The $253 Million Verdict Against the Maker of Vioxx: Its Likely Short-Term and Long-Term Impact For the Company

Last week, a Texas jury awarded $253 million to Carol Ernst, whose husband Robert died of heart failure. Mrs. Ernst blamed her husband's death on Vioxx, a pain reliever manufactured by Merck, and the jury agreed.

Merck's defeat in the small town of Angleton, Texas is bad news for the pharmaceutical giant. But just how bad, really?

A case like this has to be evaluated in terms of its short- and long-term impact.

The Short-Term Impact for the Company May Be Modest

The short-term impact for Merck could be quite minor, for a number of reasons.

First, it is possible that the judge will decide to reduce the $24 million the jury awarded in "non-economic damages." That sum included $22 million for Mrs. Ernst's own mental anguish and her loss of Mr. Ernst's companionship. As compared to other cases, the figure is relatively high.

Second, whether or not the judge reduces the award of non-economic damages, it is certain that Texas law will reduce the punitive damages award. The jury awarded $229 million in punitive damages. But punitive damages are capped in Texas at twice the "pecuniary damages" awarded by the jury, plus up to $750,000 if "non-economic damages," such as pain and suffering are awarded.

Here, the pecuniary damages - representing past and future money losses - amounted to only $450,000, which is understandable, given that Mr. Ernst was 59 and he did not earn a lot of money as a manager at Wal-Mart. Twice that award is $900,000, and according to Texas law, since the jury did award pain and suffering damages, $750,000 may be added to that - so punitive damages could reach a total of $1,650,000. That's a large sum, but it's far less than the $229 million the jury awarded.

In the end, then, Merck's real financial exposure in the Ernst case is capped by Texas law at about $26 million.

The Long-Term Impact for Merck May Be Very Significant

The real risk to Merck comes from the estimated 4300 other lawsuits that have been filed against it. Merck cannot afford to pay $20 million per case. Furthermore, a significant number of those cases will be tried in jurisdictions that do not cap punitive damages, or do not cap them as severely as Texas. And more big-ticket verdicts against the company will likely mean more suits are filed.

As in the case of asbestos and breast implants, we might be seeing the beginning of a long road of litigation. And that road will probably be marked by numerous settlements; often, a company is driven to settle even those cases that it might think it could win, just to avoid an accumulating list of defeats that embolden would-be plaintiffs and plaintiffs' lawyers to file even more suits.

We can only speculate about what Merck's litigation strategists are now thinking. Three features about the Ernst case stand out, however, and they are doubtless among those that Merck is weighing as it considers its next few steps.

A Possibility for Merck's Lawyers: An Appeal Based on Weak Causation Evidence

First, the Ernst verdict is a strong candidate for reversal on appeal. Many observers thought that Merck would win this case because Ernst's suit was very weak on the issue of causation.

The coroner's report for Ernst said that he died of cardiac arrhythmia, or an irregular heartbeat. The reason that Merck had voluntarily pulled Vioxx from the market in September 2004 was that a large-scale post-release study showed an elevated risk of heart attacks and strokes among patients who had taken the drug for 18 months or longer. Ernst had taken Vioxx for a much shorter period, of eight months.

At trial, Ernst's lawyer, Mark Lanier, did a masterful job of overcoming the fact that he had little positive evidence of a causal connection between the alleged defects in Vioxx and the cause of death of his particular client. Among other smart moves, he was able to retrieve the coroner who examined Ernst from the United Arab Emirates, where she had moved, and she testified on the stand that she would not today discount the possibility that Ernst died of a heart attack.

There is still a risk that an appellate court will rule that all of the evidence of causation produced at trial is purely speculative, and that no reasonable jury could have found that the alleged defects in Vioxx were more likely than not the cause of Ernst's heart failure. (The standard of proof in a civil case is by a preponderance of the evidence - which means, roughly, more likely than not.)

But even if this strategy works in the Ernst case, it won't work generally: There are lots of other plaintiffs suing Merck who can adduce much stronger evidence showing that they did indeed die of heart attacks or strokes. And their proof of this will only be made easier by the fact that Merck itself admits Vioxx significantly increases the risk of heart attacks or strokes among certain groups of patients.

A Serious Problem for Merck: Evidence of Bad Behavior Will Increase Punitives

Moreover, if we look beneath the evidence issues in the Ernst trial, we uncover another important issue for Merck. Ten of the twelve jurors (the verdict did not have to be, and was not, unanimous - as it would have had to be in a criminal case) overlooked some very serious evidentiary problems at the trial. Why? I suspect one reason was that they were deeply distressed by evidence they heard about Merck's bad behavior when it came to testing Vioxx.

Lanier--like any good plaintiff's lawyer--tried to overcome his client's causation problems by focusing on his opponent's bad character. The story that Lanier told was one in which Merck--driven by considerations of profit--rushed to get Vioxx onto the market as soon as possible, and with as few warnings as possible.

Apparently, 7 million documents were produced in the course of discovery, and Lanier, to his credit, was able to find a few that might be described as "smoking guns." One of the most damning documents was an internal Merck memorandum that noted that Merck could make an additional $229 million in sales if an F.D.A.-requested warning were delayed for a certain period of time. Two hundred and twenty-nine million dollars, once again, just happens to be the amount of punitive damages the jury awarded--proof that this document stuck in their minds.

What Merck needs to think about, is what the documents Lanier produced really mean. If there is no credible explanation for them, other than the company tried to place profits above lives, then Merck had better think seriously about establishing some sort of global settlement, if the company is to survive.

But, on the other hand, if the documents have a more innocent meaning, then Merck had best figure out a more effective way to communicate that to a jury. Was the $229 million memo an attempt to help the company to rethink its estimated sales, or an attempt to justify evading the FDA? The jury was convinced of the latter interpretation.

Was the Texas Verdict a Fluke - Or Will It Be Typical in Vioxx Cases?

Finally, the third thing that Merck and its attorneys have to think about is the relevance of where the Ernst trial was held and who tried the case.

Despite its reputation as a socially conservative state, Texas also has a reputation of being a very pro-plaintiff jurisdiction, especially when the defendant is an out-of-state corporation. The trial judges in Texas are still reputed to be very pro-plaintiff, and the trial judge in the Ernst case made a number of rulings that suggested a pro-plaintiff disposition. By contrast, tort plaintiffs have a much smaller advantage in a state like New York.

Mark Lanier is reputed to be one of the best trial lawyers in Texas, and he seems to have outsmarted Merck's big-firm lawyers at every turn. For example, he did not reveal that he would call as a witness the coroner who played such a critical role in undermining Merck's causation case until the first day of trial. And that revelation threw a wrench into Merck's defense case: Merck's lawyers had been trying to locate the coroner in the UAE but for some reason they could not find her, so Merck was unable to interview her in preparation for the trial until it was almost too late. (Apparently the coroner had failed to read any of the many emails that Merck's lawyers had sent, and for some reason only Lanier was able to reach her -- in person -- overseas.)

Granted, the coroner story is a minor detail in a case that involves complicated scientific evidence and millions of pages of corporate records. Still, it shows that even big products liability cases can turn on the smallest details. Lanier was on his home ground, and he made the best of every advantage he had. Not every lawyer Merck will face in the future will be so good.

Merck Must Take a Good, Hard Look at the Evidence Against It Now

Still, if Merck is serious about fighting its way through the onslaught of Vioxx cases that it will now face, it will have to take an honest look at the strengths and weaknesses of its case.

It may not always have the edge on causation, as it did in the Ernst case. It must take a hard look at the paper trial that has been uncovered, and figure out whether or not there are truly any "smoking guns" - or if it can account for documents that may trouble juries. And it should not underestimate the skills of its opponents.

Maybe then Merck will be able to survive this litigation and come out the other side.