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Forget Fair; It’s Litigation as Usual
By JOE NOCERA
Published: November 17, 2007

They had the kits ready to go. The “trial package,” they called it.

Then again, as we mass tort aficionados know only too well, the plaintiffs’ bar always develops a trial kit when a mass tort gets to a certain point; it’s one of the weapons trial lawyers use to put pressure on the company they are attacking. The big-time lawyers who bring the early cases — “the keynote cases,” as Russ Herman, a New Orleans plaintiffs’ lawyer, calls them — can wind up spending $1 million to $1.5 million developing their case. They hunt down expert witnesses. They do the discovery. They take the depositions. They hire the jury consultants. Through trial and error, they figure out which documents, which lines of questioning, which approaches, work best.

And then they put their collective knowledge in a neat little package of documents and videotaped depositions and suggested lines of attack, so that all the other lawyers who have sued the same company can partake of their acquired scholarship, and bring their own trials — for a lot less money. “Ours would have allowed a lawyer to try a legitimate case for under $200,000,” said Mr. Herman, with no small touch of pride. He was talking, of course, about the Vioxx litigation, which the drug’s manufacturer, Merck, settled late last week for the tidy sum of $4.85 billion.

Mr. Herman has 120 of the 27,000 cases — that’s right, 27,000 — that were brought against Merck, which took Vioxx off the market three years ago after a study made it clear that the medication increased the risk of a heart attack or stroke. He was also one of the key architects of last week’s settlement. When I spoke to him a few days ago, he defended the settlement as a fair one, which, as he put it, “balances the scales between two competing parties.” He made it sound like standard business negotiation. Which it was.

But he also said something plaintiffs’ lawyers don’t often say out loud — at least not when a reporter is within hearing distance. “A corporate defendant cannot afford to defend thousands of cases where there is an alleged mass disaster at one time,” Mr. Herman said. So true. If we’ve learned anything as mass torts have evolved over the last decade, it is that it scarcely matters anymore whether the facts are on the plaintiffs’ side — not when a thousand lawyers are armed with those kits.

When the litigation got under way in 2004, Kenneth C. Frazier, then Merck’s general counsel, vowed to defend every case. But that was never a believable statement. When you are a corporation facing 27,000 lawsuits, the question is never whether you’re going to settle. The only questions are when and for how much.

Well, actually, there is one other question, though in a society as litigious as ours, it is rarely raised. Is a mass tort really the right mechanism to settle disputes about product safety, or to punish corporate wrongdoing?

Vioxx was hardly Merck’s finest hour. I’ll readily concede that point. The company did things it shouldn’t have. For decades, Merck was the most admired pharmaceutical company in the world, with a sterling reputation for producing high-quality, innovative drugs. But like its competitors, it caught a serious case of blockbuster fever in the 1990s. In its effort to crank out drugs with $1 billion or more in annual sales — the definition of a blockbuster drug — it over-reached. The Vioxx fiasco was the result.

Vioxx, you may recall, was a painkiller that was originally aimed at a pretty small group of patients: people who suffered serious stomach problems as a result of taking aspirin regularly. But Merck spent hundreds of millions of dollars marketing Vioxx, largely through direct-to-consumer advertising, portraying it as some kind of miracle pain reliever. So instead of having a few hundred thousand users in the short time it was on the market, it had 20 million. Its annual sales grew to $2.5 billion a year.

Even before the drug was approved by the Food and Drug Administration, there were rumblings in the scientific community that Vioxx might increase the risk of heart attacks or strokes. It’s not quite right to say that Merck completely ignored those potential problems — but the company certainly tried to avert its eyes.

“Once a drug has been approved, there is a marketing enthusiasm that takes over that doesn’t want to deal with the risks and wants to promote the drug,” said Bruce Psaty, a drug safety expert at the University of Washington. At Merck, Dr. Psaty added, “there was a kind of studied ignorance” of the possibility that Vioxx could increase the chances of a heart attacks — even after one study, called Vigor, suggested that the drug could quadruple the heart attack risk. Only in 2004, when another study confirmed the increased risk, did Merck finally react — by taking the drug off the market.

If Merck’s first mistake was overselling the drug, its last mistake was withdrawing it entirely. The company says it did so because it was putting patient safety first, but from a litigation standpoint, it was like walking into a bullring dressed in red. On the one hand, withdrawing the drug meant keeping it from the small population that really needed it. On the other hand, the act of pulling the drug turned a trickle of lawsuits into a torrent. In its naïveté, Merck thought that its move would win it plaudits for “doing the right thing.” Instead, its decision was viewed by the plaintiffs’ bar as an admission of guilt — and the perfect club with which to beat the company into submission.

There are many problems with viewing product liability lawsuits as a means to right wrongs, which is how we see them in this country. They often make lawyers rich while the people who say they were hurt wind up with very little. The legal system gives corporations zero incentive to step forward if there is evidence that a drug might have a harmful side effect — because, after all, they’ll get sued as soon as they make such an admission. Third, even the smartest lawyers aren’t the Food and Drug Administration, which is charged with making decisions about which drugs should be allowed on the market and how their risks should be disclosed. Mass torts have become a rogue form of regulation, and not necessarily in the public interest. And finally, when you get right down to it, litigation is a crapshoot, and it can be cruelly unfair.

That was certainly true of Vioxx, whose potential side effect is one of the most common serious conditions known to mankind: a heart attack. It is impossible to know what causes someone to have a heart attack, just as it is impossible to know why someone develops cancer. In the Vioxx litigation, the plaintiffs’ lawyers were arguing, in effect, that the way to punish the company’s bad behavior was to make it hand their clients large sums of money, even though they couldn’t prove that the clients’ heart attack had been induced by Vioxx. Meanwhile, the company argued that it was just as likely, if not more likely, that some other risk factor was involved, like smoking or obesity — even though it had put a product on the market that increased heart attack risk.

As a result, a handful of lucky people who may well have been victims of their own bad habits — and not of Vioxx — won large sums of money. (Although they haven’t seen a penny yet: every case the plaintiffs won is on appeal.) And some people who may well have suffered because of Vioxx lost their cases and didn’t get a penny. How does such a system even approximate “justice”?

Over the last year, Merck had gained the upper hand. It was winning most of the cases, as juries bought into its arguments that there was simply no proof that Vioxx had caused the plaintiffs’ heart attacks. And the plaintiffs’ lawyers, who had invested upwards of $100 million developing the litigation and had yet to receive a penny, were on the run.

So why, then, did Merck settle? Because it had no choice. The four judges managing most of the cases had decided that the time had come to settle the litigation, and Merck was not in a position to say no to the judges. If Merck had continued to fight, the judges could have piled on so many trials that the company would have been begging for mercy. Besides, Merck had won enough cases that it felt it could devise a settlement that it could live with.

Which it did. The sum is a very large one, but not nearly as large as Wall Street once feared; not surprisingly, the stock jumped when the $4.85 billion deal was announced. With the litigation behind it, Merck can focus on being a great pharmaceutical company again, something it was doing even before it settled the Vioxx mass tort.

The company is taking particular pride in the hoops claimants will have to jump through to wind up with some of the $4.85 billion. People who were the healthiest and took Vioxx the longest will get the most money — which is still not the same as saying that people who had Vioxx-induced heart attacks will get compensated. Because, after all, that can never be proved. There has to be better way, doesn’t there?

As for the plaintiffs’ lawyers, they are likely to pocket around $1.5 billion of the settlement money, which means that Merck will wind up feeding the beast, just like every other company that finds itself embroiled in a mass tort. That money will go to funding the next mass tort. In fact, shortly after the settlement, I heard Mark Lanier, the flamboyant Texas lawyer who won the first Vioxx case, tell CNBC that he would take his winnings “and put it back into more litigation to try to help hold the pharmaceutical industry accountable.”

When I spoke to him on Thursday, I asked which drug he was going after next. “I’m one of the leaders in the Avandia litigation,” he boasted. Avandia is a controversial diabetes drug marketed by GlaxoSmithKline; studies have suggested that taking it increases the risk of — wouldn’t you know it? — heart attack and stroke. Just this week, the F.D.A. strengthened the language on Avandia’s black box warning, though it’s still not tough enough to satisfy the drug’s critics.

Although GlaxoSmithKline says there are only 45 lawsuits filed so far, Mr. Lanier told me that he knows of at least 1,500 Avandia cases. He added that he expects the number to top out at 4,000. A judge in Philadelphia has been named to manage the growing litigation. Discovery is expected to begin shortly.

Here we go again.