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Healthy Skepticism Library item: 16827

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.


Publication type: news

Mauro T
High Court Seems Unconvinced by Merck in Vioxx Arguments
The National Law Journal 2009 Dec 1

Full text:

U.S. Supreme Court justices seemed reluctant Monday to give the pharmaceutical company Merck & Co. a “statute of limitations” way out of defending against a securities fraud class action involving Vioxx.

The Court heard arguments in Merck v. Reynolds, the latest round in a continuing battle over how easy or hard it should be to file class actions. Companies want speed, while shareholder and consumer groups insist they need time to develop the evidence for their claims. In this case, the Obama administration sided with the shareholders.

Merck lawyer Kannon Shanmugam of Williams & Connolly argued that there was enough evidence of possible fraud in his client’s statements about the anti-inflammatory drug in the public domain by September 2001 that diligent investors should have filed their lawsuit before November 2003, in order to satisfy the two-year statute of limitations. Among the public evidence, Shanmugam said, was a September 2001 warning by the Food and Drug Administration that the claims made by Merck about Vioxx were false and misleading. The company removed Vioxx from the market in 2004 after increasing evidence that the drug increased the risk of heart attacks. The U.S. District Court for the District of New Jersey dismissed the class action in 2007 on statute-of-limitation grounds, but the 3rd U.S. Circuit Court of Appeals reinstated the case, ruling that the shareholders could not have been aware of the wrongdoing within the period advocated by Merck.

Justice Ruth Bader Ginsburg, noting that Merck initially insisted there were other explanations for the increased risk, said, “How would the most diligent plaintiffs have gone about finding out whether Merck really had no good-faith belief” in those alternate theories.

Justice Antonin Scalia also suggested that in the early stages there was “simply substantial evidence of inaccuracy,” not of the kind of fraud needed to trigger a securities suit.

Shanmugam insisted that the FDA and others had given enough warning suggesting fraud that the investors should have been on notice that the statute of limitations had begun. Even as he asserted these seemingly unfavorable facts about Merck, Shanmugam also said the company still takes the position that the plaintiffs in the suit “still don’t have sufficient facts” to satisfy pleading requirements for securities fraud suits.

To which Justice Anthony Kennedy said, “companies can’t have it both ways.” In other words, Kennedy seemed to be saying that companies can’t both urge heightened pleading standards for plaintiffs and assert that plaintiffs should be filing suit before there is clear evidence that companies were intentionally committing fraud.

David Frederick of Kellogg, Huber, Hansen, Todd, Evans & Figel, representing the plaintiffs in the suit against Merck, said Congress intended to give consumers and shareholders sufficient time to file securities fraud suits. “This was the era,” Frederick said, “in which Enron and WorldCom exposed to the world the complexity of vast and difficult-to-ascertain frauds, and Congress was seeking to extend that period so that investors would have an opportunity responsibly to bring cases.”


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