New Jersey Supreme Court rejects Vioxx class action suit

TRENTON, N.J. -- In a major legal victory for Merck & Co. in its massive Vioxx litigation, New Jersey's Supreme Court on Thursday rejected a potential class-action lawsuit that could have cost the drugmaker up to $18 billion.

New Jersey's highest court, reversing two lower-court decisions, ruled a nationwide class was not appropriate. The lawsuit had been brought by a union health plan on behalf of all insurance plans that paid for prescriptions for the withdrawn painkiller -- roughly 80 percent of all Vioxx sold.

"We were thrilled with the decision," said Merck lawyer John Beisner.

The plaintiffs' lead lawyer, Chris Seeger, said he will now proceed with individual lawsuits seeking to recoup what insurance plans paid for the widely used arthritis treatment, which Merck pulled from the market three years ago because it doubled risk of heart attacks and strokes. Vioxx was then Merck's No. 2 drug, with about $2.5 billion in annual sales.

Had the class action proceeded, it would have been a setback to the company's strategy of fighting each Vioxx suit individually. Whitehouse Station, N.J.-based Merck faces nearly 27,000 individual lawsuits from people claiming Vioxx caused heart attacks and strokes, but more than 1,170 cases have been dismissed permanently. Of cases that have reached verdicts, Merck has won nine and lost five; a new trial was ordered in another case.

Merck shares closed up $1.07, or 2.2 percent, at $50.47.

"This is a big win for Merck," said Jane Thorpe, a national class action defense lawyer specializing in product liability cases.

Lawyers have been watching the case closely since New Jersey Superior Court Judge Carol Higbee certified the class action using what Thorpe called "a very liberal standard." Thorpe thought it unlikely it would be upheld because national class actions are so rare.

"The decision by the court will have a significant impact in preventing New Jersey from becoming a dumping ground for junk class actions" and will affect future suits by third-party payers against drug companies, she said.

Benedict Morelli, an attorney representing about 1,200 Vioxx plaintiffs, said he didn't see the ruling as a great victory for Merck because individual insurance companies, HMOs and union health plans can still sue.

"I don't think this is anything Wall Street or Merck should be celebrating," Morelli said, noting Merck has spent more than $1 billion to defend itself in a handful of trials.

Merck has about $810 million left in its Vioxx defense fund. It has not paid any jury awards because it is appealing each loss.

Seeger, lead attorney for the West Caldwell, N.J.-based International Union of Operating Engineers Local 68, estimated a loss could have cost Merck $15 billion to $18 billion; its revenue last year were $22.6 billion.

Seeger noted the high court did not rule that the state's consumer fraud law cannot be applied to health plans from other states, so those claims can still be pursued in New Jersey, with triple-damage provisions in play.

"Merck temporarily dodged a bullet. Merck didn't totally dodge the bullet," he said.

Seeger said health plans with close to $1 billion in claims have already contacted him and he expects more to sign on for individual suits.

Morelli said the fact that juries in New Jersey, Merck's home state, have ruled in several cases that Merck violated the state's consumer fraud law bodes well for any future insurance plan suits.

Seeger, who this year won a $47.5 million jury award for a heart attack survivor who took Vioxx, sued Merck in October 2003. He argued that if Merck had disclosed all risks earlier, prescription plans would have favored other painkillers, generally much cheaper ones.

A state judge and then an appeals court approved the class action, but Merck kept appealing.

The state's highest court ruled 5-0 Thursday that a nationwide class action is not the best way to handle the cases because while Merck ran a uniform marketing campaign for Vioxx, insurance plans made individual decisions about covering the drug.

The judges also wrote that the engineers' union and the other third-party payers have "considerable resources," and that it was unlikely their claims were too small to pursue individually.

Beisner, the Merck lawyer, said the drugmaker has "very good" prospects for winning any individual suits filed by health plans because they had adequate information about the drug's risks.