Merck & Co has agreed to pay $4.85 billion to settle claims that its painkiller Vioxx caused heart attacks and strokes in thousands of users, the drugmaker said on Friday. The agreement covers lawsuits filed against the company in US courts, resolving a major legal battle that cost the drugmaker a third of its market value in 2004.
Merck recalled the popular painkiller, which had $2.5 billion in annual sales, in September 2004 after a study showed it doubled the risk of heart attack and stroke in patients taking it for more than 18 months.
In the settlement, reached with law firms on the steering committee for the federal Vioxx litigation as well as representatives of plaintiffs'' counsel in state proceedings, Merck did not admit Vioxx caused patient injury and did not admit fault.
The drugmaker, whose shares rose in pre-market trade on news of the deal, said it would take a charge of $4.85 billion to cover costs of the agreement. The settlement marks a reversal in strategy for Merck, which previously said it intended to fight Vioxx litigation on a case-by-base basis rather than consider any broad settlement.
"The agreement is structured to provide a significant degree of certainty toward resolving the majority of the outstanding Vioxx product-liability claims in the United States for a fixed amount," said Richard Clark, chairman, president and chief executive officer of Merck. The drugmaker said it will still defend all claims not included in the settlement.
He noted that litigation over Wyeth''s Phen-Fen diet drug was only now coming slowly to a close after 10 years in the courts and over $21 billion in settlement costs. Since the withdrawal of Vioxx, Merck has won 11 court cases over the drug and lost five. It is appealing those cases that it lost.
Merck shares tumbled on news of the withdrawal of the drug in 2004, losing more than a third of their market value. But with Vioxx victories in court, and a string of successful new medicines, the company''s value has recouped those losses.
The stock, even with the major litigation drag, has outperformed its peers on the American Stock Exchange pharmaceutical index this year, rising 25 percent, compared with little change in the index. Merck shares traded up to $55.50 in pre-market dealings from a Thursday close at $54.77 on the New York Stock Exchange. The stock is trading just below a four-year high of $58.36, reached earlier this month.