Reporters Cover Merck Victory With Caution

Merck may have scored a victory in its second Vioxx trial this week. But business reporters kept the game in check for readers across the country.

A ruling by a New Jersey court held the drug giant not legally responsible for a plaintiff's heart attack. The plaintiff, Frederick Humeston, argued that his condition was directly related to taking Vioxx for two months.

Following a massive $253 million decision in favor of a Texas widow whose husband died after taking Vioxx (which is being appealed), Merck leveled the legal playing field a bit with this recent verdict. But with thousands of cases pending, a precedent is far from being set.

Three immediate questions come to mind for Aaron Smith, staff writer with CNN/Money:

• How does this decision impact Merck?
• What effect will it have on the company's legal strategy going forward?
• What effect does it have on company finances?

Attorneys for Merck said their strategy of relying on the science and medical evidence helped them prevail in the New Jersey case. It remains to be seen whether they use that approach in futures cases.

"I divide the cases into three categories -- Texas, New Jersey and federal -- because these court jurisdictions represent the largest clusters of lawsuits," Smith says. "Going forward I look chronologically at the next case (in each category) all at the same time. There's not much point in looking ahead further than that because the landscape changes with every verdict."

Smith says it's important to pay attention to the consolidation and organization of cases as verdicts are reached, because it is highly unlikely that 6,500+ cases will each be tried individually.

Merck's victory comes with a hefty price tag as well. Its legal coffers are being hit with each case it must defend. As with any major company, Merck has adequate financial arsenal for legal issues. But the magnitude of potential settlements is something journalists should keep an eye on.

"To Merck, the $675 million set aside for legal battles is peanuts, because the company had $22.9 billion in sales last year," Smith explains. "But reporters are always asking Merck whether the sum has increased, because they're trying to find out if Merck is spending more money to build up its legal armory."

Those on the outside looking in say the ultimate financial damage to the drug giant will take years to be fully realized.

"While Merck faces anywhere from $4 billion to $50 billion in liability from Vioxx claims, legal observers and financial analysts say it will take years for the true costs to emerge -- particularly if the pharmaceutical company continues its strategy of fighting virtually all of the more than 6,000 cases filed so far," pharmaceuticals reporter Jeff May writes in The Star-Ledger.

Sources such as legal observers and analysts helped provide punctuation marks to the verdict -- whether they are periods or question marks. Don't forget about the plaintiff's lawyer and attorneys in cases yet to be tried. Their reactions can offer a glimpse into how future cases will be pursued and the likely courtroom life of Vioxx cases.

Copyright © 2008 Donald W. Reynolds National Center for Business Journalism