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Merck to Settle Vioxx Lawsuits

Updated from 8:27 a.m. EST

Merck (MRK - Get Report) said Friday morning that it will settle the Vioxx product liability lawsuits filed against it in the U.S. for $4.85 billion. In reaction, shares were rising $2.75, or 5%, to $57.52 in recent trading.

The company will pay the fixed amount into two settlement funds for qualifying claims that enter the resolution process -- $4 billion into a fund for heart attack claims and $850 million for ischemic stroke claims. Merck pulled Vioxx from the market in the fall of 2004 after a study revealed increased rates of heart attack and stroke in patients being treated with the arthritis-pain drug.

Ben Zipursky, a Fordham Law School professor and an expert in product liability law, noted that despite it being a big settlement, it's far less than many estimates of potential liability and the savings on litigation alone are significant. But Zipursky also speculated, "It remains an open question whether it will ultimately be approved, because Merck and the plaintiffs' lawyers will almost certainly be subjected to strong attacks by third parties intervening to challenge the agreement."

As of Oct. 9, Merck was a defendant in some 26,600 Vioxx-related lawsuits, which included about 47,000 plaintiff groups, alleging personal injuries resulting from the use of the drug. The company had also been named in roughly 264 suits seeking class-action status.

Merck had long said it would fight each case individually, so the settlement comes as something of a surprise. In the cases that have gone to trial and been decided thus far, juries have sided with Merck 12 times and in plaintiffs' favor five times.

One Merck verdict was set aside by the court and has not been retried. Another Merck verdict was set aside and retried, leading to one of the five plaintiff verdicts. There have been two unresolved mistrials.

Merck's defense record thus far in the Vioxx litigation may be why the drugmaker was able to negotiate to a much lower-than-speculated number, and thus decided to settle.

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