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U.S. Supreme Court to Decide on Allowing Vioxx Suits

Wed, 05/27/2009 - 4:31am
LINDA A. JOHNSON AP Business Writer The U.S. Supreme Court will decide whether shareholders can sue Merck & Co. over whether the drugmaker properly warned about the risks of its former blockbuster painkiller Vioxx before it was pulled from the market. The case could have implications for many securities lawsuits by examining the legal standards for determining exactly when the clock starts running for the two-year window to sue a company accused of defrauding investors. On Tuesday, the high court agreed to review Merck's challenge to a federal appeals court's reinstatement of a class-action securities lawsuit related to the tens of billions of dollars in shareholder value lost overnight after Merck pulled Vioxx off the market because it doubled risks of heart attack, stroke and death. Investors had accused Merck of providing misleading information or omitting information about the risks of Vioxx. A U.S. district judge dismissed the November 2003 lawsuit, ruling it was filed after the two-year statute of limitations expired, because the Food and Drug Administration had issued warnings to Merck about Vioxx risks late in September 2001. But the 3rd U.S. Circuit Court of Appeals then decided to allow the many shareholder lawsuits, now consolidated in federal court, to proceed. Merck appealed to the Supreme Court. The Whitehouse Station, N.J.-based company did not withdraw the drug from the market until Sept. 30, 2004. Sean Coffey, co-lead counsel for tens of thousands of Merck shareholders, said Tuesday the legal clock didn't start running until late October 2003, when investors saw the first published evidence that Merck's public reassurances to investors and the media that Vioxx was safe ran counter to what company executives and scientists were saying internally. "It's the earliest that investors had a reason to suspect there was the possibility that Merck was lying," Coffey said about what came to be known as the "naproxen hypothesis." After a widely publicized study comparing Vioxx to naproxen, another pain reliever, found about five times more heart attacks in the patient group taking Vioxx, Merck officials argued repeatedly that was because naproxen protected the heart. Experts have since dismissed that. Coffey said he wasn't surprised the Supreme Court chose this case for review in its term beginning Oct. 5 because lawyers for other clients raising statute of limitation issues had also petitioned the high court to hear their cases. "We are confident that the Supreme Court will affirm the decision" allowing the Merck shareholders' case to proceed, he said. In a statement, Merck said the company is pleased the Supreme Court agreed to hear its appeal and to resolve the split among the circuit courts in their rulings on what constitutes proper notice to investors under securities laws. "We believe that the District Court in this case correctly held that the intense public discussion of data surrounding Vioxx" had put investors on notice of the relevant issues long before Merck announced new scientific information and voluntarily withdrew Vioxx from the market, the statement said. "The evidence shows that Merck properly informed the (U.S. Food and Drug Administration) and the scientific community about scientific data as it emerged," Merck wrote. After it pulled Vioxx from the market, Merck was hit with a deluge of lawsuits from shareholders, patients and their survivors claiming Vioxx caused heart attacks and strokes, and from insurance plans seeking reimbursement for their costs for covering Vioxx prescriptions. Merck is currently making payments to patients and survivors under a $4.85 billion settlement that ends lawsuits on behalf of roughly 50,000 patients who claimed Vioxx harmed them.
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