Merck’s Vioxx Strategy Paying Off

Merck's strategy of not paying off on Vioxx court cases is paying off not only for the company but for the executives who devised the plan to try every suit brought against the company. Even in the cases it loses, the victims' families will not see a penny for years.

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In fact, none of the 45,000 people who have sued Merck, contending that they or their loved ones suffered heart attacks or strokes after taking Vioxx, have received payments from the company. The lawsuits continue, for now in a state of legal limbo, with little prospect of resolution.

In combating the litigation, Merck has made an aggressive, and so far successful, bet that forcing plaintiffs to trial will reduce the number of Vioxx lawsuits and, ultimately, its liability.

Promising to contest every case, Merck has spent more than $1 billion over the last three years in legal fees. It has refused, at least publicly, to consider even the possibility of an overall settlement to resolve all the lawsuits at once.

The strategy’s successes, from the view of Merck and its shareholders, are clear. In the last year, the company has won most of Vioxx cases that have reached juries. Though its stock plunged immediately after the Robert Ernst verdict, it has since risen 80 percent, easily outpacing those of other big drug makers. And estimates of Merck’s ultimate liability, once as high as $25 billion, are now closer to $5 billion, said C. Anthony Butler of Lehman Brothers.