Vioxx pact vindicates Merck legal strategy

By Martha Graybow - Analysis

NEW YORK (Reuters) - For Merck & Co, the $4.85 billion proposed settlement of Vioxx litigation is a big pill to swallow, but the payout could have been a lot higher if not for the company's successful and aggressive legal strategy.

From the start, the drug maker said it would fight lawsuits filed by thousands of users of its withdrawn painkiller Vioxx one by one rather than enter into a broad group settlement.

Vioxx was pulled from the market in 2004 after a study found it increased heart attack and stroke risks in some users.

Merck's decision to agree to a wide pact is a shift in strategy, but legal experts say it is unsurprising that the company would want to try to put an end to the distracting and costly litigation. They say that the amount to be paid is much lower than what was originally projected.

The $4.85 billion "seems like an enormous amount of money," said Susan Dwyer, a partner at law firm Herrick Feinstein who defends companies in product liability cases but is not involved in Vioxx suits.

However, she said, "It is minuscule compared with what they would have paid had they tried to put an agreement in place like this at the outset."

The settlement could cover as many as 50,000 former Vioxx users, it is estimated, which would mean payouts of less than $100,000 each before lawyers' fees.

When Vioxx was first withdrawn, experts said that the company could ultimately have to pay users as much as $20 billion, in line with what rival Wyeth has had to pay to users of its "fen-phen" diet medicines, which were recalled in 1997.

In the past three years, Merck has won 11 Vioxx court cases and lost five, giving it leverage with some plaintiffs who have seen these cases are not easy to win, lawyers say. Merck has appealed the cases it lost and has succeeded in getting some other pending cases dropped before trial.

LOST FIRST CASE

Merck lost the first Vioxx case to go to trial in the summer of 2005, when a Texas jury awarded $253.5 million to the widow of a man who died from a heart attack after taking the drug. That verdict, which the company has appealed, later was lowered to $26.1 million.

The plaintiff's lawyer in that case, Mark Lanier, who also represents other Vioxx users, said on Friday that he has not yet spoken to his clients about the settlement but would recommend that they accept it.

For plaintiffs' lawyers, the pact could be lucrative. Experts say lawyers who bring product liability cases often can get as much as 30 percent to 40 percent of any settlement paid to their clients.

Since the first trial, Merck went on to rack up several victories in other Vioxx cases. Even in trials that Merck has lost, it has not yet paid any plaintiffs because it is appealing.

Still, it is unclear how many Vioxx plaintiffs will choose to participate in the settlement. If many opt out, that could scuttle the deal.