Merck and Vioxx

A little more on that Vioxx settlement announced yesterday.

Merck, the US pharmaceutical giant, is to continue battling with hundreds of British claimants over its failed arthritis painkiller, Vioxx, in spite of agreeing yesterday to a settlement with US residents.

Merck agreed a $4.85bn (£2.42 bn) settlement, one of the biggest in history, with US claimants who blamed the drug for heart attacks and other side-effects.

But the company said this would not apply to British lawsuits or others round the world suing for compensation.

Hmm….now why would that be? I think that at least part of it is the difference in the way that legal fees are paid. Here, if you sue someone and lose, then you have to pay their legal bills. Over there, the colonial cousins have a rule that each side (except in exceptional circumstances) pays its own legal bills.

So, Merck lost the first big case and has then won a series of others (not all of them, but a majority). But even though they\’ve won them, even though they\’ve not had to pay damages, I\’ve seen it said that their legal bills were running at $600 million a year. Making a $4.85 billion settlement thus makes some sort of sense for them. It\’s not an admission of guilt so much as a simple trade off. A decade\’s worth of legal bills? Or pay them to go away?

The reason why people here aren\’t being treated equally is that if you sue Merck and lose, you owe them money. So the same pressure to settle isn\’t there.

Now, which system you prefer would tend to depend upon your views about consumers, companies and the lawyers in between them. Should we adopt the US system, meaning that it will be easier for those wronged to sue? Or should the US adopt loser pays? Meaning that fewer will have an opportunity to shake down the innocent, but deep pocketed, corporations?

Your call really, depends on the prejudices you bring to the start of the argument I guess.

One comment on “Merck and Vioxx

  1. How much of the $4.85 billion was pocketed by the lawyers? My guess is anything from a third to a half which I believe is typical of commission rates for a no win/no fee deal in the US. So, to be generous to the lawyers, claimants still get around $3.2 bn and Merck still pays $4.85 bn. However, in the end and if Merck is still in business, Merck has to recover those costs from somewhere. I guess a lot comes from its insurers (ie we all pay) and the rest will be built into the cost/pricing structure of the company ie future customers and Merck shareholders pay. Actual costs to the lawyers were, what, $200 million. So consumers would have to cough up, say, $400 million to get Merck into court without a no win/no fee arrangement.

    I don’t know the odds of Merck winning or losing a court action but, whatever way we go, the lawyers win: only it seems they win bigger if they take a risk. In fact, unless they were going to win bigger, over the long term, they would generally opt for a fixed/time based fee structure, not a bet on whether or not the deep pockets will settle. Seems then the consumer gets a better deal (if that equates to lawyers getting less) if our system is adopted rather than the US one.

    BTW Tim what happened to the “preview” facility on your comments.

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