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Merck and Vioxx (B)

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Yale School of Management
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Backing off their strategy to fight every single claim, Merck & Co. reached a settlement with a steering committee of plaintiff’s attorneys on November 9, 2007. According to the agreement, the company would pay $4.85 billion to settle most claims arising from its Vioxx medication.

The settlement deal was announced in New Orleans where representatives of the two sides met in marathon sessions to iron out the final details of the agreement. Since judges asked the two sides to begin settlement talks, Merck and the plaintiff’s attorneys had conducted over 50 face-to-face negotiating sessions that stretched out over 11 months.

Under the terms of the agreement, claimants would be paid according to a point system determined by a claimant’s severity of side effects, exposure to Vioxx and other health risks. Merck’s liability was fixed at $4 billion for heart attacks and $850 million for strokes. Individual claimants would be paid according to the number of points they amassed and the value of each point, once the total number of points was determined.

According to the 72-page agreement, the settlement offer would only go into effect once 85 percent of the claimants with the most serious injuries gave up their individual suits and joined the settlement. Lawyers hoping to enroll their clients in the settlement had to guarantee that 100 percent of their clients entered into the settlement agreement. As of January 22, 2008, some 50,000 plaintiffs had signed up for the settlement, though a Merck spokesmen noted that it was not clear that all of the plaintiff’s were eligible for the deal and therefore it could not be determined if the 85% level had been reached.

Merck stressed that the settlement was not a class action. In addition, Merck did not admit to any fault in its sale of Vioxx. Lawsuits that had already gone to verdict would not be affected by the settlement.

Published Date: 27/01/2008

Suggested Citation: Jaan Elias and Constance E. Bagley,"Merck and Vioxx (B)," Yale SOM Case 08-017 , January 27, 2008

Keywords: lawsuits