PHARMA: Brutal news for Merck

The jury in the first Vioxx trial has found Merck liable for the death of the patient by arrhythmia. Merck had to fight this one as it didn’t even seem to be the kind of heart disease that those people who did get heart disease in the VIGOR and other studies died from.  But they lost, and the jury awarded $253.4m.  Where they got the .4 from I’m not sure, but that’s a hell of a lot of punitive damages.  Guess that "Dodgeball" memo was pretty expensive in the end.

So if you play out the math there are an alleged 56,000 deaths from Vioxx. So if every 4 death’s costs Merck  $1 billion, then they owe some 14 trillion dollars.  That somewhat exceeds the gross national income of the country, so perhaps this amount might be reduced on appeal!

Mrk1yr But either way the recovery that Merck stock’s had since Vioxx was pulled last year is absolutely over for now. And it’ll probably be headed lower than today’s close (as usual wish that I’d bought some put options as they were expiring today!)

Here’s today’s action. Mrktoday Not exactly pretty.

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7 replies »

  1. //what Merck themselves estimated they’d earn by lying//
    Thank you so much for putting it those words!

  2. They’re punitive damages. They are intended NOT to compensate the victim for having suffered, but to punish the company for lying.
    In this case, the jury apparently chose to punish Merck by the amount Merck estimated it would earn in profits by refusing to label the drug as heart-dangerous.
    You can consider the sum outrageous, but it’s what Merck themselves estimated they’d earn by lying. The jury simply said “well, ya should have told the truth. As punishment, we’re taking the money you earned by lying.” I think that’s perfectly defensible.
    Merck doesn’t have to raise its prices to avoid judgments like this. It just has to stop lying. Shareholders should really demand nothing less.

  3. I don’t think such awards are stupid: corporations don’t have an incentive to change for anything less than large numbers. I don’t think of these sorts of awards as any sort of compensation (after all, what can compensate for the loss of a loved one or life-changing disability), but rather as the only way society can convince corporations that lying, stonewalling, and generally treating “people who don’t matter” poorly is a bad, bad, bad idea.
    When the average person on the streets gets on the corporate side and starts decrying large punitive damages, they are shooting themselves in the foot. Yes, a business’s costs do factor into shareholder value and pricing – but prices would rise infinitely anyway without various other types of market controls (from public regulation to the customer going someplace cheaper). On the other hand, what’s the risk of paying a few more cents to the risk that one day *you* might be the victim of a corporation’s sleazy block-and-tackle practices? Every time we as a society help the corporation get off the hook, we don’t just short-change the victim – we contribute to a situation where nothing at all stops corporations from covering up their misdeeds and merely blowing off their victims. There is no conscience left in society – only the hope that an expensive legal judgment will give corporations the incentive to not destroy people.
    Just keep in mind that today holocausts are not something that hasve to be actively conspired: they’re something people have to work every day to keep at bay.

  4. This is crazy. A couple just got a $15 million award because the doctor could not save their child with a really rare disorder when they arrived at the ER. The doctor only had a couple of hours and he couldn’t figure out what was wrong. But this award is a perfect example of stupidity. Now the cost of all Rx will have to go up to accumulate funds for potential lawsuits.
    All Rx can be dangerous. Same as any surgery. We should have some limit on liability on each dead person caused by a medical mistake, say $10 million, increasing annually with the Consumer Price Index (CPI). I don’t care if the dead person makes $10 million a year like Warren Buffett or some basketball player. This would limit liability and malpractice insurance passed on to the masses who end up paying the cost anyway. Who cares what the will of the jury is or how they can be brainwashed by some slick lawyer.

  5. Wasn’t the Bush administration pushing to shield drug markers from liability for ANYTHING that the FDA approves?
    Tort reform will certainly have a hand in ensuring that the will of the jury won’t be realized in this case:
    “The award…is likely to be drastically reduced to no more than $26.1 million because Texas law caps punitive damages…The jury, which voted 10-2 in favor of Ernst, awarded $450,000 in economic damages for Robert Ernst’s lost pay, $24 million for mental anguish and loss of companionship and $229 million in punitive damages… But state law caps punitive damages at twice the amount of economic damages and up to $750,000 on top of noneconomic damages, which are comprised of mental anguish and loss of companionship.”

  6. Victims triumph against Dodgeball, woo hoo!!!!
    Now if only corporations would get the message that plain dealing and an apology is ultimately cheaper than Cover Ups and Issues Management.