Supreme Court Says Vioxx Lawsuit Can Proceed

WASHINGTON (AP) -- The Supreme Court said Tuesday investors who lost millions betting on the blockbuster drug Vioxx can sue Merck & Co. over whether the pharmaceutical giant provided enough information about the painkiller's risks before it was pulled from the market.

The high court agreed with a federal appeals court's decision to allow a class-action securities lawsuit. The suit was over whether the drugmaker provided adequate information about the drug's risks before its withdrawal.

The Whitehouse Station, N.J.-based company pulled the drug on Sept. 30, 2004, because it doubled the risks of heart attack, stroke and death. Investors lost tens of billions of dollars in shareholder value overnight.

The class-action lawsuit will now move forward in federal court.

"Merck is disappointed in today's decision, but believes that the allegations in the complaint are unfounded and will continue to defend itself vigorously," said Bruce Kuhlik, the drugmaker's executive vice president and general counsel. "The company has already made a motion to dismiss the operative complaint on numerous other grounds, and will renew that motion in the district court."

Investors have two years to sue a company accused of defrauding investors. Merck argued that the two-year clock began when the first hint of Vioxx trouble was made public in September 2001. Investors argued that the two-year time limit should not have been started in 2001.

Justice Stephen Breyer, writing an unanimous judgment for the court, agreed with the investors. "The plaintiff's suit is timely," he said.

After it pulled Vioxx from the market, Merck was sued by shareholders, patients and survivors claiming Vioxx caused heart attacks and strokes, and from insurance plans seeking reimbursement for their costs for covering Vioxx prescriptions.

Merck says the investors should have known from public information that there could be problems with the drug because the regulatory Food and Drug Administration had issued warnings to Merck about Vioxx risks late in September 2001.

A federal judge agreed and dismissed the November 2003 lawsuit, ruling it was filed after the two-year statute of limitations expired.

But the Philadelphia-based 3rd U.S. Circuit Court of Appeals reversed that decision, allowing the many shareholder lawsuits, now consolidated in federal court, to proceed.

The appeals court said the investors could not have known more than two years ahead of time of the possible wrongdoing.

Merck has not proved otherwise, said Justice Antonin Scalia in a separate opinion. "Merck has not shown that respondents actually discovered (possible wrongdoing) more than two years before bringing suit," said Scalia, who was joined in his separate opinion by Justice Clarence Thomas.

In a second case decided Tuesday, the court handed business interests a victory by making it harder for consumers to join forces in arbitration proceedings with businesses. The justices voted 5-3, with conservatives in the majority in an ideologically split decision, to throw out an appeals court ruling that allowed class arbitration to proceed in a dispute between shipping companies and some of their customers.

Businesses favor arbitration, and often compel its use, as a means of resolving disputes over more costly and time-consuming lawsuits. Consumer groups argued that class arbitrations often are the only practical way to hold corporations accountable when consumers can't get into court.

The arbitration case is Stolt-Nielsen S.A. v. Animalfeeds International Corp., 08-1198, and the Vioxx case is Merck v. Reynolds, 08-905.

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