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Merck's future rides on jury verdict
If Merck loses an Atlantic City trial on the health effects of its Vioxx painkiller, its troubles will get much worse. The verdict could come this week.
By Jim Jubak
If Merck can't win a Vioxx trial in New Jersey, it can't win anywhere.
Now that the closing arguments have closed in the Atlantic City, N.J., trial pitting the company against postal worker Frederick "Mike" Humeston, the company's future is in the hands of the six women and three men on a jury that could render a verdict this week.
Even if the company loses, the monetary damage to Merck (MRK, news, msgs) from this one case isn't likely to be anywhere near the $253 million verdict brought in against the company by a Texas jury in the first Vioxx trial. New Jersey state product-liability laws cap damages at a relatively low level.
But a loss by the Whitehouse Station, N.J.-headquartered pharmaceutical giant on its home turf, in a state where the legal system favors Merck, and in a trial where the company's lawyers have outperformed the plaintiff's team, will send trial lawyers around the country into a filing frenzy. And it will send Merck's stock further into the tank. (It's down 56% since June 2003 and 21% since May 4.)
After Merck's Texas defeat in August, the number of Vioxx lawsuits filed against Merck jumped from 4,200 at the time of the trial to 6,400 at the end of September. One estimate (granted, from a team of plaintiff lawyers) estimates that an additional 20,000 cases would be filed in state courts around the country if the verdict in New Jersey goes against Merck. A jump like that -- or even one that just matched the increase after the Texas verdict -- could send Wall Street projections of Merck's potential Vioxx liability soaring well above the $38 billion that now marks the peak of analyst damage assessments. (The low-ball Wall Street estimate puts Merck's liability at $5 billion.)
Much in Merck's favor
Why is winning one trial in New Jersey so important to Merck's future? Because the playing field in New Jersey is about as favorable as the company is going to get in any Vioxx trial. Here's how the odds in this trial favor Merck.
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The plaintiff's case is weak. Humeston, a 60-year-old postal worker from Boise, Idaho, contends that Vioxx caused his heart attack even though he had used Vioxx for only two months. If the data does indeed show an elevated risk of cardiac events in patients taking Vioxx -- and there's certainly expert testimony on both sides of that question -- it shows the heightened risk in patients taking Vioxx for 18 months. As one of Merck's experts put it, there's no "significant evidence" that Vioxx is a risk factor when taken for less than three months. In contrast to the Texas trial, where the case was brought by a grieving widow of a 59-year old athletic husband, Mike Humeston is still alive. That has let Merck raise questions about how much Humeston's own behavior contributed to his heart attack. Shortly before his heart attack, Merck has pointed out; Humeston was involved in a stressful dispute with his employer.
The New Jersey jury is paying attention to the science. How do we know? Because in the New Jersey system, jurors are allowed to ask questions of witnesses -- actually, they submit questions to the judge, who asks them -- after the lawyers are finished. Many of the questions have involved clarification of scientific issues and medical terminology. In Texas, the jury seems to have tuned out the scientific testimony early in the trial, according to post-trial analysis by both sides in the case. That destroyed any chance Merck had to convince jurors that it had conducted valid risk studies for Vioxx before taking the drug to market. In Texas, the trial hinged not on science but on the emotional formula of widow against big, evil, profit-hungry corporate giant.
Merck's lawyers aren't facing Mark Lanier. In the Texas case, lawyer Lanier ran circles around Merck's legal team. The charismatic Lanier came across as a down-to-earth Texan. That helped him with his message to the jury of "send them a message." Lanier knew the community and values of these jurors. They were highly religious, for example, and began their deliberations each day with a silent prayer. Lanier himself is a part-time Baptist minister. In contrast, Merck's team, from such national powers as Houston's Fulbright & Jaworski, Washington's Williams & Connolly and New York's Hughes Hubbard & Reed, came across as the hired gunslingers of a far-distant and unfeeling corporation. Lanier also just plain out-lawyered Merck's team. The Texas trial may have hinged on the testimony of Marie Araneta, who had performed the autopsy on the plaintiff's body. Merck presented the coroner's death certificate, which stated that the plaintiff had died of an arrhythmia, as conclusive proof that he had not died of a heart attack. But then in a videotaped deposition, Araneta testified -- for Lanier -- that she had never ruled out a heart attack as the cause of the plaintiff's arrhythmia. It turns out that Merck's lawyers had never bothered to interview the coroner; Lanier had.
In New Jersey, Merck may have the better lawyers. Merck certainly isn't facing any pushover. Plaintiff's attorney Chris Seeger is fresh off a June victory over Eli Lilly (LLY, news, msgs), in which he won a $690 million settlement in a case involving Lilly's anti-psychosis drug Zyprexa, and he's the lead plaintiff's lawyer for 2,475 Vioxx lawsuits pending in New Jersey. But in Merck defense attorney Diane Sullivan, the drug company has someone who can more than hold her own. Sullivan repeatedly has been willing to push the envelope. On the trial's first day, she earned Judge Carol Higbee's rebuke for reminding the jurors that Merck was a hometown New Jersey company. She has made repeated attempts -- with partial success -- to get a long U.S. Food and Drug Administration memo (saying that Vioxx doesn't appear to cause heart attacks in short-term users like Humeston) in front of jurors. On occasion, she's made Higbee look hostile to Merck. That can't hurt with jurors, who might sympathize with the company if they think it is not getting a fair hearing, and it lays the grounds of a future appeal if the verdict goes against the company.
New Jersey legal rules favor corporate defendants like Merck. Under the state's product liability law, to win punitive damages the plaintiff needs to prove that the company knowingly withheld or misrepresented information material relevant to the harm in question. So much of the New Jersey trial has hinged on what Merck told the FDA. If Merck passed along all reliable, relevant data to the agency and the agency approved the drug without seeking a warning label, that would go a long way to making the drug giant's case. (Which is also why Sullivan fought so hard to get the FDA memo in front of the jury.) Even if Merck loses, the New Jersey system requires a separate proceeding, with jury -- to set punitive damages. The one part of the New Jersey law that Merck won't like, if it loses this trial, is a provision that requires the court to refer the case to state and local prosecutors to determine if Merck committed a criminal act.
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