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The huge popularity of the arthritis drug Vioxx has turned into a huge liability for its manufacturer, Merck & Co. After a new study showed that Vioxx increased the risk of heart attacks among its users, Merck recalled the drug this fall. Now the 20 million people who have taken Vioxx in the past five years have all become potential litigants. Indeed, Merck, which is based in Whitehouse Station, N.J., faces new suits every day. Steven Scala, a drug industry analyst at SG Cowen & Co., a New York-based investment bank, predicts that the drug giant could eventually get hit with 600,000 suits and up to $10 billion in damages. Other financial analysts have set their projections even higher. (Merck officials, including general counsel Kenneth Frazier, declined to comment for this article.) Of course, Merck isn’t the first company that’s had to pull a drug or medical device from the market. From breast implants to fen-phen, these recalls have invariably resulted in an avalanche of litigation. In-house lawyers and outside counsel who have handled recalls at other companies say that whether Merck survives the Vioxx debacle depends on its ability not to be overwhelmed by a frightfully expanding court docket. Steven Sokolow remembers the thousands of lawsuits Dow Corning Corp. faced after the Food and Drug Administration forced the company to take its silicone breast implants off the market in 1992. Sokolow, who’s still at Midland, Mich.-based Dow Corning as an associate general counsel in charge of litigation, says, “It was a brutal experience.” He adds, “It’s overwhelming when cases start appearing very suddenly, by the thousands every month.” Other lawyers who have dealt with recall nightmares say that Merck can gain the upper hand by picking its battles. That means steering cases into favorable jurisdictions, consolidating actions, and bringing the weakest suits to trial first. If successful, these tactics can ensure that early rulings set the tone for later fights. These experts disagree, however, about the right time to settle. All drugs require warning labels, and Vioxx was no exception. A study published in The New England Journal of Medicine in 2000 showed that people taking even low doses of the medication were four times as likely to suffer heart attacks and strokes as those taking other painkillers. The FDA approved the drug anyway, but in 2001 sent a letter to Merck (posted on the agency’s Web site) warning the company not to mislead doctors about Vioxx’s cardiovascular risks. The following year, Merck sponsored a new clinical study on Vioxx that — the company hoped — would come out with favorable results. But the effort backfired, and the new study confirmed the earlier findings about Vioxx’s risk. According to The Washington Post, the new results were discussed on Sept. 27 by Merck CEO Raymond Gilmartin, research lab director Peter Kim, and GC Frazier. They decided that they couldn’t keep Vioxx on the market, and the drug was pulled three days later. Wall Street’s reaction was immediate. Merck’s share price plummeted, and the company lost some $27 billion in market value. Plus, prominent plaintiffs firms started taking out full-page advertisements in newspapers across the country, looking to sign up aggrieved Vioxx users as clients. In the past, most companies who have had to recall a drug or medical device have managed to survive. In 1983, for instance, some experts predicted doom for Merrell Dow Pharmaceuticals after it pulled Bendectin, a morning sickness drug used by some 10 million pregnant women. Yet the Cincinnati-based drug maker managed to limit court damages and settlements to just $100 million total. (In 1995 Merrell Dow was acquired for $5 billion by Hoechst AG, which is now a unit of Sanofi-Aventis.) Other companies, though, have found their exploding court docket just too painful to bear. In 1995, three years after the FDA banned silicone breast implants from the market, Dow Corning decided to exit the medical device business and filed for Chapter 11 bankruptcy protection. Financial analysts are currently debating whether Merck will share the fate of Merrell Dow or Dow Corning. But lawyers are eager to prescribe treatments for a massive product liability tort catastrophe. According to Diane Sullivan, a product liability partner at Dechert, the companies that pull through are the ones who are “smart about the venues where the first few cases are tried.” Sullivan is representing Merck in Vioxx litigation, but she wouldn’t comment directly on the company’s situation. However, Sullivan has prior experience in multidistrict product liability litigation. Among other clients, she successfully defended Baxter Healthcare Corp. against several hundred suits involving its latex gloves. Being smart about early cases may mean “settling some in bad venues,” Sullivan explains, in order “to avoid the risk of plaintiffs gaining early momentum via big verdicts in hellhole jurisdictions.” She notes that when Dow Corning lost an early courtroom battle in Texas in the breast implant litigation, the defeat encouraged plaintiffs lawyers and fueled further suits. Dow Corning’s Sokolow agrees. He explains that company officials thought they should fight all plaintiffs quickly and aggressively, and that they would win on the merits. Unfortunately for Sokolow’s crew of lawyers, their timing was off. Adverse jury verdicts came early in unfavorable jurisdictions. More thumbs-down decisions followed in the company’s class action suits, eventually resulting in Dow Corning’s decision to file for bankruptcy. In 1998 the company agreed to a $3.2 billion settlement with breast implant plaintiffs. Within the next year, however, new scientific evidence emerged that exonerated silicone, and the FDA declared silicone breast implants safe again. Not everyone agrees with the idea that a company should settle some early cases if necessary to avoid unfavorable precedents. Jeffery Carlson, a partner at Carlson, Messer & Turner in Los Angeles, defended Merrell Dow after it recalled Bendectin. Carlson says that the company won because it showed plaintiffs lawyers that it was “willing to go to the mat and fight to judgment day.” While Merrell Dow serves as a model of how to survive a recall, the company also established a judicial standard that could benefit Merck. Thanks to a 1993 U.S. Supreme Court decision in Daubert v. Merrell Dow, federal judges now stand as “gatekeepers,” charged with deciding what kinds of scientific evidence can be presented in drug and medical device liability cases. According to King & Spalding partner Chilton Varner, this ruling makes it even more important that Merck does battle in favorable jurisdictions. Varner is national coordinating counsel to GlaxoSmithKline PLC for product liability litigation over its antidepressant Paxil; she has the same role for Purdue Pharma LP in defending suits over the pain medication OxyContin. Varner says Merck will want to think about consolidating cases, as well as moving state actions to the federal level, where judges can make uniform decisions affecting large clumps of litigation. Because of the Daubert ruling, Varner says that Merck’s lawyers also need to settle the scientific issues in question, including “causation factors” that contribute to a drug’s supposed bad effects. Most lawyers expect Merck to point out that notwithstanding Vioxx’s alleged role in causing heart attacks, cardiovascular disease was already the No. 1 killer in the country. And as Varner notes, all drugs have side effects — “otherwise they wouldn’t be sold by prescription.” Likewise, Merck’s legal strategy won’t be without its risks. But if the company follows the regimen suggested by these legal doctors, it has a good chance of recovery.

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