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Supreme Court Hears Challenge to Investor Suit Against Merck

Time is on its side, drug maker claims

By Mark Huffman
ConsumerAffairs.com

November 30, 2009

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For drug company Merck, which manufactured Vioxx, the ability of investors to sue the company for damages comes down to a question of time.

Merck withdrew Vioxx from the market in 2004 after clinical trials indicated the drug -- a pain reliever used to treat arthritis -- increased for risk for heart attack and stroke.

Merck's lawyers argued before the U.S. Supreme Court Monday that time ran out before an investors group could mount a lawsuit against Merck, accusing it of failing to exercise the necessary care to prevent a harmful drug from going on the market. The plaintiffs aren't bringing action because consumers who took the medication were harmed, but because investors who bought Merck stock were harmed when the stock value plummeted.

The law is relatively clear cut on the issue -- investors have two years to bring an action for damages. The issue before the court, however, is when the two-year "countdown clock" began.

Merck is challenging a lower court ruling that cleared the way for a class action suit, brought by investors who said they lost billions when Merck stock went down in value. The investors claimed Merck provided both patients and investors with misleading information about Vioxx, glossing over potential risks.

The loss of income from sales of Vioxx, along with the huge legal costs of defending liability suits brought by patients, took a significant toll on Merck's stock price. As a result, investors have joined patients in suing the pharmaceutical company.

Merck maintains both patients and investors should have been aware that there were potential problems with Vioxx when the Food and Drug Administration issued its first warning in 2001. That is when Merck insists the two-year clock should have started. However, Merck did not withdraw the drug until 2004.

Merck agreed in May 2008 to pay $58 million to settle charges that it deceptively marketed the former prescription drug Vioxx. The settlement resolved a three-year investigation by 30 states.

The multi-state investigation revealed that Merck improperly marketed and promoted Vioxx, a "Cox 2-inhibitor" drug. The states charged Merck with marketing Vioxx as a painkiller, despite its knowledge that Vioxx carried major health risks.

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