UPDATE: Supreme Court Appears Skeptical Of Merck In Vioxx Case
(Updates with additional detail.)
By Brent Kendall
Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- The U.S. Supreme Court voiced skepticism Monday of
Merck & Co.'s (MRK) arguments that shareholders waited too long to file
securities lawsuits alleging the drug maker misrepresented the safety of
painkiller drug Vioxx, which it removed from the market in 2004.
During an hourlong oral argument, Merck was in the unusual position of arguing
that investors should have filed their lawsuits earlier because there was an
overwhelming amount of public information available by late 2001 suggesting the
possibility the company committed securities fraud. Merck, however, also argued
that the investors don't have enough evidence to make a case against the
company.
"Companies can't have it both ways," Justice Anthony Kennedy told a lawyer for
Merck.
Justice Stephen Breyer said Merck's position in effect would require
plaintiffs to file lawsuits before they had enough evidence to back them up. "
That doesn't make sense to me," he said.
Investors are seeking billions of dollars in damages from Merck. They filed
the first of several securities lawsuits against the Whitehouse Station, N.J.-
based drug maker in November 2003, alleging it misled them by downplaying the
significance of clinical-trial results that appeared to show that patients
taking Vioxx faced an increased risk of heart attack.
The investors said this alleged deception caused them to pay inflated prices
for Merck's stock.
The central issue before the Supreme Court focuses on when investors should
have known that there was a possible Vioxx fraud. Investors must sue within two
years of the time they should have suspected a fraud.
A loss for Merck could eliminate one line of defense that companies use to
fend off shareholder lawsuits.
Merck argued that investors should have suspected possible fraud by late 2001,
after the U.S. Food and Drug Administration sent the company a warning letter in
September alleging that it misrepresented the safety profile of Vioxx by
minimizing the drug's potential to increase a patient's risk of heart attack.
"You had the FDA specifically accusing Merck of deliberate wrongdoing in
connection with its public representations concerning the cardiovascular safety
of Vioxx," Merck lawyer Kannon Shanmugam said.
Justices Antonin Scalia and Ruth Bader Ginsburg suggested the FDA letter
demonstrated only that Merck had made misrepresentations, not that it knowingly
committed fraud.
David C. Frederick, a lawyer for the investors, said the plaintiffs had no
concrete basis to suspect a possible fraud until a November 2004 Wall Street
Journal article disclosed internal Merck emails demonstrating that the company
had long held concerns about the safety of Vioxx.
While Frederick faced seemingly less hostile questions from the court, his
argument did suffer one potential blow. Justice Sonia Sotomayor questioned why
the investors filed their lawsuit a year before publication of The Wall Street
Journal article that was supposedly so key to their case.
Frederick said investors were initially prompted by the 2003 publication of
results from a Harvard University study that found Vioxx users faced an
increased risk of heart attack. He said the lawsuit was later amended after the
2004 Wall Street Journal article was published.
The Obama administration is siding with investors in the case, arguing they
didn't wait too long to sue.
A decision in the case is expected by the end of June.
-By Brent Kendall, Dow Jones Newswires; 202-862-9222; brent.kendall@
dowjones.com
(END) Dow Jones Newswires
11-30-091500ET
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