A New Jersey Supreme Court ruling last week may give the drugmaker a big boost in a closely watched case that, some say, poses an eye-popping, $27 billion liability.

Background: the International Union of Operating Engineers Local 68 Welfare Fund claims it overpaid for Vioxx and wants Merck to reimburse its members. The lawsuit has class-action status, which means insurers and other payers from around the country are jumping in. And under NJ’s Consumer Fraud Act, the drugmaker could be forced to pay three times whatever amount was spent on the painkiller. Some estimates peg Merck’s final bill at $27 billion.

The lawyers for the Engineers fund argue that NJ’s consumer fraud law should govern a nationwide class-action lawsuit because Merck execs made decisions at NJ headquarters about what Vioxx info to disclose and how to advertise Vioxx to the public. The Engineers fund itself paid just $200,000 for Vioxx. But throw in all those out-of-state insurers and third-party payers and their Vioxx bill amounts to an esimated $9 billion. Big difference.

Merck is appealing to the state’s Supreme Court, arguing class-action certification is wrong and that New Jersey law shouldn’t apply. The drugmaker says out-of-state insurers and third-party payers should be subject to differing consumer protection laws in their own states.

The NJ Supreme Court seems to follow such logic. Last week, the court overturned a decision by the state’s appellate court and dismissed a lawsuit brought by a Michigan man named Rowe, who sued Roche over its Accutane acne drug. Why the dismissal? Rowe lives in Michigan, was prescribed the drug in Michigan, and took the drug in Michigan. His suit can be filed in New Jersey, but Michigan law should have applied.

Here’s the rub: the same appellate court applied NJ consumer fraud law when it upheld certification for the Engineers - and cited its prior decision in the Rowe case as precedent. “We’re of the opinion that the handwriting’s probably on the wall for that one,” write the chaps at Drug and Device Law blog, who call the decision “welcome sanity.” One of them, Jim Beck, works for Dechert, which reps Merck in product-liability cases before Carol Higbee, the same NJ state judge who granted the Engineers case class-action status in the first place.

The NJ Supreme Court isn’t expected to make a decision for a few months, but if this latest opinion offers any insight into the court’s thinking, Merck may have just received the most welcome bit of legal news yet on Vioxx litigation.

Further reading….
The Drug and Device Law blog;
NJ Supreme Court decision last week on Rowe vs. Roche;
Higbee’s decision on granting class-action status.

[tags]Merck, Vioxx[/tags]