Merck agrees to $4.85B settlement over pain medication Vioxx

Merck & Co. said Friday it will pay $4.85

billion to end thousands of state and federal lawsuits over its

painkiller Vioxx in one of the largest drug settlements ever.

Company officials estimated the deal, if accepted, would end

45,000 to 50,000 personal injury lawsuits involving U.S. Vioxx

users who suffered a heart attack or ischemic stroke, the type in

which blood flow to the brain is blocked.

"Without this settlement, the litigation might very well

stretch on for years," Merck executive vice president Kenneth

Frazier said during a conference call.

He called the agreement "responsible and reasonable" and

allows Merck to better quantify its liability, once estimated as

high as $50 billion.

Negotiating teams met more than 50 times in eight states and

spoke hundreds of times by telephone over many months to hammer out

the deal, according to attorneys.

"I'm very happy with it," said Chris Seeger, one of the six

plaintiff lawyers who helped negotiate the settlement. "It's a

tremendous way to resolve this litigation."

Merck pulled Vioxx from the market Sept. 30, 2004 after its

researchers determined the blockbuster arthritis treatment, then

pulling in about $2.5 billion a year, doubled risk of heart attacks

and strokes.

To qualify for a settlement, plaintiffs must have filed claims

by Thursday and meet several criteria, including medical proof that

they suffered a heart attack or stroke, that they received at least

30 Vioxx pills and that they received enough pills to support a

presumption that they were ingested within two weeks before injury.

That is a big concession by Merck, which has long claimed that

Vioxx caused harm only after 18 months of use. Those claims were

dismissed by independent scientists and plaintiffs lawyers.

Merck stressed that the agreement is not a class action

settlement and that it is not admitting fault.

Company executives and attorneys said as recently as last month

that every case would be fought individually.

But on Friday, they said several factors made this "the right

time" for the deal, including the expiration of the statute of

limitations in 42 states.

Merck said it will take a pretax charge for the full $4.85

billion in the current quarter. It would not say whether insurance

will cover any of that, but said much of the charge will be tax


Analyst Steve Brozak of WBB Securities called Merck's handling

of the litigation "a Harvard casebook study of how to deal with a

problematic product."

Investors seemed to agree, as Merck shares ended up $1.13, or

2.1 percent, to $55.90 - trading near their 52-week high of $58.36.

After losing its first case in a $253 million verdict that was

later sharply reduced, Merck has won a string of civil cases. It

has won 10 of 15 court verdicts to date. Some of those cases will

be excluded from the settlement, but appeals in others continue.

The company said last month it had added $70 million to its

reserves for defending lawsuits. As of Sept. 30, Merck had reserved

a total of $1.92 billion for legal expenses and spent a total of

$1.2 billion.

The deal becomes binding only if 85 percent of the plaintiffs in

key categories agree to the deal: all pending heart attack and

ischmic stroke cases, all cases involving deaths and all cases

alleging more than 12 months of Vioxx use.

"I'm not in the least bit of doubt that we'll do it," said

Russ Herman, a New Orleans attorney who served as chairman of the

plaintiffs negotiating committee. "This was a really, really tough

litigation for both sides; this way you have some certainty."

The deal was finalized in the early morning hours after

attorneys for Merck and the plaintiffs met with three of the four

judges overseeing nearly all Vioxx claims.

Seeger said the deal was put in motion last December when three

key judges pushed the parties to open out-of-court talks.

"Every claimant is going to be compensated" once their claim

is validated, he said.

Seeger said this deal is larger that the original settlement in

cross-state rival Wyeth's diet drug litigation, which was $3.75

billion initially but ballooned past $20 billion with repeated


Merck lawyers said they had closely scrutinized that and other

cases to find ways to ensure that its settlement does not exceed

the $4.85 billion, of which $4 billion will go to heart attack

claimants and the rest to stroke claimants.

Among other things, potential claimants will have to have prior

medical documentation of a heart attack or stroke, and they will

not be able to later opt out of the settlement. Also, all law firms

involved in the "steering committees" directing pretrial

discovery and other coordination of both state and federal cases

must get every one of their clients to settle.

Payments would vary, depending on severity of injuries, length

of time that Vioxx was used and each person's risk factors for

cardiovascular disease. A complex system would assign points to

each claimant. Payments could start as early as August 2008.

Lawyers fees are to come out of the $4.85 billion fund, based on

the percentage in their contingency agreements with clients;

additional fees will go to the law firms that together amassed more

than 50 million pages of documents for use by all plaintiffs'


Attorneys for both sides presented the deal Friday morning to

U.S. District Judge Eldon E. Fallon in New Orleans.

A total of about 60,000 personal injury cases have been filed,

including thousands on hold under agreements suspending the statute

of limitations, plus about 265 potential class action cases, some

of which allege shareholder losses.

The deal does not include people in foreign countries, any with

different injuries, any with stock-related claims or a group with

no evident injuries that is suing for Merck to pay for medical



Settlement agreement and related documents:



Associated Press writers Michael Kunzelman in New Orleans, Jeff

Gold in Newark, N.J., and Phillip Rawls in Montgomery, Ala.,

contributed to this story.