PRESCRIPTION DRUGS Vioxx suits imperil Merck's finances, credibility

The drugmaker's legal expenses over Vioxx could reach $12 billion.
NEW YORK (AP) -- Already wounded by the withdrawal of its Vioxx pain reliever from the market, Merck & amp; Co. must now contend with hundreds of lawsuits over the drug's side effects -- lawsuits that threaten to further damage the company's finances and reputation.
Wall Street analysts are concerned about Merck's potential legal liability. This week, Standard & amp; Poor's Corp. warned that it might downgrade its ratings on Merck's debt because of the huge payouts the company might be forced to make.
Pulled from market
Merck withdrew Vioxx from the market Sept. 30 because the drug doubled the risk of heart attacks and strokes in patients taking it longer than 18 months.
Merck's stock plunged nearly 27 percent and the company lost $28 billion in shareholder value after the announcement -- partly in response to the loss of revenue from Merck's second best-selling drug, but also because of the lawsuits, said Richard Evans, an analyst at Stanford C. Bernstein Research. He estimates Merck's legal costs could reach $12 billion.
If plaintiffs win, and prove their allegation that Merck put profits before patients' welfare, the company's reputation will also suffer.
"This has a credibility cost. Merck's brand and stature are tarnished by this," said David Moskowitz, an analyst at Friedman, Billings, Ramsey.
Hundreds of suits
There have been at least 700 Vioxx-related lawsuits filed against Merck so far, and one analyst estimated the number at more than 1,000. Legal experts said lawyers suing Merck must prove two primary assertions: The company understood Vioxx's risks and downplayed them, and that the drug played a role in causing heart attacks or strokes.
A federal judge in Alabama has ruled that Merck needed to be ready for trial after Dec. 13 in a case brought by William Cook, a retired miner who has been taking Vioxx for about a year when he suffered a heart attack in 2000. The case was filed before Merck pulled Vioxx from the market. However, Merck filed a motion with the Judicial Panel on Multidistrict Litigation in Washington D.C. to consolidate all the federal cases in one jurisdiction, which could delay Cook's trial, according to his lawyer Andy Birchfield.
Hoping for precedent
The case that goes to trial first will be closely watched by other plaintiffs and their lawyers, who are hoping for a precedent that could set a pattern for future lawsuits.
Other drugs that were taken off the market and the subject of numerous lawsuits such as Bayer AG's cholesterol drug Baycol and Wyeth's diet drugs Pondimin and Redux caused uncommon injuries that made proving liability easier.
Wyeth took its drugs off the market in 1997 and has paid out $13.6 billion in legal fees and settlements of its $16.6 billion reserve. Baycol was withdrawn in 2001 and Bayer has paid out $1.09 billion so far.