Merck and Schering-Plough to pay $688 million in class action securities fraud litigation

After nearly five years of litigation, a settlement was announced Thursday on behalf of investors totaling $688 million in class actions against Merck & Co. Inc., Schering-Plough Corp., and Merck/Schering-Plough Pharmaceuticals.

These two actions stem from claims that Merck and Schering, which merged in November 2009, artificially inflated their securities by concealing information and making false and misleading statements about the anti-cholesterol drugs Zetia and Vytorin, attorneys for the plaintiffs said in a statement. 

The plaintiffs alleged that even though the defendants knew that a clinical trial of Vytorin, called “ENHANCE,” demonstrated that Vytorin, a combination of Zetia and a generic statin medication, was no more effective than the cheaper, generic statin drug at reducing artery thickness, the companies championed the “benefits” of the drugs, attracting billions of dollars of capital in the process.

Yielding to public pressure to release the results of the ENHANCE trial, the plaintiffs alleged that the companies reluctantly announced that the cholesterol drugs showed "no statistically significant difference" in plaque buildup, and that news of these negative results and their related consequences caused sharp declines in the value of the companies’ securities, resulting in significant losses to investors.

The law firms Bernstein Litowitz Berger & Grossmann and Grant & Eisenhofer represent the Merck class. Bernstein Litowitz and Labaton Sucharow represent the Schering class.

Among the plaintiffs are the Arkansas Teacher Retirement System, Public Employees' Retirement System of Mississippi, Louisiana Municipal Police Employees' Retirement System, Jacksonville Police and Fire Pension Fund, and General Retirement System of the City of Detroit.

Copyright 2013, Rita R. Robison, Consumer Specialist

Comments

[tom sightings]

Interesting. I wonder, how much of that $688 million did the investors get? How much did the lawyers get? And how much have Merck drug prices gone up to cover the litigation costs?

[Rita]

Hi Tom,

Good questions. Usually, when it's a government settlement they announce what the money will be spent for.

In many legal cases, the attorneys get a third of the winnings.

As for Merck's prices, I'm sure the company has a tremendous legal budget. If you read my blogs often, you will have seen dozens of articles about prescription drug companies settling for millions again and again for deceptive business practices, including promoting off label uses of the drugs. It looks to me like legal costs are a part of their business costs.

Thanks for your comment.

Rita

P.S. Doctors can prescribe drugs for off label uses, but drug companies can't promote them.