New York Comptroller Sues Merck Over Concealing Safety Risks of Vioxx, Contributing to Stock Loss for Pension Fund
The New York State Common Retirement Fund on Tuesday filed a lawsuit against Merck over allegations that the company misled shareholders about the safety risks of the arthritis medication Vioxx prior to the Sept. 30 market withdrawal of the treatment, the New York Times reports. According to the lawsuit, the pension fund lost about $171 million on the day of the Vioxx withdrawal, when the value of Merck shares decreased 27%. The value of Merck shares has decreased almost 40% since the Vioxx withdrawal. The pension fund, the second-largest in the nation after CalPERS, has about $120.8 billion in assets and serves more than 970,000 retirees, beneficiaries and members. In the lawsuit, the first Vioxx-related lawsuit filed by a pension fund, New York State Comptroller Alan Hevesi (D) cited recent newspaper and broadcast reports and medical journal articles that indicated Merck was aware of, but failed to disclose, evidence of the safety risks of Vioxx. The lawsuit names Merck, company CEO Raymond Gilmartin and other individuals as defendants and seeks unspecified damages. Hevesi spokesperson John Chartier said that at the time of the Vioxx withdrawal, the pension fund owned 9.4 million Merck shares (Meier, New York Times, 12/1). About 7.8 million of those shares were held in an internally managed index fund, according to Chartier (Dale, Dow Jones/Long Island Newsday, 11/30). In the lawsuit, filed in U.S. District Court in Trenton, N.J., Hevesi asked the court to consolidate all securities-related lawsuits against Merck into a class action and to make him the lead plaintiff, "a position that would give him a key role in settlement talks," the Long Island Newsday reports (Harrigan, Long Island Newsday, 12/1). The lawsuit seeks class-action status for individuals who purchased Merck shares between May 21, 1999, and Oct. 29, 2004. According to Merck spokesperson Joan Wainwright, the company faces about 15 lawsuits that allege fraud against shareholders. Hevesi on Tuesday also filed a separate but related lawsuit in U.S. District Court in New Orleans.
Hevesi Comments
"Merck must be held legally responsible for its actions. These actions have put lives at risk and cost shareholders billions of dollars," Hevesi said in a statement (New York Times, 12/1). In a separate interview, Hevesi added, "Merck has produced a product that they knew was harmful and dangerous for a substantial period of time." He also said that the lawsuit will take "a number of years" to resolve and that the plaintiffs "will only get back a percentage of the losses" (Dunaief, New York Daily News, 12/1). According to Dow Jones/Newsday, "Hevesi has been considered an activist comptroller, filing suits against a number of companies," such as a 2003 lawsuit filed against Bayer related to the withdrawal of the anti-cholesterol medication Baycol (Dow Jones/Long Island Newsday, 11/30).
Merck Reaction
"Merck extensively studied Vioxx before seeking regulatory approval to market it," Wainwright said, adding, "We promptly disclosed the clinical data about Vioxx. When questions arose, we took additional steps, including conducting further prospective, controlled studies to gain more clinical information." She said that the company has not reviewed the lawsuit filed by Hevesi (New York Times, 12/1).
