Mercky waters

AMERICAN PHARMACEUTICAL GIANT MERCK faces an uncertain future and the prospect of an avalanche of lawsuits after a US jury found the company liable for the death of a man who took its painkiller Vioxx. It’s not the first time corporate liability has severely undermined a major US company. Many observers have likened Merck’s position to that of Pan Am, Philip Morris or Ford, where a series of lawsuits threw their businesses into turmoil.

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By  David Robinson Published  August 28, 2005

Mercky waters|~|tablet200.jpg|~|BITTER PILL: Merck faces US$30 billion payout|~|AMERICAN PHARMACEUTICAL GIANT MERCK faces an uncertain future and the prospect of an avalanche of lawsuits after a US jury found the company liable for the death of a man who took its painkiller Vioxx. It’s not the first time corporate liability has severely undermined a major US company. Many observers have likened Merck’s position to that of Pan Am, Philip Morris or Ford, where a series of lawsuits threw their businesses into turmoil. Hundreds of claims have since been filed against Merck around the world, after a court in Texas awarded US$253 million award to the widow of a man who took the once popular drug. More than 4000 Vioxx-related cases have been filed already, and lawyers say they expect between 20,000 and 100,000 will follow. More than 20 million people had taken the painkiller before the company pulled the drug from the market last September. Vioxx had annual sales of US$2.5 billion before the withdrawal. Merck representatives in the UAE were tight-lipped last week as to how many people have been taking the drug across the region. Vioxx belongs to a category of anti-inflammatory known as Cox-II inhibitors — along with Bextra and Celebrex made by Pfizer — when they first came on the market it was believed they would revolutionise pain relief, offering the benefits of aspirin, without the older drugs risk of stomach ulcers. Elderly people suffering from arthritis were the main patients, but doctors also prescribed it for other kinds of pain, such as that caused by sports injuries. However concerns have been raised after research linked the drugs to heart attacks and bleeding of the gut. Similar concerns have also been raised about Bextra and Celebrex. Pfizer stopped selling Bextra in April, while Celebrex remains on the market for now but has a prominent warning of its heart dangers. Lawsuits have been filed over both drugs. Merck shares have fallen about 33% since Vioxx was withdrawn from the market in September. Meanwhile, Merck’s market value has plunged about US$30 billion. Analysts predict a total payout of between US$4 billion and $30 billion. It is not the first time a corporate liability crisis has threatened to undermine the foundations of a major American corporation. Tobacco giant Philip Morris even changed its name to the Altria Group, after a deluge of lawsuits. This followed the tobacco industry’s US$206 billion settlement in 1998 with 46 state governments trying to recoup the cost of caring for sick smokers. In early 1999, the company faced 670 suits filed by smokers and others. Despite the soaring stock market, the company’s stock plunged about 57% in 1999, making it the worst performing stock in the Dow Jones Industrial Average. Philip Morris executives even seriously considered filing for bankruptcy-court protection in 2003. Meanwhile in 2001, the reputation of automaker Ford took a battering when the United States’ National Highway Traffic Safety Administration noted a high incidence of tyre failure on Ford Explorers fitted with Firestone tyres. Ford investigated and found that several models of 15’’ Firestone tyres had very high failure rates, especially those made at Firestone’s Decatur, Illinois plant. The plant was eventually closed. The failures all involved tread separation — the tread peeling off followed often by tyre disintegration. If that happened at speed, there was a high likelihood of the vehicle would leave the road and roll over. It has been estimated that this failure caused over 250 deaths and more than 3,000 serious injuries. A large number of lawsuits have been filed against both Ford and Firestone, some unsuccessful, some settled out of court, and a few successful. Lawyers estimated Ford and Firestone paid between US$3 million and US$6 million in the majority of cases where a death was involved. Perhaps the most notorious corporate liability collapse involved Pan Am. After a series of security concerns the airline was finally bankrupted after one of its planes, a Boeing 747 exploded in mid-flight over Lockerbie, Scotland, in 1988, due to a bomb in its cargo hold. All people on board were killed as well as eleven people on the ground. It was a major blow to an already weakened airline. Pan Am’s iconic image had already made it a target for terrorists, and the carrier had already succumbed to a number of high profile security lapses. After the Lockerbie disaster it fell apart. Faced with a US$300 million lawsuit filed by more than 100 families of the victims, the airline subpoenaed records of six US government agencies, including the CIA, the Drug Enforcement Administration, and the State Department. Though the records suggested that the US government was aware of warnings of a bombing and failed to pass the information to the airline, the families claimed that Pan Am was attempting to shift the blame. In 1991, Pan Am declared bankruptcy. However, one US firm to so far avoid any lasting damage from liability claims has been McDonald’s. In 2003, a federal judge threw out a class-action lawsuit by two US teenagers who claimed the fast food restaurant used false advertising and that the chain’s food made them fat and contributed to their health problems. The plaintiffs’ lawyers claimed unknown ingredients and processing made McDonald’s food damaging to consumers’ health. But the judge ruled that consumers who choose to eat at the hamburger chain could not simply blame McDonald’s if they put on weight as a result. Had the teenagers won, a deluge of similar suits would surely have followed. At least once corporate giant lives on. Merck may not be so lucky. ||**||

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