brought by the offices of Attorney General Andrew Cuomo and Mayor Michael Bloomberg, seeks restitution for tens of millions of dollars allegedly spent on Vioxx through Medicaid and a prescription-drug assistance program for the elderly between 1999 and 2004. States develop lists of preferred drugs that they will pay for, and New York officials might have chosen cheaper alternatives to Vioxx had its risks been known earlier.
When asked about the timing of the suit, Jeffrey Lerner, director of communications for Mr. Cuomo, said, "One of the priorities for this AG, who has been in office only 10 months, is to focus on Medicaid fraud."
The complaint alleges that "Merck tried to distort each negative disclosure about Vioxx. Merck cherry-picked outcomes from its own research, omitting material information that would have communicated Vioxx's real cardiovascular dangers."
Thursday, September 13, 2007
Drug and Device Law Blog discusses in detail the recent New Jersey Supreme Court Operating Engineers opinion, decertifying a third-party-payer, consumer fraud class involving Vioxx.
Food Law Prof Blog has a post on the FDA Statement on the Strategic Framework Document on Import Safety.
Thursday, September 6, 2007
The New Jersey Supreme Court today ruled in favor of Merck in the appeal of the third-party payor class action involving Vioxx. Here is the court's opinion in International Union of Operating Engineers Local No. 68 Welfare Fund v. Merck & Co., reversing the Appellate Division and holding class certification improper on grounds of predominance and superiority.
Tuesday, September 4, 2007
Judge Fallon, who is presiding over the Vioxx MDL in Louisiana, issued an order on August 14 resolving the ongoing and onerous privilege disputes in those cases through sampling. The procedure is very innovative (this may be the first time it has ever been done). As Judge Fallon points out in his opinion, the enormity of discovery disputes in the electronic age requires innovative techniques. I suspect we'll be seeing more use of sampling in discovery the future. You can access a pdf of the Judge's carefully crafted order here. One interesting thing to note: the sampling was not random. Instead, the Special Master, and subsequently the court, reviewed a sample consisting of 2,000 documents chosen by Merck (and a smaller sample of 600 documents chosen by plaintiffs).
Friday, August 31, 2007
Article on cnn.com -- Merck's post-Vioxx comeback, by Aaron Smith. Here's an excerpt:
When the Vioxx lawsuits started piling up, analysts projected, on average, some $30 billion in potential legal liabilities. But three years later, Merck hasn't paid a penny to anyone blaming Vioxx for their heart attacks.
The company has won 10 of the 15 lawsuits filed against it and has appealed all the cases it lost.
"They're winning 65 percent of the cases," said Joseph Tooley, analyst for A.G. Edwards. "When it's all said and done, I think the ultimate liability is going to be a much more manageable number than was originally anticipated."
But Merck still faces nearly 27,000 more cases. That hardly seems like cause for celebration.
Nonetheless, Ken Frazier, the company's lead counsel throughout the Vioxx debacle, has forged a simple legal strategy that analysts say has helped Merck escape major damage. He has refused, from the beginning, to consider any kind of mass settlement and has instead vowed to fight the cases one at a time.
"Their strategy in fighting every case and being very clear about it, and telling the whole world they were going to fight every case, was a brilliant strategy. Merck is, of course, in a much better position to defend itself than individual plaintiffs trying to take on this organized effort," said Bryan Liang, professor of health law studies at the California Western School of Law in San Diego.
Analysts believe this case-by-case strategy prevented some lawsuits from opportunists looking for an easy cash-out to ever make it to trial. So far, 4,650 plaintiffs have been dismissed, according to Kent Jarrell, the spokesman for Merck's outside counsel.
"Our core strategy has been examining individual cases," said Jarrell. "The approach is working. We've seen thousands of cases dismissed because the cases, on closer examination, weren't backed by facts."
The next Vioxx trial is scheduled for Sept. 17 in Florida Circuit Court in Hillsborough County.
A couple of thoughts in reaction -- First, the strategy of holding off settlement is only working for Merck because Merck is winning the individual cases. If Merck continued to lose case after case, the number of cases filed would likely increase, and the jury awards would add significantly to Merck's already-burdensome defense costs. Second, I would generally disagree with the implication of Professor Liang's comments about Merck being in a "much better position" to defend itself in individual cases, compared to plaintiffs. In modern mass tort litigation, not only do most plaintiffs' law firms invest in hundreds or thousands of cases for a product, but the plaintiffs firms generally work with other firms and use information technology to share information, pool resources, and coordinate strategy. As has been remarked, the situation is no longer "David versus Goliath" between the plaintiff and defense counsel in mass tort litigation, but "Goliath versus Goliath." That is a good thing, because it means that representation is more likely to be equal in individual litigation.
Thursday, August 23, 2007
According to an article in today's Star-Ledger, New Jersey Judge Carol Higbee has met with lawyers to propose a plan to move Vioxx trials more quickly. Under her plan, four judges would preside over simultaneous trials, each involving multiple plaintiffs. Here's an excerpt:
In an effort to move the sheer volume of lawsuits, Judge Carol Higbee is proposing four simultaneous trials at the courthouse. Each trial would involve multiple plaintiffs from New Jersey, New York and Pennsylvania. Under the plan, which has been discussed in conference meetings between Higbee and lawyers involved in the cases, three other judges would be assigned to preside over the additional trials. All four trials are scheduled to begin Jan. 22 at the Atlantic City courthouse.
Merck has consistently opposed joint trials in the Vioxx litigation, insisting that the issues are too individualized to permit a fair trial with multiple plaintiffs. Merck's defense attorney Theodore Mayer of Hughes Hubbard & Reed was quoted in the article as saying, "We feel very strongly that justice in each case should not be affected by the large number of cases." Simultaneous separate trials presumably would not present the same problem, but the inclusion of multiple plaintiffs in each trial would.
This news comes on the heels of an article in the New York Times two days ago (see Byron Stier's prior post) pointing out that despite a number of plaintiff verdicts, no Vioxx plaintiff has yet been paid by Merck. With tens of thousands of Vioxx suits in the pipeline and with lengthy appeals from every judgment, plaintiffs could wait years for trial and, if successful, much longer for payment.
In this light, it's interesting to think about Merck's strategy. Merck steadfastly refuses to settle Vioxx cases, preferring to pay massive legal fees to litigate each case individually. It is reminiscent of the litigation strategy of the tobacco industry from 1954 to 1994. The tobacco defendants, however, knew that they could win virtually every case, in part by vastly outspending and outlawyering the opposition. That's not the case with Vioxx. Merck faces capable opposition with substantial resources to invest in the litigation. Trial outcomes have gone both ways. But that does not mean that Merck's strategy is wrong. To the contrary, it appears to have been a highly successful strategy of lowering settlement values.
It still seems likely, despite Merck's avowed disinterest, that the endgame will be some form of collective settlement. By avoiding class actions or joint trials, by declining to settle early, and by litigating each individual case to the hilt, Merck has improved its bargaining position. Its strategy forces plaintiffs' lawyers to think hard about which prospective clients' cases are worth pursuing, and undoubtedly has discouraged some lawyers from investing their time and resources in the litigation. When the hardball strategy reaches a point of diminishing returns, and as litigation costs continue to mount, it may make sense for Merck to seek a settlement or series of settlements. When the cost of litigating exceeds the cost of settling, a defendant can justify the expense only as long as it reaps a substantial strategic benefit, such as discouraging plaintiffs from piling on early in the litigation.
In the meantime, the judicial system cannot work on the assumption that an aggregate settlement is in the offing. The judges have to move forward with trying these cases, while respecting the individual issues. Judge Higbee's reported plan of simultaneous trials seems to be a reasonable step in that direction.
Tuesday, August 21, 2007
Interesting article in the New York Times -- Plaintiffs Find Payday Elusive in Vioxx Cases, by Alex Berenson. Thanks to Evan Anziska for pointing the article out. Here's an excerpt:
[N]one of the 45,000 people who have sued Merck, contending that they or their loved ones suffered heart attacks or strokes after taking Vioxx, have received payments from the company. The lawsuits continue, for now in a state of legal limbo, with little prospect of resolution.
In combating the litigation, Merck has made an aggressive, and so far successful, bet that forcing plaintiffs to trial will reduce the number of Vioxx lawsuits and, ultimately, its liability.
Promising to contest every case, Merck has spent more than $1 billion over the last three years in legal fees. It has refused, at least publicly, to consider even the possibility of an overall settlement to resolve all the lawsuits at once.
The strategy’s successes, from the view of Merck and its shareholders, are clear. In the last year, the company has won most of Vioxx cases that have reached juries. Though its stock plunged immediately after the Robert Ernst verdict, it has since risen 80 percent, easily outpacing those of other big drug makers. And estimates of Merck’s ultimate liability, once as high as $25 billion, are now closer to $5 billion, said C. Anthony Butler of Lehman Brothers.
The article also features several comments from Professor Peter Schuck of Yale Law School.
Friday, July 27, 2007
Post on the Wall Street Journal Health Blog -- Merck’s Vioxx Warrior Gets Promoted, by Jacob Goldstein. Here's an excerpt:
Frazier, 52, has won points among Merck defenders for his tell-it-to-the-judge style. He hasn’t settled any of the roughly 27,000 Vioxx lawsuits filed against the company following the withdrawal of the pain medicine. So far, the company has won 10 cases and lost five.
Frazier’s replacement as general counsel is Bruce Kuhlik, who joined the company in 2005 to help deal with the Vioxx litigation. He previously worked for PhRMA, the drug industry trade group.
Monday, July 23, 2007
Article on cnn.com -- Merck soars on high profits, outlook: Profits grew 12 percent, helped by higher sales of new vaccines, medicines, by Reuters. Here's an excerpt:
Merck & Co. said Monday that quarterly earnings rose 12 percent on strong demand for its newer vaccines and medicines, and raised its 2007 profit forecast, sending its shares up nearly 8 percent.
Merck (up $3.97 to $52.99, Charts, Fortune 500) shares jumped 7.8 percent in heavy midday trading on the New York Stock Exchange after it revealed second-quarter net income rose to $1.68 billion, or 77 cents per share, from $1.5 billion, or 69 cents per share, a year earlier.
The latest results include the impact of setting aside another $210 million for legal fees associated with litigation involving the company's Vioxx arthritis drug. Merck is facing about 27,000 lawsuits filed by people who claim to have been harmed by the widely used pill, which was withdrawn in 2004 after being linked to heart attacks.