High Court Clears Way For Vioxx Investor Litigation

Merck Sued By Investors For Fraud

Add one more lawsuit for Merck to fight over the recalled painkiller, Vioxx. 

Shareholders won approval by the U.S. Supreme Court Tuesday to go forward with an investor fraud lawsuit that charges Merck withheld unfavorable data about the risky drug and its link to heart attacks and strokes.   

The suit has been ongoing with a federal judge ruling the statute of limitations had expired, but an appeals court overturned that decision. Merck then appealed that unfavorable ruling to the high court.

What has been the focal point of debate is  - when to start the clock on limitations - when investors suspected fraud might have occurred or when they knew? 

Merck was found to have withheld insider information on Vioxx and its link to heart attacks and strokes before the arthritis drug was withdrawn from the market in September 2004. That year, a clinical trial proved the link to heart attacks and strokes, but internal documents show Merck scientists knew about the risks earlier.

In a turnaround, Merck now argues that by 2001 there were “storm warnings” about Vioxx. That year federal regulators accused the company of underplaying potential heart risks.  Merck argues that was enough information to start the clock on the statute of limitations, which would mean investors missed their two-year deadline.     

But last year, Bloomberg reports, an appeals court ruled that was not enough of a storm warning because Mercks’ explanation of the health risks study results were plausible.     

The first investor suit was filed in November 2003, Bloomberg reports, more than three years after a clinical study showed Vioxx was responsible for five times the heart attacks as rival drug, naproxen.

The Wall Street Journal Legal Blog says expect the justices in their October 2009 term, to provide more guidance on exactly how much time investors have before they can proceed to court.  

In a statement, Merck said it looks forward to resolving the question of what constitutes proper notice under the securities laws. 

Merck is already settling about 27,000 cases of patients who suffered heart attacks and strokes, or their survivors, out of a $4.85 billion settlement fund set aside in November, 2007.   #