In what appears to be one of the most important “gate-keeping” rulings ever rendered in a mass-tort case, the federal judge presiding over 3,000 personal injury lawsuits against Pfizer (PFE) has barred plaintiffs’ experts from testifying that Celebrex can cause increased risk of heart failure and stroke at what Pfizer says is the drug’s most commonly administered dosage, 200 milligrams per day. The ruling is here..

Judge Charles Breyer of San Francisco — U.S. Supreme Court Justice Stephen Breyer’s brother — rejected, however, Pfizer’s more audacious request for him to also bar such testimony relating to 400 mg/day dosages, which were commonly prescribed for rheumatoid arthritis. Pfizer conceded that 800 mg/day dosages would cause increased risk.

Celebrex is the only Cox-2 inhibitor class of painkiller still sold in the United States; Merck’s (MRK) Vioxx was pulled in September 2004 due to concerns with increased cardiovascular risk, while Pfizer’s Bextra was pulled in April 2005 due to a melange of safety reasons, including cardiovascular risk.

Two leading plaintiffs lawyers in the litigation told the Wall Street Journal last night, see here, that the ruling would affect only about one-third of the cases. (That sounds optimistically low. Merck, for instance, has claimed that, as of September 30, 2007, more than 5,500 “plaintiff groups” who sued over Vioxx had either had their suits dismissed or had voluntarily withdrawn them, and that 20 suits were withdrawn or dismissed after they were actually set for trial; in many of these cases the plaintiffs were having difficulty proving that they had ever taken Vioxx.)

Pfizer’s national liaison counsel in the case (and its national coordinating counsel for all Bextra/Celebrex litigation) is Amy Schulman of DLA Piper. She was not immediately available for comment.

Judge Breyer had held three-days of hearings in San Francisco in October, hearing testimony from four plaintiffs experts and one defense expert. Only two of the plaintiffs experts opined that 200 mg/day could cause increased cardiovascular risk, and Judge Breyer’s caustically found that their views lacked sufficient scientific basis to even allow a jury to consider them.

“Dr. [Neil] Doherty, a clinical physician with no relevant research experience and who developed his opinion for the purpose of testifying,” Breyer wrote, “bases his opinion on a study that he fundamentally misunderstood, is counter to the great weight of the evidence, and, by his own admission, does not make biological sense. . . . Dr. [Maryilyn] Rymer’s . . . opinion is also not good science. She ignores all the evidence that contradicts her litigation-created conclusion and instead bases her opinion on the same cherry-picked study as Dr. Doherty, even though that study suffers from the exact same limitations that caused her to reject other studies that do not support her conclusion. She also relies on an unpublished, non-peer reviewed study that does not disclose its design or confidence intervals.”

At the same time, Judge Breyer rejected Pfizer’s long-shot attempt to score a nearly total knock-out punch by excluding testimony that 400 milligrams/day increased risk. Pfizer’s claim in this regard had been contradicted on its face by the so-called APC study, “a large, long-term, randomized, placebo-controlled, double-blind, multi-center clinical trial that was halted after 33 months [in December 2004] because it demonstrated a statistically significant risk of heart attack, stroke, and heart failure at 400 mg/d.” (The increased risk had been 260%. At 800 milligrams a day, the increased risk was 340%.)

Although Judge Breyer’s ruling does not apply to cases filed in state court, New York State supreme court justice Shirley Werner Kornreich, who presides over hundreds of cases there, where Pfizer is headquartered, sat in with Judge Breyer at the October hearings in San Francisco. It’s not clear yet how she will rule.

For coverage in a pharmaceutical journalist’s blog, see here, and for coverage by a pharmaceutical industry defense lawyer’s blog, see here.

As CNNMoney reported here on Friday, Merck (MRK) has signed a global settlement that could end the nationwide litigation over the painkiller Vioxx, with the company agreeing to pay $4.85 billion into a settlement fund.

The strategy and timing behind the settlement had largely been foreseen by plaintiffs lawyer Mark Lanier, though he was off by a year.

When he was trying the first Vioxx personal injury trial in Angelton, Texas, in August 2005 — the one that ended in the $253 million verdict, later reduced to about $26 million under Texas tort reform rules (and now on appeal) — I had asked him one night what his advice would be to Merck.

With astonishing candor, Lanier said he would tell Merck to “hang tough” for the first two years; then, after most of the statutes of limitation had run and Merck could be sure that a settlement wouldn’t invite the filing of additional, opportunistic, frivolous cases, he’d advise them to do a global settlement.

That’s exactly what Merck did, though it waited an extra year. Merck pulled the blockbuster painkiller off shelves on September 30, 2004. It then waited three years, until September 30, 2007, when, by its calculations, the statutes of limitations had run in 42 states and it had a good idea of the entire universe of cases it would have to deal with: 26,600 suits on behalf of about 47,000 plaintiff groups. (A plaintiff group might include the spouse or dependents of a victim, who might be alleging “loss of consortium” or other damages related to the loss of a loved one or breadwinner.) Then it worked out the settlement.

Unlike asbestos-related diseases, which can become apparent 20 or 30 years after the exposure, most of the science suggested that the risks of Vioxx only lasted for as long as the patient continued to take it.

According to Merck, to qualify for recoveries, claimants will have to pass, at a minimum, these three “gates”: (1) objective medical proof of either a heart attack of ischemic stroke; (2) documented receipt of at least 30 Vioxx pills; and (3) receipt of pills in sufficient number and proximity to the event to support a presumption that the patient was still taking the pills within 14 days before the heart attack or stroke. Here is the Merck press release.

The settlement is conditional, and won’t take effect unless 85% of all the strongest cases can be resolved by it. I.e., it won’t take effect unless its terms are accepted by 85% of all heart attack plaintiffs; 85% of all the ischemic stroke plaintiffs; 85% of all deceased plaintiffs’ survivors; and 85% of all plaintiffs who took Vioxx for more than 12 months.

The amounts paid to each claimant will depend on such factors as how serious his injuries were, how long he took Vioxx, and how many claimants are able to submit qualifying documentation (since they’re divvying up a pie of set magnitude).

The settlement does not conclude international cases, pension-fund and third-party cases, or state attorney general cases.

All told, I think Merck made out well. In my humble opinion, I thought the facts of the case were not great for Merck, in that it bent itself into contortions to believe the rosiest possible explanations of adverse outcomes that showed up in its studies, and it lobbied the FDA forcefully (and successfully) to persuade it not to place warnings on the drug at an earlier stage that ultimately turned out to have been warranted.

What do others think?

On Tuesday the U.S. Supreme Court quietly agreed to hear a case with tremendous potential consequences for Merck (MRK) in its pending Vioxx litigation, as well as for Big Pharma generally.

The case, now known as Warner-Lambert v. Kent (and known in the lower court as Desiano v. Warner-Lambert) specifically involves a federal preemption issue that was raised by a Michigan state law in a suit against the Pfizer (PFE) unit over the drug Rezulin. Very similar issues are raised, however, by state laws enacted by seven other states, including New Jersey, where more than half the 28,000 Vioxx personal injury suits have been filed, and Texas, where about 1,000 more are pending.

All of these state laws curb to varying degrees attempts to bring personal injury suits against drug companies relating to any drug that has been approved by the Food & Drug Administration unless the plaintiff can first establish that the manufacturer committed fraud on the FDA by, for instance, submitting false information or failing to submit relevant information during the drug approval process.

The issue that has arisen is how such statutes should be interpreted in light of a 2001 U.S. Supreme Court ruling called Buckman Co. v. Plaintiffs’ Legal Committee. In that case the Court ruled that any attempt by a state to allow a plaintiff to sue a drug company under a “fraud-on-the-FDA” theory was preempted by the federal statutory scheme that set up the FDA. In essence the Court said that the FDA and federal prosecutors were fully capable of punishing “fraud-on-the-FDA” if and when it occurred, and states had to butt out.

The question then became: How do you interpret a statute like Michigan’s, which bars bringing any action against a drug company over an FDA-approved drug unless there’s been fraud-on-the-FDA? Does the Buckman precedent mean (possibility number 1) that the exception is now preempted, but the remainder of the state law remains in effect. If so, the result is that all suits over FDA-approved drugs are now prohibited in Michigan — a pro-business result. Or does Buckman mean instead (possibility number 2) that the whole state law has to be struck down in its entirety (taking the bitter with the sweet). If so, the result is that no suits over FDA-approved drugs being barred anymore — a pro-plaintiff result. Or (possibility number 3), do you just continue to enforce the state statute as written, because it doesn’t really allow the plaintiff to sue on a fraud-on-the-FDA theory (which is what was forbidden in Buckman), but rather only allows the plaintiff to sue on more traditional theories, while conditioning that right upon the occurrence of a particular factual circumstance — which happens to be fraud-on-the-FDA? That’s another fairly pro-plaintiff result.

In 2004, in a case against Wyeth (WYE) over its Duract drug, the U.S. Court of Appeals for the Sixth Circuit, in Detroit, ruled that possibility number 1 was correct, and knocked out the exception while keeping the rest of the statute. (The pro-business result.) But in late 2006, the U.S. Court of Appeals for the Second Circuit, in New York, ruled that possibility number 3 was correct, and continued to give effect to the exception notwithstanding Buchman. (That’s a pro-plaintiff result.) Both cases involved interpretation of the exact same Michigan statute. It’s the latter case, then known as Desiano and now known as Kent, that the Supreme Court just decided to hear. (The Michigan case had been transferred to New York as a result of the multi-district litigation process.)

According to Mark Herrmann, a partner at Jones Day in Chicago who has written about these issues, of the eight laws that are implicated by the appeal, the Michigan law imposes the strongest curbs on suits over FDA-approved drugs, in that it purports to bar any such suit absent fraud-on-the-FDA. (Herrmann also co-writes the Drug and Device Law Blog, available here.)

The next strongest law, Herrmann says, is the Texas statute, which bars “failure to warn” claims absent fraud-on-the-FDA. Since “failure-to-warn” — an accusation that the drug label failed to warn doctors and patients about just how unsafe the drug really was — is by far the most common theory for bringing personal injury suits against drug companies, this law is also quite powerful. In April, in the Ledbetter case, the Texas state judge presiding over 1,000 Vioxx suits ruled that possibility number one was correct, following the Sixth Circuit, and granted partial summary judgment to Merck on the core theory of liability in all of those cases. All of those cases have been stayed pending appeal. (An article Herrmann wrote about that case on his blog at the time is available here.)

The six other states bar only the attempt to seek punitive damages in a case over an FDA-approved drug, absent fraud-on-the-FDA, according to Herrmann. These states are New Jersey, Arizona, North Dakota, Ohio, Oregon, and Utah, according to Herrmann. Judge Carol Higbee, who is presiding over many thousands of Vioxx cases in New Jersey, followed the Desiano reasoning (possibility three), and decided to let the plaintiffs seek to prove fraud-on-the-FDA and, therefore, seek punitive damages in those cases.

We’ll soon get clarity and uniformity. Some pro-business groups are already interpreting the Court’s decision to review the Desiano case as a good sign for their constituency. See, e.g., here.

The case will likely be heard early next year.

This morning the Supreme Court of New Jersey unanimously rejected a nationwide consumer-fraud class-action against Merck (MRK) that had exposed the company to many billions of dollars in potential liability.

The case had been brought on behalf of third-party payers of the costs of consumers’ purchases of Merck’s now-withdrawn painkiller Vioxx. The ruling, entitled International Union of Operating Engineers Local No. 68 Welfare Fund v. Merck, is available here.

The individual plaintiffs — HMOs, health insurance carriers, and union trust funds — can still pursue their cases individually, but not united in a single, block-buster (potentially bank-busting) class action.

Though most state and federal courts nationwide have rejected attempts to bundle personal injury cases into class actions, the viability of consumer class actions like this case (and like the Lights cigarette cases against the tobacco companies) is more of an open question.

In the personal injury context — where an individual might claim, for instance, that Vioxx caused his heart attack — most state and federal courts have held that the issues unique to each individual class member’s claim (like how long did he use Vioxx, what were his other risk factors for heart attack) outweigh the common issues presented (like, were Merck’s warnings inadequate), making such cases unsuitable for class treatment.

In consumer class actions, on the other hand, plaintiffs do not seek reimbursement for their injuries, but only for what they paid to buy the drug. The theory is something like: Had the class member known how unsafe the drug really was, he wouldn’t have bought it, or, alternatively, if he had bought it, he’d have only paid $60 a bottle for it instead of, say, $80. Though such suits are ordinarily worth far less to each class member than a personal injury class action would be, the class action is still worth a tremendous amount to both the plaintiffs lawyer and the defendant, because it allows the aggregation into the class of every single person who ever used the challenged product — including the millions who were concededly never injured by it and, indeed, may have benefited from it.

Since some states have very broad consumer fraud laws — which make companies liable for misleading statements, even without proof that any individual plaintiff was actually misled by the statement — a much stronger argument can be made that consumer fraud suits are truly suitable for class action treatment (common issues of law and fact may, indeed, predominate over issues individual to each class member) and some courts have allowed them.

The case against Merck differed from the typical consumer class-action in two ways. First, the class members were not the individual consumers who took Vioxx, but were rather the third-party payors who reimbursed all or portions of their purchases.

The second difference was that the trial judge, Carol Higbee of Atlantic City, had permitted this case to proceed as a nationwide class, rather than just a state-wide class, which is more common. Judge Higbee ruled that because Merck was based in New Jersey, she could give nationwide application to New Jersey’s Consumer Fraud Act.

She had also allowed the plaintiffs to proceed on a theory that would not have required any proof that each individual class member would have actually behaved any differently had it known the true facts about Vioxx. Instead, a single pricing expert witness would have testified about the total “ascertainable loss” that the whole class suffered as a result of Merck’s alleged misrepresentations. (Merck disparagingly referred to this as a “fraud on the market” theory, referring to a type of damages theory that is usually allowed only in securities fraud class actions.)

Judge Higbee’s rulings, which were upheld by New Jersey’s intermediate appellate court in March 2006, had spooked many New Jersey-based companies — particularly the many pharmaceutical companies there, like Johnson & Johnson (JNJ), Wyeth (WYE), Abbott Laboratories (ABT), and Bradley Pharmaceuticals (BDY) — since they exposed all of them to the prospect of defending nationwide consumer class actions.

Now it won’t happen. In a 5-0 per curiam decision (meaning no judge admits to being the author), the court decided that New Jersey’s Consumer Fraud Act requires much more individualized proof of “ascertainable loss” to each class member than the plaintiffs had planned to prove. “Plaintiff does not suggest that each of these proposed class members,” the court wrote, “receiving the same information from defendant, reacted in a uniform or even similar manner. Rather . . . each third party payor . . . made individualized decisions concerning the benefits that would be available to its members for whom Vioxx was prescribed.”

It specifically rejected the plaintiffs’ streamlined proposal for proving damages. “To the extent that that plaintiff intends to rely on a single expert to establish a price effect in place of a demonstration of an ascertainable loss or in place of proof of a causal nexus between defendant’s acts and the claimed damages,” the court wrote, “plaintiff’s proofs would fail.”

Thus, even assuming for the sake of argument that N.J.’s Consumer Fraud Act could be applied nationwide — an issue the court never decided — the case was not suitable for class action treatment because the issues unique to each class member predominated over common issues. (The case was argued in the New Jersey Supreme Court by Christopher A. Seeger of Seeger Weiss for the plaintiffs, and by John H. Beisner of O’Melveny & Myers for Merck.)

In addition, the court also stressed that the individual class members in this case, because they were, for the most part, well-heeled HMOs or health insurers, were fully able to pursue their cases individually, even if class relief were disallowed. That’s a factor that ordinarily will not be the case when consumer class actions are brought on behalf of ordinary consumers.

What do readers think of this ruling?

This morning the Supreme Court of New Jersey unanimously rejected a nationwide consumer-fraud class-action against Merck (MRK) that had exposed the company to many billions of dollars in potential liability.

The case had been brought on behalf of third-party payers of the costs of consumers’ purchases of Merck’s now-withdrawn painkiller Vioxx. The ruling, entitled International Union of Operating Engineers Local No. 68 Welfare Fund v. Merck, is available here.

The individual plaintiffs — HMOs, health insurance carriers, and union trust funds — can still pursue their cases individually, but not united in a single, block-buster (potentially bank-busting) class action.

Though most state and federal courts nationwide have rejected attempts to bundle personal injury cases into class actions, the viability of consumer class actions like this case (and like the Lights cigarette cases against the tobacco companies) is more of an open question.

In the personal injury context — where an individual might claim, for instance, that Vioxx caused his heart attack — most state and federal courts have held that the issues unique to each individual class member’s claim (like how long did he use Vioxx, what were his other risk factors for heart attack) outweigh the common issues presented (like, were Merck’s warnings inadequate), making such cases unsuitable for class treatment.

In consumer class actions, on the other hand, plaintiffs do not seek reimbursement for their injuries, but only for what they paid to buy the drug. The theory is something like: Had the class member known how unsafe the drug really was, he wouldn’t have bought it, or, alternatively, if he had bought it, he’d have only paid $60 a bottle for it instead of, say, $80. Though such suits are ordinarily worth far less to each class member than a personal injury class action would be, the class action is still worth a tremendous amount to both the plaintiffs lawyer and the defendant, because it allows the aggregation into the class of every single person who ever used the challenged product — including the millions who were concededly never injured by it and, indeed, may have benefited from it.

Since some states have very broad consumer fraud laws — which make companies liable for misleading statements, even without proof that any individual plaintiff was actually misled by the statement — a much stronger argument can be made that consumer fraud suits are truly suitable for class action treatment (common issues of law and fact may, indeed, predominate over issues individual to each class member) and some courts have allowed them.

The case against Merck differed from the typical consumer class-action in two ways. First, the class members were not the individual consumers who took Vioxx, but were rather the third-party payors who reimbursed all or portions of their purchases.

The second difference was that the trial judge, Carol Higbee of Atlantic City, had permitted this case to proceed as a nationwide class, rather than just a state-wide class, which is more common. Judge Higbee ruled that because Merck was based in New Jersey, she could give nationwide application to New Jersey’s Consumer Fraud Act.

She had also allowed the plaintiffs to proceed on a theory that would not have required any proof that each individual class member would have actually behaved any differently had it known the true facts about Vioxx. Instead, a single pricing expert witness would have testified about the total “ascertainable loss” that the whole class suffered as a result of Merck’s alleged misrepresentations. (Merck disparagingly referred to this as a “fraud on the market” theory, referring to a type of damages theory that is usually allowed only in securities fraud class actions.)

Judge Higbee’s rulings, which were upheld by New Jersey’s intermediate appellate court in March 2006, had spooked many New Jersey-based companies — particularly the many pharmaceutical companies there, like Johnson & Johnson (JNJ), Wyeth (WYE), Abbott Laboratories (ABT), and Bradley Pharmaceuticals (BDY) — since they exposed all of them to the prospect of defending nationwide consumer class actions.

Now it won’t happen. In a 5-0 per curiam decision (meaning no judge admits to being the author), the court decided that New Jersey’s Consumer Fraud Act requires much more individualized proof of “ascertainable loss” to each class member than the plaintiffs had planned to prove. “Plaintiff does not suggest that each of these proposed class members,” the court wrote, “receiving the same information from defendant, reacted in a uniform or even similar manner. Rather . . . each third party payor . . . made individualized decisions concerning the benefits that would be available to its members for whom Vioxx was prescribed.”

It specifically rejected the plaintiffs’ streamlined proposal for proving damages. “To the extent that that plaintiff intends to rely on a single expert to establish a price effect in place of a demonstration of an ascertainable loss or in place of proof of a causal nexus between defendant’s acts and the claimed damages,” the court wrote, “plaintiff’s proofs would fail.”

Thus, even assuming for the sake of argument that N.J.’s Consumer Fraud Act could be applied nationwide — an issue the court never decided — the case was not suitable for class action treatment because the issues unique to each class member predominated over common issues. (The case was argued in the New Jersey Supreme Court by Christopher A. Seeger of Seeger Weiss for the plaintiffs, and by John H. Beisner of O’Melveny & Myers for Merck.)

In addition, the court also stressed that the individual class members in this case, because they were, for the most part, well-heeled HMOs or health insurers, were fully able to pursue their cases individually, even if class relief were disallowed. That’s a factor that ordinarily will not be the case when consumer class actions are brought on behalf of ordinary consumers.

What do readers think of this ruling?

This morning Merck announced the number of Vioxx-related lawsuits that had been filed against it as of September 30, 2006. That date is crucial, because it represents the second-year anniversary of the company’s withdrawal of Vioxx from the market, and the vast majority of states have either one- or two-year statutes of limitations for personal injury suits. According to Vioxx plaintiffs lawyer Mark Lanier, only seven states remain with statutes of limitations that have not yet expired. So we’re getting close to the grand totals.

As of September 30, 2006, Merck had been hit with 23,800 suits on behalf of 41,750 “plaintiff groups.” (A plaintiff group might include the spouse or dependents of a victim, who might be alleging “loss of consortium” or other damages related to the loss of a loved one or breadwinner.) In addition, the company now faces 275 class actions, either for personal injury or economic damages (including consumer fraud suits, seeking reimbursement for patients’ costs of buying a drug that was allegedly misrepresented as being safer than it really was, even if nothing bad ever happened to the purchaser as a result.)

The September 30 date is important for another reason. Because most of the filing is complete, Merck can realistically begin to consider moving toward a settlement strategy without worrying that its willingness to settle would entice a deluge of suits by lawyers and clients seeking quick and easy money. Though the company is still pledging to fight every one, that might be a posture it can begin relaxing. Says Lanier in an email: “Merck is going to have to come up with another strategy than to try every case. Aside from the fact it abuses the court system (the corporate version of lawsuit abuse), the next 12 months Merck will sustain some real significant losses.”

Merck also announced today that it would increase its reserves for Vioxx-related legal defense costs from $685 million to $958 million, and said it had spent $325 million on defense costs during the first nine months of 2006. The company has not yet allocated any reserves toward paying Vioxx-related judgments or settlements.

MERCK REPLY: I solicited a received a comment from Kent Jarrell, a spokesperson for Merck’s outside law firm, Hughes Hubbard & Reed. Here his comment in its entirety:

“You are correct that in most states the statute of limitatations has now run. But by our count when it comes to personal injury lawsuits, there are still 28 states with longer limits and in death cases, there are 16 more states.

“The last minute increase of filings just before Sept. 30th 2006 is not unexpected. Generally this tide of ‘deadline beater’ cases turn out to be comprised of weaker cases. Plaintiff lawyers faced with a filing deadline want to avoid malpractice claims from their clients for failing to follow through and actually filing their cases.

“As we examine cases, we are finding, time after time, that the allegations are not backed up by facts. The claims of over 3,000 plaintiff groups have been dismissed to date. More specifically, there have been over 1,100 plaintiff groups whose claims were dismissed with prejudice either by plaintiffs themselves or by the courts. Over 2,000 additional plaintiff groups have had their claims dismissed without prejudice. Almost 800 plaintiff groups had their claims dismissed by courts because plaintiffs did not submit fact sheets or were dismissed by plaintiffs themselves after Merck noted their failure to submit fact sheets.

“From the beginning, Merck has said it would look at this litigation on a case by case basis. That is exactly what we have been doing. It takes resources to back up our ongoing strategy and that is what this reserve increase is all about. We face a rigorous trial schedule for the rest of this year and into next year. We have the legal infrastructure in place across the country to ensure that we continue engaging in a vigorous defense of this litigation.

“Remember, it is the plaintiffs who are responsible for filing cases. They
now seem to be frustrated by the very fact that Merck is closely examining each one on an individual basis and is prepared to go to court to defend the cases.”