JEFFREY BROWN: Shares of the pharmaceutical giant, Merck, slumped today, on the first full day of trading since the company was hit with a $253 million verdict in the first trial involving the painkiller drug, Vioxx.
SPOKESPERSON: This is right. Justice is done. This is right.
JEFFREY BROWN: Friday, a Texas jury held Merck liable in the May 2001 death of 59-year-old Robert Ernst, who died eight months after he started using Vioxx to relieve pain in his hands. His widow was awarded the large payout.
CAROL ERNST: Had Bob known the true risks of taking that one pill a day, he never would have taken it.
JEFFREY BROWN: Merck pulled Vioxx off the market in September 2004, when its own clinical testing showed it increased the risk of heart attack and stroke. In the months since, the safety of other popular pain drugs, such as Celebrex, has been under scrutiny.
AD SPOKESPERSON: Vioxx is here, a prescription medicine for the most common type of arthritis pain.
JEFFREY BROWN: Mr. Ernst's lawyers argued that Merck had known of problems connected with Vioxx for several years, but had gone ahead and sold it to the public.
MARK LANIER: Drug companies must tell us the good, the bad, and the ugly about their drugs. They cannot hide behind an almighty dollar and a profit sign in an effort to get their money in the bank and not tell us the truth about their drugs.
JEFFREY BROWN: Evidence on that issue seemed to sway the jury.
STACY SMITH: The issue, to me, was did Merck know before they put the drug on the market? And when they did, why didn't they do something about it immediately?
JEFFREY BROWN: Attorneys for Merck argued that Mr. Ernst actually died from arrhythmia, a condition Vioxx has not been linked to. They said they would appeal the verdict.
JONATHAN SKIDMORE: We believe the plaintiffs did not meet their burden of proof in linking Mr. Ernst's death to Vioxx with any reliable scientific basis.
JEFFREY BROWN: Under Texas law, which caps punitive damages, the actual award in Friday's verdict will be limited to $26 million. But Merck now faces more than 4,000 other lawsuits over Vioxx.
JEFFREY BROWN: Now some insight on the verdict and its impact, from Alex Berenson, who covered the trial in Texas for The New York Times, and Benjamin Zipursky, a law professor at Fordham University.
Alex Berenson, starting with you, this was a lot of money, you talked to some of the jurors. It was mostly about punitive damages. So was the issue for them mostly about the behavior, punishing the behavior?
ALEX BERENSON: Yes, that's absolutely right. It was a message verdict; it was a very bad verdict for Merck in a lot of ways. This was not supposed to be a case that the plaintiffs were supposed to win. They had problems with causation, in other words did Vioxx actually cause the death of Mr. Ernst, because as your reporter noted, Vioxx has never been linked to what the cause of death was for Mr. Ernst.
But the jury was so angry with the documents that it saw, documents from inside Merck, emails from inside Merck that it essentially decided that Merck needed to be punished. Mr. Lanier, in his closing argument, asked the jury to send a message to Merck, and jurors said they had heard that and that had resonated with them.
JEFFREY BROWN: Tell us a little bit, Alex, about Mr. Lanier. I gather he's quite a colorful character himself.
ALEX BERENSON: He's quite a colorful character and, you know, he's an exceptional lawyer. And this case just confirms that. You know, he sorts of comes out of the southern preacher tradition. He is a -- he does actually teach a class each Sunday at a Baptist church near his estate in northwest Houston. And he has a remarkable ability to connect with people and to break complicated terms down into simple language that jurors don't have to be scientifically adept to understand.
If he has a weakness, it is that he does tend to like to hear himself talk a little bit, and he does sometimes like to be the center of attention in the courtroom. But it takes a very skilled team on the other side to take advantage of that, and Merck had a team that was not skilled at all.
JEFFREY BROWN: Professor Zipursky, how do you read the size and scope of this verdict?
BENJAMIN ZIPURSKY: I agree with Mr. Berenson. I think it's a very bad verdict for Merck. And it's a bad verdict for Merck because the fact that the jury took particularly seriously our facts about Merck's conduct as a company and although the particular facts of Mr. Ernst's case were indeed dicey, it wasn't clear that there really was a strong case for Mr. Ernst. The facts that pertain to how Merck conducted itself and the spirit of gamesmanship, it seems to have taken into its marketing of Vioxx -- those facts are going to continue to be with Merck in future cases.
JEFFREY BROWN: And, Professor, we said of course there are many potentially thousands of future cases. So what does Merck do now in terms of re-jiggering its legal strategy?
BENJAMIN ZIPURSKY: Well, I think a couple of things. First of all, Mr. Berenson nicely depicted some of Mr. Lanier's strengths, but I think it would be a mistake for Merck to take the view that some sort of stereotype of a rural Texas jury might come in with a big award against them, but they'll do better in the rest of the country.
I think they have to take seriously that these are damaging documents and damaging facts, and they have to focus on blunting that argument from the plaintiff. And they also have to work very hard on cutting the causal link between Vioxx and the injury of each particular plaintiff.
JEFFREY BROWN: Alex Berenson, in the days since, have you been able to gauge any sense of how this verdict affects others waiting to go to trial or perhaps thinking about it at this point?
ALEX BERENSON: Well, this is going to cause more people to file lawsuits. You know, the estimates from the Wall Street analysts about what this will cost Merck are all over the map and the estimates of the number of plaintiffs are all over the map. But this is going to encourage people who have only took Vioxx for a short time, who maybe had a heart condition that wasn't a heart attack or stroke, this is going to get more people into the courtroom.
And, you know, I can't agree enough that thinking of this as a rural Texas injury is just way off. This county is just south of Houston, the northern part of it is actually the suburb of Houston; it's a suburb called Perlin, part of the county is represented by Tom DeLay, this was an overwhelmingly Republican jury, an overwhelmingly white jury. This was not some jury that is out to get corporate defendants. And, you know, the people who think that are going on stereotypes and were not in that courtroom.
JEFFREY BROWN: Alex, you said everyone is trying to gauge the number of potential cases. I was reading that more than 20 million Americans have taken Vioxx, so perhaps a kind of limitless litigation down through the next months and years?
ALEX BERENSON: Well, 20 million people worldwide, and in the last five years more than 1.5 million Americans have died of cardiac events, heart attacks or strokes; the number is actually even, it's more than 2 million, I think. So if you sort of take those two pools and figure out who was in both, you get a really, really big number.
You know, what the plaintiffs lawyers think Merck should do, and obviously Merck would be wise to take their advice with a grain of salt, but what the plaintiffs lawyers think Merck should do is acknowledge to juries, "Hey, we're not going to stand behind these documents; we think that a lot of them do show conduct that were not particularly happy about, we're not particularly proud of, but what you have to do is decide each individual case on causation. And if you decide that this person, we know Vioxx hurt some people, if you decide that Vioxx hurt this person, we'll accept that and we'll pay. We won't be thrilled about it, but we'll do it."
Now, whether or not that's a winning strategy, I don't know. But it has to be -- there's got to be a better strategy out there than the one that just caused them to get hit with a $253 million verdict.
JEFFREY BROWN: Professor Zipursky, I guess the broader question here is how this affects the larger industry. What are the implications of a verdict like this for drug companies who are now thinking about doing new research or looking at marketing what they already have in the pipeline?
BENJAMIN ZIPURSKY: That's a good question. I think for decades now, American products liability law, which this is, has been trying to send a message to pharmaceutical companies that they want more disclosure; they want more disclosure to the FDA, and people like those on the jury would like more disclosure to physicians and to consumers.
So I think that pharmaceutical companies are going to produce more disclosure. The problem is Merck is regarded by many on Wall Street and many in the medical community as quite a good company in many ways, as a general matter. So from their point of view, I think the pharmaceutical companies are going to be saying, you know, Merck was trying in some ways, it looks like people in their marketing departments made mistakes; it looks like they took a fairly aggressive stance at certain junctures. But this isn't some terrible company who was behaving in an outrageous way.
And so I think the pharmaceutical companies are going to be puzzling over what they can do now that will protect them five or ten years from now if certain risks surface. It's easy to look at it with hindsight and say they should have disclosed it then, and indeed some of the documents are pretty bad in this case. But I think it's puzzling what the pharmaceutical companies should do.
My own view is that it would be helpful instead of focusing after the fact on what was known and should have been concealed -- shouldn't have been concealed, should have been revealed, it would be helpful to focus on a regulatory regime we could put in place that would get all that information about fears that are, and suspected risks, all that information out there now, before 20 million people start taking a new product.
JEFFREY BROWN: Okay, Benjamin Zipursky and Alex Berenson, thank you both very much.
ALEX BERENSON: Thanks.
BENJAMIN ZIPURSKY: Thank you.