September 2005

The $253 Million Vioxx Verdict: What Does It Mean?

On August 19, 2005, a jury in Angleton, Texas, found Vioxx producer Merck liable for the death of fifty-nine-year-old Robert Ernst. The Brazoria County jury assessed a staggering $253 million ($24 million compensatory, $229 million punitive) in damages against Merck, although Texas law will cap the punitive damages at less than $2 million and thus reduce the total award to about $26 million. What implications does this verdict have for drug development, for the pharmaceutical industry, and for the justice system? What consequences will this verdict have for consumers? Is further liability reform needed, or is the current jury trial system an appropriate means of regulating drug safety? On September 7, 2005, AEI hosted a panel discussion to address these and other questions surrounding the Texas verdict and pharmaceutical litigation.

John E. Calfee
AEI

Evidence that has emerged since February 2005 shows that cardiovascular risks that had been associated exclusively with Vioxx (leading to its voluntary withdrawal from the market) are actually associated with a much larger class of pain killers, including such common drugs as Advil. In light of this new evidence, the Food and Drug Administration (FDA) and Canada’s corresponding agency have both approved a reintroduction of Vioxx to the market. These developments show that plaintiffs’ lawyers have no scientific case with which to prove general causation, since doing so would apply equally to Vioxx’s competitors. Nor can they show specific causation in any particular case of heart attack. In spite of this, though, plaintiffs will still win some cases because juries are instructed that they need only 51 percent certainty in rendering a verdict.

Since FDA approval gives no liability protection to the companies marketing such drugs, companies marketing beneficial drugs with some risks face huge financial burdens imposed by angry and misguided juries. If this situation becomes the norm, drug companies will have no incentive to learn more about their drugs before submitting them for FDA approval, since their inquiries could be used against them in court. This disincentive operates even when the research might potentially discover new, socially beneficial uses for a drug, and in this way the adversarial liability system results in massive overdeterrence.

Ted Frank
AEI

The $253 million jury award in Ernst v. Merck exemplifies the kind of problems caused by asking juries to assign monetary values to intangibles like non-economic compensatory and punitive damages. Previously enacted Texas liability reform caps punitive damages, reducing the total award to $26 million, but this is still a disproportionately high figure. Damages are intended to compensate injured parties and deter future misconduct, but the jury’s award in this case is incommensurable to both of these tasks. By awarding $24 million in non-economic damages, the jury created a problematic situation in which Mrs. Ernst would be better off financially than if her husband had died from some other cause of sudden death. Since there is no rational way to compute the amount of suffering caused by loss of companionship, superficial factors (such as the plaintiff’s “sympathetic” characteristics and mannerisms) determine the size of any award. Such arbitrary awards betray justice.

The details of the Ernst trial also show a system malfunctioning. The jury in Ernst had a deeply flawed approach to the evidence in the case, with some jurors apparently disregarding science altogether. Critics who blame Merck’s attorneys for a variety of substantive weaknesses or stylistic deficiencies are in effect choosing a system of policymaking by game show, and by doing so indict the capriciousness of the current system. One policy change that could improve the situation would be to require that all cases with opposing parties from different states be removed to federal jurisdiction, thereby preventing the sort of fraudulent joinder that allowed this case to be kept in state court.

Evan Schaeffer
Schaeffer & Lamere, P.C.

If it were true that there was no real scientific evidence in the Ernst case, then critics should be angry at the trial judge for letting the case get to the jury in the first place. The judge, as gatekeeper of scientific evidence, could have excluded evidence as overly speculative or unscientific before the jury heard it, or could have granted summary judgment, or could even have set aside the verdict. When advocates of tort reform criticize judges, they really mean that they want more Republican judges. In Texas they have these Republican judges, including the one in the Ernst case, and so the critics of Ernst have instead blamed the jurors, saying that they were too stupid to understand the science. But the plaintiff’s theory was substantiated by well-qualified medical experts who believed Vioxx had been contributing significantly to Mr. Ernst’s death.

Judges, plaintiffs’ lawyers, and defense lawyers all agree that the jury system works quite well. Punitive damages are awarded only when they are intended to punish parties harshly for outrageously reckless conduct and thus influence future behavior. There is no reason to consider granting tort immunity to the pharmaceutical companies, because their liability problems would be solved if their products came with appropriate warnings and were marketed only to appropriate users. Reforms such as those suggested by Mr. Frank are radical and unnecessary. Drug companies willing to risk consumers’ lives for the sake of their profits require reform more than the system that oversees them.

Daniel Troy
Sidley Austin Brown & Wood, LLP

An erosion in the FDA’s institutional confidence and a dramatic increase in caution have resulted in a slowdown in new drug approvals, more requirements for pre-market studies, the routine use of black-box warnings, and too much restraint generally. While I have often been a critic of the FDA, it does have the virtue of consistently trying to work scientifically. Unfortunately, science is not the paramount value in the courts. Both sides will always present impressively credentialed experts, since they pay well for their services; just because a few doctors are willing to advance an argument does not make it scientific. The consequences of allowing our tort system to act as a de facto regulatory regime are quite severe, contributing to high costs of drugs and vaccines and lower availability of important drugs. Because of our tort system, drug companies use their resources to develop drugs for cancer and other chronic illnesses rather than drugs for the general public. As a result of this distortion, we get far less benefit from our public health spending than we would otherwise. Even without the tort system, drugs are already the most closely regulated products in our economy. Allowing pharmaceutical companies to be preyed on even after regulatory compliance is therefore imprudent and dangerous to our society’s ability to develop new, life-improving medicines.

AEI research assistant Philip Wallach prepared this summary.