Merck Loses in Texas

Updated from 2:53 p.m.

A Texas jury handed Merck (MRK) a big setback in the first civil lawsuit over its Vioxx painkiller.

The jury in Angleton, Texas, ruled after deliberating the case for two days that Merck was negligent in its marketing of the drug and liable for the death of a 59-year-old man. The jury awarded the plaintiffs more than $200 million in damages. Merck said it would appeal, but shares of the big New Jersey drug firm dropped 7% on news of the damage award.

The jury had been weighing Carol Ernst's complaint that Vioxx caused the death of her husband, Robert, who took the drug for eight months to alleviate pain in his hands. He died suddenly in 2001. Carol Ernst claims that Merck knew Vioxx posed cardiovascular risks many years before the company pulled the drug from the market.

Jurors awarded Ernst $253.4 million in damages, The Associated Press reported, reflecting a combination of his lost pay as a Wal-Mart produce manager, mental anguish, loss of companionship and punitive damages. In Texas, punitive damages are capped at twice the amount of economic damages -- lost pay -- and up to $750,000 on top of non-economic damages, which are composed of mental anguish and loss of companionship.

Plaintiffs lawyer Mark Lanier predicted the loss would be the first of many for Merck, which faces many other suits on the Vioxx link to heart problems.

"I've got several thousand other clients," Lanier said in an interview on CNBC. "What happened with Merck is a crime."

Merck didn't agree.

"We believe that the plaintiff did not meet the standard set by Texas law to prove Vioxx caused Mr. Ernst's death," Merck lawyers said in a press release. "There is no reliable scientific evidence that shows Vioxx causes cardiac arrhythmias, which an autopsy showed was the cause of Mr. Ernst's death, along with coronary atherosclerosis."

Merck added that the case "did not call for punitive damages," saying the company "acted responsibly -- from researching Vioxx prior to approval in clinical trials involving almost 10,000 patients -- to monitoring the medicine while it was on the market -- to voluntarily withdrawing the medicine when it did."

"There are other Vioxx cases coming to trial and we will vigorously defend them one by one over the coming years," Merck said.

Even so, the jury verdict gave investors the jitters. Although Merck has established a $675 million reserve to finance legal defense costs, it hasn't established a reserve for potential damages. Analysts' estimates on Merck's Vioxx litigation costs range from $4 billion to $55 billion.

Merck is a defendant in 120 lawsuits seeking class-action status. The next state court case could start next month in New Jersey, and the first federal trial is expected to start in November in New Orleans.

Merck also is a defendant in a number of lawsuits alleging securities law violations in relation to its handling of Vioxx, and it's a defendant in some cases alleging violations of laws governing retirement savings plans. Plaintiffs outside the U.S. have filed Vioxx-related suits, too.

Merck says it withdrew the drug only after clinical trials showed that people who took the drug for more than 18 months had a higher risk of heart attack and stroke than did people receiving a placebo.

In February, a Food and Drug Administration advisory committee voted 17-15 that Vioxx could be returned to the U.S. market under certain restrictions for some patients. The FDA and Merck are discussing the matter, though the drug giant says it hasn't decided whether to revive Vioxx.

In July, a panel of medical advisers to the Canadian government recommended by a 12-1 vote that Vioxx be reinstated with certain restrictions. Merck plans to discuss the matter with Canada's health department.

On Friday, Merck fell $2.22 to $28.26.

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