Drug maker Merck & Co. Inc. (MRK) said Thursday it is satisfied that the thresholds required to trigger funding of the settlement related to its withdrawn painkiller Vioxx will be met. The company said that it would waive its right to walk away from the agreement if the thresholds and other requirements were not met, thus triggering its obligation to pay a fixed total of $4.85 billion. Accordingly, the company noted that the first payment into the resolution fund is slated for August 6, 2008.
The Whitehouse Station, New Jersey-based company expressed confidence that sufficient enrollments will be verified to exceed the participation threshold requirements and said that more than 97% of eligible claimants now have initiated enrollment in the program. Interim payments to qualified plaintiffs are expected to commence in August.
Vioxx was approved for use in 1999 for treatment of arthritis and quickly became a blockbuster for Merck, recording sales of $2.5 billion in 2003. However, the company recalled Vioxx from the market after the drug was linked to cardiovascular problems in patients taking the drug for over 18 months. A study revealed that users of the drug were more susceptible to heart attacks and strokes than people using other pain medications.
Following the recall, Merck was hit by thousands of lawsuits. Though the company had earlier said that it would fight cases one by one, it retracted from that stance in November 2007. Merck then agreed to pay $4.85 billion to settle lawsuits involving heart attacks, stroke or death.
Under the terms of the settlement, Merck set up a $4 billion fund for people who claim they suffered heart attacks as a result of Vioxx, and another $850 million fund for those who suffered ischemic strokes.
Merck said that the Claims Administrator will report to the U.S. District Court Judge Eldon Fallon in New Orleans on Thursday that more than 48,500 of the approximately 50,000 individuals who have registered eligible injuries have enrolled in the program and that the vast majority of enrolled individuals have submitted releases and other materials for verification.
Bruce Kuhlik, executive vice president and general counsel of Merck said, "This is an important milestone that shows the resolution program is on track. Enough claims have been verified for Merck to fund the program."
Merck said that payments into the resolution fund would be made in installments, with the first payment of $500 million slated for August 6. Additional payments will be made on a periodic basis going forward, as and when required to fund payments of claims and administrative expenses.
Interim payments are expected to be authorized by the Claims Administrator on a rolling basis to claimants alleging an MI injury or sudden cardiac death who enrolled by the March 31, 2008 deadline for those payments, and whose claims have been found qualified for payment by the Claims Administrator under the guidelines set forth in the agreement.
Interim payments are calculated at 40% of the then-currently estimated total final payment. Interim payments to qualified claimants alleging ischemic stroke will follow, beginning in or after February 2009. Merck noted that the exact amounts of final payments cannot be calculated until all claims have been processed.
The Claims Administrator expects that before the end of August, it will have evaluated more than 2,500 individual claim packages submitted on behalf of claimants qualified to receive interim payments under the resolution program. According to Merck, this is sufficient to trigger the interim payment process as provided in the agreement
The company said that its action automatically extends to October 30, 2008 the enrollment deadline for eligible U.S. claimants who had lawsuits pending or tolling agreements as of Nov. 9, 2007, which is the date the agreement was signed. In 2007, Merck recorded a pretax charge of $4.85 billion, which represents the fixed amount to be paid by the Company to settle qualifying claims.
Last month, the New Jersey Supreme Court ruled that Vioxx users who suffered no known personal injury could not sue the company to pay for electrocardiograms and follow-up consultations with cardiologists. A trial court had dismissed the suit in May 2005, but an appellate court ruled that the dismissal was premature.
In Thursday's regular trading session, MRK is trading at $36.19, down $0.44 or 1.20% on a volume of 1.83 million shares. The stock has been trading in a range of $34.49-$61.62 in the past 52 weeks.
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