Merck & Co., Inc. (NYSE: MRK) appeared to win a major victory today when the New Jersey Supreme Court ruled that so-called third party payors could not proceed with their claims against Merck via a national class action. However, a closer look at the opinion should send shock waves throughout the financial community. For what the case really said, depite Merck’s spin, is that all third party payors can bring their own individual cases against Merck. There is about $15 billion at stake here, the value of what third party payors, such as Blue Cross, Aetna, Oxford, and union plans paid for Vioxx, the killer drug withdrawn from the world market in September, 2004. It is estimated that Merck caused somewhere between 80,000 and 130,000 needless heart attacks and strokes by aggressively and falsely marketing this pain killer. The Supreme Court said third party payors can pursue Consumer Fraud Act claims against Merck. This poses a monumental problem for Merck since in these cases Merck will not be able to blame the plaintiffs for smoking or being obese, as they have done in some of the individual trials to date. The cases will be giant companies, such as Blue Cross, vs. Merck. Merck has spent $1.3 billion dollars so far defending the 15 trials and there are over 30,000 cases pending. Ten cases are set for trial in January in New Jersey and Merck continues to promise they will trial every case one at a time. Various juries to date have specifically found that Merck violated the Consumer Fraud Act and in some cases awarded punitive damages to punish Merck for their egegious conduct. This conduct necessited the trial judge to report Merck to the Attorney General where Merck’s conduct is under review. Wall Street analysts who think today’s decision is a win for Merck will find they are sadly mistaken.
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