$688 Million Settlement Approved in Merck Case
By ROSE BOUBOUSHIAN
(CN) – Merck and Schering-Plough must pay $688 million for lying to shareholders about the benefits of cholesterol drug Vytorin over its cheaper, generic version, a federal judge ruled.
The complaint, filed in New Jersey federal court in 2008, accused Merck & Co. Inc. fka Schering-Plough Corp. of hiding from the public that its drug Vytorin, a fixed-dose combination pill containing the anti-cholesterol agent Zetia, was no more effective at reducing formation of plaque in carotid arteries than Zocor, a cheaper, generic drug containing only Simvastatin. Though the drugs’ clinical trial ended in May 2006, Merck and Schering – to avoid damaging their common stock price – only partially reported the results in January 2008, and did not release the full results until several months later, the complaint states.
The defendants meanwhile not only blamed the delay on data issues, but also publicly touted the purportedly greater benefits of Vytorin over Simvastatin alone, the plaintiffs say.
Around the time the partial results were published, reports on Congressional and regulatory investigations into Merck and Schering’s improper marketing were released, causing the manufacturer’s common stock price to drop from $60.55 to $54.87 per share.
The price had dropped to $38.75 per share by the end of March, according to an unpublished ruling by U.S. District Judge Dennis Cavanaugh in September 2012.
Therein, the judge certified a class of all those who purchased or acquired Merck common stock or call options and/or sold Merck put options from Dec. 6, 2006 to March 28, 2008 and did not sell them on or before Jan. 14, 2008.
Lead plaintiffs included Stichting Pensioenfonds ABP, the Netherlands’ pension fund for government employees; Luxembourg’s International Fund Management S.A.; the Jacksonville Police and Fire Retirement System in Florida; and Detroit’s General Retirement System.
Also named as defendants were Merck’s American and Singapore distribution services companies, as well as its Chairman, President, and former CEO Richard Clark and several other executivess.
After a 36-state settlement was reached in 2009, Merck and Schering ultimately agreed to pay a total of $688 million to damaged investors.
Upon reviewing two special masters’ report and recommendation on the matter, Judge Cavanaugh finally approved the settlement as consistent with the 3rd Circuit’s 1975 decision in Girsh v. Jepson, on Oct. 1.
Although more than a million potential class members were notified of the settlement, only two oppositions have been filed, the unpublished ruling states.
“Here, the litigation is at a very advanced stage, as the settlements were reached only a few weeks before trial was to begin,” Cavanaugh wrote. “Discovery has been going on for years and has consisted of a vast number of depositions, the review of millions of documents, mock trials, and extensive pre-trial-preparation. The parties have clearly had the opportunity to gain a detailed understanding of the case during this time.”
The court further held that the benefits of accepting the immediate settlement funds outweigh the potential woes of a jury trial.
Cavanaugh also agreed to award co-lead counsel in the Schering case more than $4 million attorneys’ fees and costs.
Categories: Corruption - Fabricated Data