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Merck to Pay $4.85 Billion to Resolve Vioxx Claims
  By Jef Feeley and Shannon Pettypiece
Nov. 9 (Bloomberg) -- Merck & Co., the third-largest U.S. drugmaker, agreed to pay $4.85 billion to settle the majority of claims that it hid the health risks of its withdrawn painkiller Vioxx, the company said.
The agreement, the largest U.S. settlement this year, is aimed at resolving about 85 percent of the lawsuits filed over the drug, Merck officials said in a release. A settlement fund will be created with $4 billion for those who suffered heart attacks while taking the drug. Another $850 million will be set aside for those who suffered strokes, the company said.
``This is a good and responsible agreement that is sure to provide a significant degree of certainty,'' Richard T. Clark, Merck's chief executive officer, said on a conference call with analysts and investors this morning.
Merck pulled Vioxx off the market in 2004 after a study showed it raised the risk of heart attacks in some patients. The company is facing more than 26,500 lawsuits filed by former users who claim the drug caused strokes and heart attacks.
The company expects to record a fourth-quarter 2007 pretax charge of $4.85 billion to cover the cost of the agreement. Merck had $4.4 billion in profit last year.
`Bargain for Merck'
``In the big picture this is a bargain for Merck,'' said Michael Krensavage, an analyst with Raymond James and Associates in New York who estimates Merck was spending about $600 million a year in legal fees. ``The settlement is chump change compared to the initials fears that sent Merck shares into the $20 range.''
Until now, Merck had set aside about $1.8 billion to cover its Vioxx litigation costs while refusing to create a reserve for its potential liability.
Merck said in its statement that it wasn't admitting wrongdoing by agreeing to the settlement, which needs court approval.
Merck rose $1.60, or 2.9 percent, to $56.37 at 10:15 a.m. in New York Stock Exchange composite trading. The stock has gained 31 percent in the past 12 months making it the top performer in the 14-member Standard & Poor's 500 Pharmaceutical Index.
The drug's sales reached $2.5 billion in 2003. Merck trails Pfizer Inc. and Johnson & Johnson, the largest and second-largest drug companies.
Largest Settlement
The accord is the largest lawsuit settlement in the U.S. this year, according to data complied by Bloomberg. It also is among the largest settlements in U.S. legal history.
Rival drugmaker Wyeth has reserved more than $21 billion to resolve litigation over the withdrawn fen-phen diet combination.
Wyeth faced more than 150,000 claims over fen-phen, whose former users argued it damaged their hearts. Merck is facing fewer than 30,000 claims over Vioxx.
``They were having pretty good success in court so I didn't have a problem with them going at hand-to-hand combat and fighting one-to-one in court,'' said Jon Fisher, who helps manage $22 billion in shares, including Merck, at Fifth Third Asset Management in Minneapolis. ``I defer to Merck and their attorneys on this one.''
``It takes away uncertainty, but come Monday it will be forgotten about and sometime next year there will be another court case that comes up and people will remember this isn't all over with,'' he said.
Jury Trials
Merck has won 11 of 16 cases that have gone to a jury and hasn't paid any money in the cases it lost while it appeals those verdicts. Last month, a Florida jury said the company wasn't responsible for the heart attack of a former professional soccer player who took the painkiller.
Its latest loss was in March, when a New Jersey jury ordered the drugmaker to pay $47.5 million in damages to an Idaho postal carrier who had a heart attack while taking the drug.
Last year, another New Jersey jury awarded $13.5 million to John McDarby, 77, who took Vioxx for four years before suffering a heart attack in 2004. McDarby, a diabetic confined to a wheelchair, died recently before collecting any money.
His widow, Irma, denied an interview request through her attorney, Jerry Kristal. After the verdict, the jury's spokesman said the panel sought to ease his family's pain with their award.
``I wanted for him to at least know that the people taking care of him are being taken care of,'' Tim Kile, the jury's foreman, said after the verdict was handed down in April 2006. ``There's got to be some solace in that.''
`Right Thing'
Mark Lanier, a Houston-based lawyer who won the first Vioxx verdict against Merck in 2005, praised Merck's decision to offer a global resolution of the cases.
Lanier won a $253 million jury award against Merck over the drug on behalf of the family of a Texas man who suffered a fatal heart attack while taking the painkiller. That award later was reduced to about $26 million and is on appeal.
``This was simply the right thing to do, and we're grateful that the people at Merck recognized that it was the right thing to do,'' Lanier said in a statement.
Merck officials have ``done the calculations and found that buying certainty on these claims for $5 billion is the best way to go,'' said Michael Kelly, a Wilmington, Delaware-based lawyer who has represented other drugmakers in products-liability cases.
``This relieves them of the need to roll the dice anymore when it comes to these cases,'' Kelly added.
The case is In re Vioxx Products Liability Litigation, MDL 1657, U.S. District Court, Eastern District of Louisiana (New Orleans).
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