In the second major loss for Merck this month, a Texas state court returned a verdict and award of $32 million in a Vioxx case.
The lead counsel for the case, Attorney David Hockema of Edinburg, Texas successfully argued the case for the deceased plaintiff, Leonel Garza, a 71 year old retired gentleman who had been taking Vioxx for about one month prior to his fatal heart attack. This therefore marks the first short duration case that has been won by a plaintiff, and of course Merck plans to appeal the decision.
The verdict, which will be reduced substantially under Texas law to a maximum award of $7.75 million, marks the third major win in the ongoing Vioxx litigation, and once again raises the cost of Merck's somewhat controversial "try them one case at a time" strategy. Early this week the WSJ online had an intriguing article that mentioned, "oh by the way" Merck has put $685 million into reserve to fight litigation costs for the next 12 months. That, is some serious money, and you have to wonder what shareholders and institutional stakeholders will think of the strategy and costs if they continue to take losses.
Interesting stuff, and it will only get more intriguing. I of course am on record as saying that this strategy is going to ultimately be insanely expensive and more costly then if the company had taken a proactive approach to creating a global settlement. The cases are just now working through the pipeline and as they do, the costs and verdicts are going to pile up. Where the "scream point" is we can only guess.
Additional articles appear in the NY Times Online
The NY Times article highlights some key issues, both with the trial and with Merck's defense. First, the case was tried down in the Rio Grande Valley section of Texas, a region known for large verdicts against out of state defendants. Second, there was only a 7 day documented use of Vioxx, which would indicate that the jury to some degree brushed aside the current evidence that seems to imply that Vioxx was most dangerous only on long term usage, and finally, the judge left several avenues of appeal open to Merck to get a new trial on appeal, or to over turn the verdict entirely. I tend to agree with defense counsel that this particular verdict is an aberration. However, this is EXACTLY the risk Merck is choosing to subject itself and it's shareholders too with it's try every single individual case strategy. The NY Times article goes on to mention a $1 billion reserve just for defending the cases, and that over 23,000 plaintiffs have sued the company to date.
Every verdict, aberrant or not, raises the risk and ultimate long term cost to Merck and eventually cooler heads are going to start discussing a global settlement of claims instead of the current process.
Also, co-counsel was incorrectly listed in the initial press reports as Attorney Joe Esposito. In fact co-plaintiff counsel was Jose Escobedo who tried the case along with Attorney David Hockema.