A Precedent is Set

On Friday afternoon of last week, a Texas jury set a precedent that sent waves through the boardrooms of drug companies everywhere.

Merck & Company was found liable — to the tune of a $253.4 M settlement — in the death of a man in his sleep who had been taking Vioxx, a popular but now-recalled drug, for about eight months.

The jury’s decision in this civil wrongful death suit was made swiftly — just over 24 hours after deliberations began.

While Merck had set aside $675 M to cover the legal bills of such suits, it had not reserved any money for settlements. The fact that the company was found liable — and that the settlement is so large — has company executives worried and sent shareholders to the exits.

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Merck’s stock had lost $2.35 per share by the market close on Friday. Prudential Equity Group analyst Timothy Anderson warns, “Investors should prepare for a multi-year legal battle.”

The concern, of course, is that more lawsuits will now be on their way to the courtrooms — and this isn’t just a possibility, it’s a certainty.

The biggest controversy in this story is the theory that many Merck employees had been questioning just how save Vioxx really was for years before it was actually recalled.

The first class action suit against the drug maker goes to trial next month, while the first federal case is expected to start in November.

The good news in this case is that pharmaceutical companies are going to start being held responsible for the side effects of their products. For anyone who takes a prescription drug, this accountability is a positive — especially considering the number of hospitalizations and even deaths that occur every year as a result of taking prescription drugs.

The bad news is that, due to the more rigorous testing on potential drug candidates that pharmaceutical companies will now be doing to protect their own interests, it could take even longer for promising drugs to actually come to the market — and “fast-tracking” important treatment breakthroughs may no longer be possible for fears of future litigation.

At the present time, Merck has over 4,000 lawsuits over Vioxx ahead of it — with more sure to follow after Friday’s verdict. It’s going to be very interesting to watch the rest of this story unfold — and to see what effect one little pill could have on the health industry as a whole.