Merck Executives Finally Succumb to Vioxx Pressure-Or Do They?
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Finally, three years after withdrawing its pain medication Vioxx from the market, Merck announced today that it will pay $4.85 billion to settle 27,000 lawsuits by people who believe they or their family members suffered injury or died after taking the drug. The settlement, one of the largest ever in civil litigation, comes after nearly 20 Vioxx civil trials over the last two years from New Jersey to California.
In 2005, most Wall Street analysts estimated that Merck’s ultimate liability in Vioxx would be between $10 billion and $25 billion after plaintiffs announced that they would file lawsuits against Merck. Merck stunned just about everyone in the industry by not settling and announcing that it would fight each Vioxx lawsuit one-by-one. In hindsight, this was a brilliant legal strategy. As you may recall, Merck’s stock price plummeted to the mid $20s shortly after the Vioxx scandal broke. After Merck implemented its legal strategy–and won a few lawsuits after a crushing initial defeat–its stock price began to steadily rise. Merck's stock closed yesterday at almost $55 per share–it is up about 5% today in early trading.
Although one of the largest ever, the settlement payment represents less than one year’s profits for the company. The agreement is far smaller than Wall Street analysts and lawyers predicted when Merck withdrew Vioxx, and especially after the verdict in the first case. By agreeing to settle, Merck will be able to get past the Vioxx debacle and also sharply reduce its Vioxx-related legal defense fees, which are now running at more than $600 million annually.
I must admit that I was one of the many who thought that Merck was making a big mistake by not settling all of the Vioxx lawsuits. It just goes to show you that some of these well paid pharmaceutical executives actually know what they are doing.
Maybe that's why Merck is still hiring and its competitors’ are not?????
Until next time….
Good Luck and Good Job Hunting!!!!!!!!!
