Merck Case Study -- Merck

Merck case study -- Merck & Co., known as Merck Sharp and Dohme outside North America, is a U.S. based pharmaceutical company originally the subsidiary of a Germany company confiscated after World War I and set up as an independent company. It is now in the top 5 pharmaceutical companies in the world posting sales of almost $30 billion in 2009 (Financials - Merck, 2010). One of Merck's most popular, and profitable, products was Rofecoxib, marketed under the name Vioxx. Vioxx was one of the drugs of choice for treating pain from arthritis and injury without the downside of narcotic side effects. At one time globally, almost 100 million people were taking, or had taken, Vioxx; resulting in over $2.5 billion in revenue (Reuters, 2006).

The problem came in September 2004 when Merck voluntarily withdrew the product from the market due to publicity focusing on increased risks of heart attacks and strokes over long-term, high dosages. Despite a number of clinical studies, there has been nothing to definitively link Vioxx with increased risk, but the FDA estimated that Vioxx contributed to between 90-140,000 heart attacks. This was cooborated by the journal the Lancet who also believed the FDA was complicit by not pulling the product earlier, at least by 2000 (Horton, 1995-96). By March 2006, there were over 10,000 cases and 190 class actions. The case brings up several interesting points when dealing with pharmaceutrical products and product liability.

First, in tort product liability there must be a manufacturing defect, a design defect, or a failure to warn. Clearly, for Vioxx, the litigation stems from the argument that Merck knowingly allowed Vioxx onto the market with the potential for causing cardiac issues. This is difficult enough to prove conclusively, let alone damages. For instance, there is typically never one cause for an illness, heart attacks included, and proving that taking Vioxx caused premature death as a sole factor is problematical -- although some juries bought this argument. A class action suit allows a group of people that believe they have suffered ill effects under Vioxx and can come together to file a larger, more representative suit than a single individual. For the company, however, the issue was more risk-management oriented than guilt. For Vioxx, there were approximately 27,000 suits against Merck; from 2005-17 went to trial, and Merck won 12 (71% of the cases). However, experts estimated it would likely take over 3,000 years to finish trials for all, which is a great deal of money tied up in litigation fees, executive energy, and continued sales and product dysfunction. Merck had to decide where to draw the line with revenue vs. future profitability, declining public relations, and acute market malaise (Vassar, 2007).

Part 2 -- in legal terminology, a tort is a common law wrong that involves a breach of promise or duty by one party to another. It is different than a criminal action, which involves a breach of duty owed to society at large. It is possible that actions are both tors and crimes; but only the state may prosecute a crime, but any injured party may bring a lawsuit against another as a tort ruling. There are a number of different torts; ranging from assault to negligence, all with foundations in the common law tradition (Van Gerven, 2001).

One business tort example is called Ultrahazordous Activity. This tort asserts that there is something so inherently dangerous that a person engaged in that activity can be held liable for any injuries caused to anyone else; even if the person or organization took every reasonable precaution to prevent injury. For instance, a hypothetical company called Xenon might be transporting explosive materials from California to a job site in Colorado via railroad. They have taken precautions, but during a storm, the train bumps so that an explosion occurs; damaging property and killing people. Xenon is liable under tort law because of the relative possibility of harm, seriousness of the explosives, possibility of an explosion, and the level of risk (Sgroi, 1996, 408-13).