Attorney urges punitive damages against Merck

NEW YORK — An attorney for a 77-year-old New Jersey man who won a $4.5 million verdict against Merck & Co. over the withdrawn Vioxx painkiller urged the jury on Thursday to send a strong message to the drugmaker by awarding punitive damages.

"Because of your verdict, you now have the undivided attention of Merck," Jerry Kristal, an attorney for plaintiff John McDarby, said at the start of the punitive phase of the trial in Atlantic City, New Jersey.

"You now have the undivided attention of other companies that make potentially dangerous products. The message you can send is very important, not just for the McDarbys, for society as a whole."

Merck shares fell 4.6 percent in morning trade, a day after the jury found that Vioxx had been a substantial contributing cause of a heart attack suffered by McDarby. The jury determined the drug was not a significant cause of a heart attack suffered by a second plaintiff, Thomas Cona.

Merck pulled the $2.5 billion-a-year drug off the market in September 2004 after a study showed it doubled the risk of heart attack and stroke among people who used it for at least 18 months.

The drugmaker has been hit with nearly 10,000 Vioxx-related lawsuits.

In her opening arguments on Thursday, Merck attorney Christy Jones argued that the company "acted in good faith and the doctors and scientists at Merck did their very best to comply" with U.S. health regulations.

Former Merck Chief Executive Raymond Gilmartin was to appear at Thursday’s hearing to explain the company’s actions over Vioxx. Gilmartin resigned in May 2005, well ahead of his scheduled retirement in 2006.

Credit Suisse analyst Catherine Arnold said Wednesday’s jury verdict should hurt Merck shares.

"Most investors told us that they expected Merck would win this case, largely because both plaintiffs had multiple risks for heart attack beyond consumption of Vioxx," Arnold wrote in a research note.

Under New Jersey law, punitive damages, which can be awarded as a punishment to rectify a wrong committed by a defendant, would be capped at $22.5 million — five times compensatory damages.

"The compensatory damages amount by itself is already large, in our opinion," Prudential analyst Tim Anderson wrote in a research note.

Merck director Lawrence Bossidy said he did not expect the latest Vioxx verdict would change Merck’s legal strategy of approaching each case individually.

"I don’t think it has any long-term consequences," Bossidy said on cable television network CNBC. "I think it will be decided on a case-by-case basis."

The McDarby case is the second multimillion-dollar Vioxx verdict against Merck.

In August 2005, Merck was ordered by a Texas jury to pay $229 million in punitive damages and $24 million for mental anguish and loss of companionship to the widow of a Texas man who took the drug for about eight months. The total award is set to be cut because of a Texas law limiting damages.

Deutsche Bank Securities analyst Barbara Ryan said Merck must stick with its strategy of trying every case in court or risk following in the steps of Wyeth, which has taken more than $21 billion in charges to cover financial liability related to its recalled diet drugs.

"To settle now would open them to an unending line of plaintiffs … Each case must be litigated on its merits — i.e. cause and effect — as was confirmed with this split verdict," Ryan said.

Rob Gordon, who represented McDarby, said his New York law firm, Weitz and Luxenberg, has 1,000 Vioxx cases filed in Atlantic County, New Jersey, and plans to file 1,500 more before September.

JP Morgan analyst Chris Shibutani said he still believes Merck has a strong case when it comes to whether Vioxx caused a heart attack in a particular case and whether the company adequately warned about the drug.

"It will take more verdicts to tell whether trying every case individually is sustainable or needs to be revisited in light of plaintiff victories," Shibutani wrote in a research note.

Merck shares dropped to the mid-20s after the company pulled Vioxx off the market. But the stock has been strong of late, rising about 30 percent in the past six months.

(Additional reporting by Anna Driver in Atlantic City and Julie Steenhuysen in Chicago)