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News and Vioxx.

By John Dietz - Email Editor

Date: 23-Aug-2005

Well, the verdict in the Robert Ernst vs. Merck case came out Friday with a $253 million dollar verdict against Merck. For those who have been out of the loop, the widow of Robert Ernst, Carol Ernst, sued Merck in Angleton, Texas claiming that her husband, who used Vioxx, died in 2001 of cardiac arrhythmia, which she feels was caused by the drug. Vioxx, a $2.5 billion dollar blockbuster arthritis pain killer, was pulled off the market by Merck in September 2004.

As most readers know, this is a very high profile case. Before the verdict, Merck was faced with approximately 2,600 filed lawsuits with 4,600 plaintiffs. I’m not a betting man, but I am going to go out on limb here and say those numbers are going to increase.

As many as 20 million people worldwide have taken Vioxx. Friday’s verdict saw Merck’s stock lose $5.2 billion in market capitalization. Merck says it will fight all cases, I believe using the classic scorched earth approach. Merck claims that there is no scientific evidence that Voixx causes fatal cardiac arrhythmia or any other type of death.

The plaintiff’s attorney, W. Mark Lanier, says that Merck knew about the drugs’ side effects and suppressed the information. When interviewed, Lanier said that Merck took the “Three Monkey Approach.” "They covered their eyes because they didn't want to see anything that would hurt the sale of Vioxx, they covered their ears because they didn't want to hear anything that would hurt the sale of Vioxx, and they covered their mouth because they certainly didn't want to say anything that would hurt the sale of Vioxx."

Of course, Merck has consistently denied charges that Vioxx caused deaths. Merck has also denied allegations that it concealed information, noting that the company voluntarily withdrew Vioxx from the market. The post verdict interview with the plaintiff’s attorney is a chilling reminder that there are no real winners. The litigator made Merck out to be a new age Bin Laden, and Merck’s defense team acted like the decision would be overturned on appeal. As my father always says: “It all depends on who’s telling the story!”

Whatever side you fall on, this is not important for our discussion. I don’t think we will know the full ramifications for at least ten years. What is important is that many people’s lives will be affected good and bad. Some Wall Street gurus are saying Merck’s value is going to be a zero. File your claim before there's nothing left, so the pundants say…

The point to the story is that you and I should go a long way to avoid being in front of a contingent fee litigator, judge and jury. Part of planning your life’s work is to limit the downside risk. Any good stockbroker worth a salt will tell you to cut your losses and let your winners run. Asset protection planning is about limiting your downside risk. If you plan for the worst, there is a good possibility that you won’t be sitting where Merck is right now.

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