Soham Posted August 19, 2005 Share Posted August 19, 2005 Aug. 19 (Bloomberg) -- Merck & Co. must pay more than $253 million to the family of a Texas man who died after taking the company's Vioxx painkiller, a jury ruled in the first personal-injury case over the drug to come to trial. Jurors deliberated more than 10 hours in Angleton, Texas, before awarding $24.4 million in actual damages and $229 million in punitive damages to the family of Robert Ernst. Merck, based in Whitehouse Station, New Jersey, said it will appeal. Shares of the company, the third-largest U.S. drugmaker, fell to a six-month low. ``It certainly will encourage more people to sue,'' Les Funtleyder, a health strategist at Miller Tabak & Co., said in a telephone interview. ``This is going to be a decade-long process. It's probably going to make Merck reserve more money.'' The Ernst family's lawyers argued that Merck rushed Vioxx to market without proper safety testing to compete with Pfizer Inc.'s Celebrex, then played down potential heart risks. Ernst, a 59-year-old marathoner and personal trainer, died in his sleep in 2001 after taking the drug for eight months for tendinitis. His autopsy blamed an irregular heartbeat. ``The jury saw the truth in black and white,'' said Mark Lanier, lead attorney for widow Carol Ernst. He said he has hundreds of other cases pending against Merck, which withdrew Vioxx in September after studies linked it to an increased risk of heart attacks and strokes. ``We're going to pound them again,'' Lanier said. Ten of 12 jurors voted for the verdict, the number needed for a court decision in Texas. The jury award is the seventh- largest of 2005, according to data compiled by Bloomberg. ``This has been my run for Bob,'' Carol Ernst said. The couple was married for less than a year. ``It's hard to put yourself in this position but I know it's been well worth doing.'' Excessive Damages The award will probably be reduced, said Sheila Birnbaum, head of the mass torts litigation group at Skadden Arps Slate Meagher & Flom. Texas law caps punitive damages to twice actual damages. The U.S. Supreme Court has ruled that punitive damages should usually be limited to nine times actual damages. ``The punitive damages are probably unconstitutionally excessive,'' Birnbaum said. Lanier said the award was based on the profits that Merck would have lost had it changed the label on Vioxx in 2000 to reflect potential side effects. Analysts also saw grounds for an appeal. Morgan Stanley Managing Director Jami Rubin, in a research note to clients, cited ``substantial errors'' in the case. Chris Shibutani, analyst at JPMorgan Securities, called the Merck share drop an ``overreaction.'' ``Even Lanier is conceding that'' the decision won't stand, said Sigurd Sorenson, head of the products liability group at Clifford Chance in New York. Merck shares fell $2.35, or 7.7 percent, to $28.06 in New York Stock Exchange composite trading, the lowest close since Feb. 1. The stock has declined 38 percent in the past year, the worst performance in the 13-member Standard & Poor's 500 Pharmaceuticals Index. The award ``seems extraordinarily extreme,'' said Eric Richter, who helps manage about $700 million at North Star Asset Management in Menasha, Wisconsin, including Merck shares. Thousands of Suits Merck is gearing up to defend itself against thousands of other injury claims by Vioxx users. The drug was used by 20 million people. A trial begins next month in Atlantic City, New Jersey, over a former Marine's claims that Vioxx caused his heart attack. The Vioxx litigation is hindering efforts by Merck Chief Executive Officer Richard Clark to turn around the company after replacing Raymond Gilmartin on May 5. Merck, once the world's largest drugmaker, reported its eighth straight decline in quarterly earnings July 21 and faces the loss of patent protection on its two biggest drugs by 2008. Merck has set aside $675 million to fight Vioxx suits and deal with any related liability. Merck shares have fallen about a third since Vioxx was withdrawn, cutting the company's market value by about $30 billion. The drug generated $2.5 billion in sales last year, about 11 percent of Merck's total. The extra yield, or spread, investors demand to buy Merck's 4.375 percent note due in 2013 instead of comparable U.S. Treasury debt widened about 10 basis points to 74 basis points, according to Trace, the bond-price reporting system of NASD. A basis point is 0.01 percentage point. Spreads widen when investors demand more yield to compensate for increased risk. Merck lost its perfect investment-grade credit ratings in November because the Vioxx withdrawal was expected to cut revenue and increase litigation risks. The company has $5.2 billion of bonds outstanding, according to Bloomberg data. `Strong Appeal' Merck denied any link between Vioxx and Ernst's death during the trial. There is no evidence that Vioxx can cause an irregular heartbeat and the case didn't call for punitive damages, Merck said. The company said it has several grounds for appeal, including the plaintiffs' use of testimony from unqualified experts. ``We have strong points to raise on appeal and are hopeful that the appeals process will correct the verdict,'' Kenneth Frazier, Merck's general counsel, said in a statement. ``There are other Vioxx cases coming to trial and we will vigorously defend them one by one.'' Company officials testified that Vioxx underwent rigorous testing before it was introduced and showed no links to heart attacks in 58 studies. Merck officials pulled the drug off the market after a later study showed users faced an increased risk of heart attacks and strokes. Further research has raised questions about the risks of all such painkillers, which are classified as Cox-2 inhibitors. The case is Ernst, et. al. v. Merck & Co. Inc., No. 19961- BH02, District Court of Brazoria County, Texas. Source Link to comment Share on other sites More sharing options...
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