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Drug Company's Greed Coming Around to Bite Them

Merck faces not only Congressional and Justice Department investigations, but also potentially thousands of personal-injury lawsuits that could tie the company up in litigation for years to resolve as a result of how it dealt with Vioxx. So how bad might this get for once-mighty Merck? While it's impossible to say precisely what the Vioxx debacle will cost the drugmaker, analysts' estimates range from a few billion dollars to nearly $20 billion. For now, Wall Street and some plaintiffs' lawyers agree that the Vioxx fallout is unlikely to lead to a Merck bankruptcy.

Merck's legal bill is likely to be considerable. The potential liability based on the fact that 20 million Americans had taken Vioxx is huge. Roughly 0.25% of those who took the drug had serious cardiovascular problems. That means some 50,000 people may have suffered consequences. Assuming that the size of average awards or settlements will range from $100,000 to $300,000, and factoring in other variables such as the likely success rate in court and added in other legal costs -- including settling suits where Vioxx users didn't suffer a major cardiovascular event.

The total hit can range from$4 billion to as high as $18 billion. But even that $18 billion figure may prove conservative; if criminal wrongdoing surfaces, in a worst-case scenario the cost could go even higher. This is exactly what is needed to level the playing field folks. These multinational drug companies are finally getting their just desserts. They have profited far too long from the public by offering them expensive options that cause serious side effects and in no way shape or form address the cause of the problem. I predict that this is the beginning of the end for the drug companies and we will see more of them crippled by their avarice for profits at the expense of human suffering.

Business Week November 22, 2004

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