Merck's Vioxx Pain Lingers

Before Merck MRK yanked Vioxx off the market, nearly a third of the employees at Ricci Leopold -- a law firm now suing the company -- used the blockbuster painkiller themselves.

Senior partner Edward Ricci actually suffered chest pains just 10 days before the stunning drug recall. He had been taking Vioxx for 11 months to ease the pain caused by bone spurs in his left foot. He never knew the popular "super aspirin" posed cardiac risks until he saw a headline announcing the drug's withdrawal on Sept. 30.

"I was stunned," Ricci said. "I stopped taking the drug immediately."

He also telephoned his son-in-law at the high-profile law firm founded by David Boies. Boies had worked with the federal government on its big antitrust case against Microsoft MSFT. He had represented former Vice President Al Gore in litigation stemming from the 2000 Florida vote recount. He had successfully defended Lloyd's of London and other insurers in the World Trade Center trial.

To Ricci's surprise, however, Boies had already filed a class-action lawsuit against Merck and rival Pfizer PFE. (Like Vioxx, Pfizer's Celebrex has since been linked to heart attacks.) The Boies complaint accused both companies of concealing cardiac risks posed by their so-called COX-2 inhibitors for pain relief. The case was more than three years old.

Ricci now had a fresh reason to doubt that Merck -- under attack by such a prominent law firm -- was itself unaware of Vioxx's dangers until a few days before it yanked the drug. Still, Merck continued to maintain its innocence during testimony before the Senate as recently as November.

Merck CEO Raymond Gilmartin, who pocketed seven-figure annual bonuses during the painkiller's popular run, insisted that the company had done the right thing at the right time.

"Withdrawing Vioxx was consistent with an ethic that has driven Merck's actions and decisions for more than 100 years," Gilmartin stated. "Merck puts patients first."

But crowds of Vioxx users, lining up to sue Merck by the thousands, feel less than reassured. Instead, they see a company that rushed to protect one of its best-selling drugs instead of the consumers who risked their lives by taking it. Ranking fourth in company sales behind such blockbusters as Zocor, a cholesterol treatment facing patent expiration in 2006, Vioxx generated $2.5 billion in revenue last year. Before the recall, an estimated 10 million patients -- many coaxed by heavy advertising -- used Vioxx to treat their pain.

Medical experts believe that more than 100,000 people may have suffered cardiac problems as a result.

Now Merck faces serious side effects itself. Assuming just 28,000 Vioxx-related heart attacks -- a number deemed "very conservative" by Food and Drug Administration veteran David Graham -- Ricci believes the company could wind up shelling out nearly $10 billion in actual damages alone. And if Merck knowingly placed consumers at risk, he says, the company could find itself paying massive punitive damages as well.

"Then," he says, "it's anybody's guess what the high end of their exposure will be."

Merck's mishandling of Vioxx -- and how much company executives knew about the dangers of the drug and their decision to not only release it but promote it heavily to consumers -- may become one of the costliest calamities in American corporate history.

In a series of upcoming articles, TheStreet.com examines Merck's handling of Vioxx and the company's growing dependence on a drug that ultimately proved hazardous to consumers and to the giant drug maker itself.

Moreover, given the subsequent controversy that has blown up around the Cox 2 inhibitor class, the scandal looks like it is just beginning. Popular but dangerously old-fashioned ways of finding and marketing drugs are no longer working, leaving an entire industry in search of answers. The wounds inflicted on a distrusting public, meanwhile, might never fully heal.

Tale of Woe Merck gives back five-year gains...

...after fall 2004's plunge

Already, Merck has lost nearly $35 billion in market value as a result of the Vioxx scandal. The company's stock has traded in the low $30s since the news emerged. Near the end of 2000 -- Vioxx's first full year on the market -- Merck stock fetched more than $80 a share.