Merck Loses Vioxx Case In Australia
22 CommentsBy Ed Silverman // March 5th, 2010 // 7:56 am
An Australian court ruled today that a Merck subsidiary was liable for a heart attack a Melbourne man suffered after using Vioxx, although the drugmaker wasn’t found negligent for keeping the painkiller on the market prior to its withdrawal in 2004. Graeme Peterson, who was awarded $287,000, was described by Australian media as the face of a class-action lawsuit. And now, still more claims are now likely.
Federal Court Justice Christopher Jessup found Vioxx doubled the risk of heart attack for users and was a defective product unsuitable to treat arthritic pain under the Trades Practices Act. He told the court a 2000 clinical trial showed “worrisome and important signals” of cardiovascular risk, although he dismissed claims Merck “turned a blind eye” to the results. At the same time, he ruled that Merck’s failure to warn doctors of the risks, instead emphasising its safety, amounted to misleading conduct (here is the ruling).
Peterson’s lawyer, Peter Gordon, called the decision “a victory for justice,” and added that Merck displayed absolute contempt for Australians when the drugmaker failed to include them in a US settlement. Merck paid $4.85 billion to settle claims with 44,000 Vioxx users, but it made no admission of guilt (background here) and was also criticized in the UK (see here).
In a statement, Merck notes the court “dismissed all claims against Merck, specifically finding that Merck was not negligent in its development, scientific study and sale of Vioxx. Merck and MSD Australia disagree with the limited portions of the court’s findings that were against MSD Australia and intend to appeal them. The companies are in the process of reviewing the full judgment. The litigation in Australia remains at an early stage.”
Condor
Good stuff, Ed!
I do think Merck’s $110 million of remaining Vioxx® balance sheet reserves exclusively cover legal defense costs (attorneys’ fees & expenses) only, here — if memory serves, there is not much left in reserves to cover the actual payment of Vioxx damages/judgments outside the US — so the court’s award (especially if at this stage, it leads to class action style filings and damages) is an important piece of information.
Specifically, Merck disclosed on Monday that there was only about $110 million left in the litigation reserve for Vioxx — and Merck also disclosed that it spent more than double that, in the last six months of last year alone. So, I see additional charges to be taken by New Merck, here.
We’ll see where this one heads from here.
Namaste
Marilyn Mann
From Merck’s press release:
“Today, the Federal Court in Australia published its judgment in the Peterson case. The Court found against MSD Australia on two claims under Australian statutory provisions. The Court dismissed all claims against Merck & Co., Inc. specifically finding that Merck was not negligent in its development, scientific study and sale of Vioxx. Merck and MSD Australia disagree with the limited portions of the Court’s findings that were against MSD Australia and intend to appeal them.”
So the court dismissed all claims against *Merck & Co., Inc.* They ruled against *MSD Australia* on two claims. I assume MSD Australia is a subsidiary of Merck & Co., Inc., although I haven’t bothered to look that up.
Condor
MSD Australia is wholly owned by Merck — according to page 6 of Exhibit 21 of Merck’s just filed SEC Form 10-K.
Under the GAAP rules on consolidation of results for wholly-owned entities, the financial statement effect of any verdict against MSD Australia will flow directly through to Merck’s consolidated GAAP income statements, and balance sheets — excepting only a currency transaltion adjustment.
So, while I quite agree with Marilyn Mann — about the specific language of the Australian court’s findings — the financial impact of the findings (whatever those ultimately turn out to be) will certainly be felt at the parent, NYSE-traded company level.
And, equally importantly, the reputational impact clearly flows upstream. MSD Australia did not invent Vioxx, did not do the research on it, and likely had no choice in the decision to sell it in Australia. Of course they DID want to sell it, but that call was made from Whitehouse Station.
That’s all.
Namaste
Anon
Disagree.
I worked at Merck with ex-US Countries selling products. MSD Australia would definitely have had a decision in determining whether they would want to sell a product in Australia or not.
Condor
Okay, anon. — we don’t really disagree at all, here.
Australia would have been unlikely to tell then CEO Gilmartin it didn’t want ANOTHER $1 plus billion franchise “down under”. But even so, the fact is it was sold in Australia — and the only company to report those profits to the public, as see it’s stock rise accordingly — sits in New Jersey.
I think your suggestion that Australia is independent is largely illusory: if Big Merck wants anything — it may simply vote its shares in MSD Australia to order it — and oust management when it refuses the order.
Namaste
Pharma Conduct Guy
Condor, thanks for posting the great insights!
Anon
Condor,
While I agree that Big Merck could do the things you say. My experience was that individual countries decided whether they wanted to sell a product or not based on the resources (number of sales and marketing people) they had available to commit to it as compared to products they were already committed to. It was often the case that I would hear one thing one day and something else about what they wanted to do with a new product the next.
Many times registration of a product in a country was obtained just in case resources could be made available at a later time to sell the product. Alternatively if they didn’t have the resources to commit to marketing and the regulatory people were overwhelmed they might not want to invest their limited resources (1 or people) to even obtain registration at that time. Then they would change their minds 2 or 3 years later when those prior blockbusters weren’t going to be around much longer and marketing the new blockbuster was more advantageous.
Justice in MI
If there was no suggestion of negligence (particularly re: marketing), was this a pure liability case–i.e., that the drug killed the guy? And where do the judge’s comments about “misleading conduct” fit in? Not negligent, but a little scuzzy?
Justice in MI
I’m still trying to sort out the decision, so if anyone has access to a copy of it (couldn’t find the whole text), appreciate a link.
Here’s what was in an Australian newspaper: “The judge found that Merck Sharpe & Dohme failed in its duty of care by not warning Peterson’s doctor about the drug’s potential cardiovascular risk, and by its sales representatives emphasizing the drug’s safety.”
It sounds like a reference to the “cardiocard”, etc. following VIGOR about which FDA chastised Merck in the 9/01 warning letter.
The argument _sounds_ like it could be reasonably shown that plaintiff’s doc was falsely reassured about the safety of Vioxx as a results of Merck’s marketing materials and strategy. Assuming so, that goes well beyond strict liability.
Condor
JiM — as near as I can tell (having no copy of the Australian decision either, myself) — but having read several Australian newspaper accounts — the judge held that Vioxx was not fit for the purpose it was being sold (and advertised). Sort of a breach of (implied) warranties finding.
That is, such goods ought to at least do no (additional, unrelated) harm. Vioxx was being sold in Austalia as a arthritis “pain reliever”, but the judge felt any pain relief (if it occurred) was entirely trumped by the doubling of heart attack risk. Mr. Peterson had a heart attack in 2003, while on Vioxx for pain relief — from arthritis.
In short, the judge said the product was not fit for the purpose MSD (and Big Merck) intended for it.
Not strict liability, at all — more a breach of implied warranties of “merchantability“.
Of course, the above is from American law concepts, all being “wall-papered over” the actual Australian legal principles involved. And, as if it needed to be said, I am no Australian lawyer (obviously).
Namaste
Robyn Clothier
Here is the judgement:
http://www.austlii.edu.au/au/cases/cth/FCA/2010/180.html
Justice in MI
G’day mate.
Interesting that this court makes no bones (so to speak) about “second-guessing” Australia’s regulatory authority, as preemptors would say. That is, they are clearly saying that the benefits of Vioxx were trumped by its risks. I believe they are also saying that those risks were (to say it most politely) “underplayed” in Merck’s marketing to docs.
I don’t know anything about Australia’s equivalent of the FDA, but this court clearly does not hesitate to say that, whatever it is, it does not hold preemptory authority.
Justice in MI
This item also interesting about a fake peer-reviewed Australian journal extolling Vioxx.
http://www.theheart.org/article/966827.do
Condor
Just in — after a Saturday night on the town, and come to find a great gift in my blog comment box — JiM, a commenter has sourced the actual Australian Vioxx® findings.
You may read the full 100 plus pages, right here (courtesy the keen eyes of Robyn Clothier, in my comments!), but I’ll quote just a little of finding 904:
“. . . .the misleading conduct was constituted by the failure to draw to the attention of doctors and other health care professionals the cardiovascular risk message that emerged from VIGOR. The respondents [Merck and MSD Australia] criticised the applicant [Graeme Peterson] for not having articulated the terms that any such advice would embody. Not having done anything, however, they are in no position to make that criticism. Ultimately, they did come up with a form of advice which I have held to be sufficient for the purposes of the applicant’s negligence case. But before that occurred, MSDA’s failure to provide any qualification to what was then contained in the Product Information did, for the reasons I have given, amount to misleading conduct. . . .”
G’night, all — I am spent — will try to comment on all the intersting posts and developments here on Pharmalot, after Sunday breakfast, and of course, MUCH more coffee!
Namaste
Justice in MI
Great, Condor!
I note the following sentence especially:
“Ultimately, they did come up with a form of advice which I have held to be sufficient for the purposes of the applicant’s negligence case.”
So, despite spin to the contrary, and legal technicalities, the judge clearly believed there was sufficient evidence of negligence in this case.
Condor
Actually, JiM, I think the judge is saying that LATER notices from Merck were adequate to rebut the negligence claims of Graeme Peterdon, but until late 2001 (well after VIGOR results had come in), Merck’s (MSD’s) silence in front of prescribing doctors, in Australia was “misleading“.
Namaste
Justice in MI
Yep, you’re right. I was reversing applicant/repondent. Here was an interesting bit from the decisions re: VIGOR–
” Although the results of that trial showed that there were, at a statistically significant level, more cardiovascular thrombotic events in patients in the Vioxx arm than in the naproxen arm, there was, and there remains, a valid scientific basis to suppose that naproxen, if taken conscientiously, was protective against such events to an extent about equivalent to the effect of aspirin.”
As I’ve understood it, the last sentence was rejected as without evidence by FDA at the time. So presumably Merck was able, finally, to dig up some supporting naproxen data?
Condor
I dunno, JiM. Honestly, I am a little road-weary, and only slowly digesting the decision — but it is clear that the judge felt MSD’s coonduct wasn’t entirely cricket — on Vioxx®.
Namaste
Robyn Clothier
JiM, as I understand Justice Jessup’s findings (on a limited reading and with no legal training), he’s saying that the theory about naproxen being cardioprotective was a plausible one, but so was the possibility that Vioxx was increasing cardiac risk and that, as VIGOR’s results threw up questions about Vioxx’s safety, they should have been communicated to doctors.
Peterson’s compensation was not awarded out of his claims of negligence. The judge says “As to the negligence aspect, I have found that there are two respects in which the first respondent fell short of what was required in the reasonable discharge of its duty of care: its failure to warn the applicant’s doctor of the signal of potential cardiovascular risk which arose in March 2000, and the emphasis given by its sales representatives to the safety of Vioxx in their discussions with the doctor.” However, he goes on to say that, in Peterson’s particular case, he is not convinced that Peterson would have ceased taking Vioxx had he and his doctor been warned.
Peterson was awarded compensation under Australia’s Trade Practices Act. The judge found that Vioxx was not fit for the purpose it was being sold. I haven’t yet been able to work out whether Justice Jessup considers that it was always “unfit for purpose” because of the inherent (if unknown) cardiovascular risk, or whether it became unfit when the VIGOR results were known by MSD and not communicated, safety having been a previous selling feature.
As to your comment about pre-emption, the TGA derives its authority from the Therapeutic Goods Act. (Here, if you’re very interested: http://www.comlaw.gov.au/ComLaw/Management.nsf/current/bytitle/67A98FD37A0824C8CA256F710006F162?OpenDocument&mostrecent=1) There are clauses in it about the conferring of powers and duties in State law to Commonwealth officers, and also about conferring jurisdiction on the Federal courts, so I assume the balancing was all sorted out when the Act came into force, but I admit it’s all a bit beyond me.
Justice in MI
Robin–Much thanks for your good and thorough post. Very useful.
Re: the naproxen issue, this excerpt from FDA’s 2001 warning to Merck related to what I assume were some of the same promotional approaches used in Australia:
“There are no adequate and well-controlled studies of naproxen that support your assertion that naproxen’s transient inhibition of platelet aggregation is pharmocodynamically comparable to aspirin or clinically effective in decreasing the risk of MIs. Therefore, your representation that naproxen prolongs bleeding time and inhibits platelets identically to aspirin is misleading, and minimizes the potential seriousness of this finding. As you know, the reason for the difference between Vioxx and naproxen has not been determined; it is also possible that Vioxx has pro-thrombotic properties.”
I understand that Merck made considerable effort to find studies that providing evidence of naproxen’s inhibition of thrombi to any degree approaching aspirin. When I last heard anything, there were no such studies. So the judge’s comment that there was a “valid scientific basis” to the naproxen hypothesis surprised me.
Dave Marr
What none of you are looking at is the suffering of so many people that had heart attacks, while taking vioxx. some died, there families suffered pain and great expense.
I suffered two heart attacks after taking vioxx.
All I can see is Merck saying what a great pill Vioxx is. They pay Millions of Dollars out in America, but here in Australa they are fighting us and will not pay anything. I told the Merck board if the board went on Vioxx for six months and none of them had a Heart attack I would say it is a great pill.
Guess what I cannot get an answer from them, I even tried to get there media circus to have a pill, they will not try them either.
So my thinking is VIOXX is poison
J.Cridland
I agree with Dave. I was on Vioxx for 3 years to the day when i collasped at home and was flown to Sydney and put on life support at Westmead hosp. I was away from my family with no money or personal items as i wasnt expected to make it thru the 1st night but i did and no one wants to know about me. I had every damaging side effort but the worst is that i have lost about 9 months of memories which no amount of money can replace.Because of Vioxx being put in the too hard basket, i am one of many who can say “Nobody cares”