Merck To Join Pfizer and Lilly At Top of DoJ Settlements Chart
Executive Summary
Merck is set to reach the third largest settlement with the Department of Justice involving drug marketing practices.
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Merck is set to reach the third largest settlement with the Department of Justice involving drug marketing practices. In reporting its third quarter financial results, the company noted that it has established a $950 million legal reserve in anticipation of resolving an investigation relating to Vioxx (rofecoxib) by the U.S. Attorney’s Office for the District of Massachusetts (Also see "Strong Diabetes Franchise Growth Highlights Solid Third Quarter For Merck" - Pink Sheet, 29 Oct, 2010.). Merck noted in a previous filing with the Securities and Exchange Commission that it had received subpoenas from the DoJ requesting information related to its research, marketing and sales activities for the COX-2 inhibitor and that it is the target of a grand jury investigation. The company has already paid out $5.6 billion to resolve lawsuits and government investigations concerning Vioxx (see chart). That’s about the amount of revenue the drug generated in two years. In 2003, the last full year it was on the market, Vioxx had worldwide sales of $2.5 billion. The largest chunk of settlement funds, $4.85 billion, settled the bulk of Vioxx product liability litigation. FDA approved Vioxx in May 1999 for treatment of osteoarthritis, management of acute pain and treatment menstrual pain and Merck withdrew it from the market in September 2004 due to increased risk of cardiovascular events, including heart attacks and strokes. Merck also has paid out millions of dollars in Vioxx legal fees. The company reported in its August 10-Q filing with the SEC that during the first six months of 2010 it spent approximately $78 million in the aggregate in legal defense costs worldwide related to Vioxx litigation. And as of June 30, its reserve for future Vioxx legal defense costs was approximately $92 million. Merck’s anticipated $950 million settlement ranks below Pfizer’s $2.3 billion agreement with the DoJ, which included a criminal fine of $1.195 billion for misbranding its COX-2 inhibitor Bextra (valdecoxib) (Also see "Pfizer's Record-Breaking $2.3 Bil. Settlement With U.S. Attorney Imposes New Restrictions on Corporate Behavior" - Pink Sheet, 7 Sep, 2009.). And it is below Lilly’s $1.4 billion settlement to resolve allegations of off-label marketing of Zyprexa (olanzapine). |