August 19, 2005
Merck
Posted by Gordon Smith

Everything is bigger in Texas, including the punitive damage awards. Even though the jury's $229 million award will undoubtedly be reduced, the result is a shot accross the bow of big pharma. The immediate result will be a Merck gold rush, but what are the long-term consequences for the pharmaceutical industry? The plaintiff says it's all about "sending a message," but Merck will need to see many more results before any message becomes clear. And if the message is the one the plaintiff wants to send, Merck will be out of business.

Steve Bainbridge expresses a sentiment that I have often shared, "There has to be a better way of running the tort railroad than this." The problem, of course, is in constructing that railroad. It all begins with a fundamental market failure (produced, at least in part, by the legal rules that structure this market). Consider Rebecca Eisenberg's article, The Problem of New Uses, 5 Yale J. Health Pol'y L. & Ethics 717 (2005):

Information about the effects of drugs has considerable social value as a resource for guiding doctors, patients, and insurers to make sound choices about which therapeutic products to use. But drug-developing firms capture only a fraction of this value. Drug companies make money by selling drugs, not by selling information about the effects of drugs. Information from clinical trials may enhance sales of drugs if it indicates that they are safe and effective, but it may also cause sales to plummet if it indicates that they are unsafe or ineffective. The social value of negative information about drugs is captured by consumers, payors, and sellers of substitute products rather than by the seller of the drug under study.

Thus, we have situations like Merck's problem with Vioxx. Big pharma essentially makes this calculation: we will sell drugs in the face of incomplete or negative information about their effects and fight to limit the consequences of any damage we cause on the back end. Yesterday, a Texas jury took matters into their own hands and decided to adjust the incentives. The problem here is not that Merck is being held accountable, but that it is being held accountable in such an ad hoc way. This was an attempt at a global solution in an isolated case. Unfortunately, I do not have a make-it-right proposal, but the shortcomings of the current system are pretty clear.

By the way, if you would like to see one reason why the plaintiff won and Merck lost, take a look at the video of the plaintiff's lawyer v. the video of Merck's lawyer. (Both on the W$J site.) If you were a juror, who looks like he is on the side of truth and justice?

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» The Merck verdict from Ideoblog ...
"Merck's quarter billion dollar loss displays a lot that is bad about both corporate governance and t ..." [more] (Tracked on August 20, 2005 @ 10:45)
» Monday Morning Quarterbacks from The Wired GC ...
" Starting Friday afternoon when news of the $253 million Merck Vioxx verdict hit the wires, the pres ..." [more] (Tracked on August 22, 2005 @ 7:06)
» Vioxx around the blogs from PointOfLaw Forum ...
"Howard Bashman rounds up many newspaper links. Evan Schaeffer at Legal Underground has a podcast on ..." [more] (Tracked on August 22, 2005 @ 13:27)
» Vioxx around the blogs from PointOfLaw Forum ...
"Howard Bashman rounds up many newspaper links. Evan Schaeffer at Legal Underground has a podcast on ..." [more] (Tracked on August 22, 2005 @ 13:29)
» Vioxx around the blogs from PointOfLaw Forum ...
"Howard Bashman rounds up many newspaper links. Evan Schaeffer at Legal Underground has a podcast on ..." [more] (Tracked on September 8, 2005 @ 8:16)
» Vioxx around the blogs from PointOfLaw Forum ...
"Howard Bashman rounds up many newspaper links. Evan Schaeffer at Legal Underground has a podcast on ..." [more] (Tracked on February 22, 2007 @ 12:43)
Comments (2)

1. Posted by John Di Saia MD on August 20, 2005 @ 19:49 | Permalink

Merck will be held accountable, but so will the patients looking for pain relief from arthritis. They will have fewer choices as a perfectly good class of drugs will likely be shelved. All this is the name of legal piracy....now pirates loot corporations.


2. Posted by healthcarethinktank on August 20, 2005 @ 20:48 | Permalink

When there is a flu pandemic and there are no vaccine makers in the U.S. maybe the trial lawyers can make vaccine.

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