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Court Reinstates Shareholder Suit Over Vioxx

By Admin on September 11, 2008 | Last updated on March 21, 2019

A federal appeals court on Tuesday reinstated a lawsuit brought by investors who had purchased stock in Merck & Co., Inc. -- manufacturer of the painkiller Vioxx -- and allege that Merck's officers and directors misrepresented the drug's safety and commercial viability.

Vioxx, once a hugely-popular prescription pain medication, was pulled from the market in 2004, due to its link to increased risk of serious cardiovascular problems like heart attack and stroke. Shareholders filed the class action securities fraud lawsuit against Merck & Co., Inc. in 2003. A federal trial court dismissed the shareholders' suit in April 2007, ruling that too much time had passed between the date on which the shareholders should have been aware of Merck's alleged fraud and the date the suit was filed, so the claims were barred by the statute of limitations.

In Tuesday's ruling, a three-judge panel of the U.S. Court of Appeals for the Third Circuit stressed that a plausible alternative explanation for Vioxx patients' increased cardiovascular risk -- a theory that the court calls the "naproxen hypothesis" -- still existed on dates relevant to the statute of limitations. In reinstating the suit, the panel ruled 2-1 that the lower court "acted prematurely" in finding that the shareholders were on legal notice of the alleged fraud on the date that would have made the claims time-barred, because "[a]s of that date, market analysts, scientists, the press, and even the FDA agreed that the naproxen hypothesis was plausible, at the very least."

Reuters reports that Merck "is considering asking either the full court of appeals or the U.S. Supreme Court to review the panel's decision," while "[l]awyers for the plaintiffs applauded the ruling and said it will permit them to move forward with the case, which seeks billions of dollars in damages."

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