Saturday, January 16, 2016

Merck Finally Settles 2004 Era Securities Litigation -- Surrounding Vioxx® Disclosures -- For $830 Million

When Merck was unable to get the various securities class action complaints dismissed in the federal District Court, in 2013, it became (in my mind, at least) just a matter of time, before the corporate officers in Kenilworth (back then, though, Whitehouse Station) would forge a settlement deal -- on the last truly material remaining exposure related to the Vioxx® alleged non-disclosures, in the SEC '34 Act reports.

That day came yesterday. A portion of the $830 million is covered by insurance, but Merck had long ago applied all its own financial statement reserves to the payment of the civil governmental claims, for improper reimbursement, and personal injuries -- all without admitting wrongdoing. Well, except for that one criminal misdemeanor, related to its illegal marketing tactics. Here's an excellent round-up, from -- do go read it all:

. . . .The decade-long fallout from Vioxx involved thousands of lawsuits, nearly two dozen personal-injury trials, months of secret negotiations with plaintiffs' lawyers, a criminal investigation and a series of legal settlements.

"For Merck and Merck shareholders, the worst is behind them," said Erik Gordon, a professor at the University of Michigan's business and law schools. "There still are cases left and Merck can't ignore them, and there is some risk. But I don't think they're going to be facing another round of billion-dollar settlements. Merck hasn't closed the book but they can finally allow themselves a sigh of relief."

Approved by the U.S. Food and Drug Administration in 1999, Vioxx became Merck's third-largest-selling drug by 2003, generating $2.5 billion in annual sales. The company pulled the painkiller in 2004 after a study found it posed an increased risk of heart attacks and strokes.

Merck paid $4.85 billion to settle thousands of patient lawsuits claiming injuries, and another $1.9 billion for legal costs. It also paid $950 million, and a unit pleaded guilty to a criminal misdemeanor charge related to the illegal marketing of Vioxx. That settlement included a $321.6 million criminal fine and $628.3 million to resolve civil claims that it sold Vioxx for unapproved uses and made false statements about its cardiovascular safety.

A judge ruled in 2011 in federal court in Newark that the shareholders could pursue claims that Merck misled them about a 2000 study reporting that the medicine caused five times more heart attacks than another painkiller, naproxen.

The company still faces individual securities suits over Vioxx from investors who opted out of the class-action case certified by the judge in January 2013. . . .

While it is probably worthwhile to note that the earlier settlements, coupled to this one, bring the bar-tab here to over $8.5 billion -- from just this debacle, I think it is good that Merck has finally cleared the decks of all the legacy overhangs. Onward, on a bright -- but crisp and cooling -- Saturday! Workout time. . . .

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