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August 22, 2005

Vioxx verdict seems outrageous

I haven't followed the case, and common sense suggests that one shouldn't evaluate an argument without hearing both sides, but I'll still state that the Vioxx verdict seems to be outrageous and indefensible. Economist David R. Henderson and Hoover Visiting Fellow Charles L. Cooper looked at the Vioxx issue and they explain the serious costs attendant on insisting that it be 100% safe. For a unique perspective from an economist/athlete, read the comments of Art De Vany.

But more than just the economics involved, I invite any lawyers among my readers to comment on a seemingly bizarre aspect of our legal system. According to the USA Today article linked to above, the jury awarded the plaintiff $450,000 in economic damages and $24 million for mental anguish, and also assessed Merck $229 million in punitive damages.

But Texas, where the trial took place, has a law that caps punitive damages "at twice the amount of economic damages and up to $750,000 on top of noneconomic damages".

My question: if the jury can do whatever the hell it pleases, what's the purpose of the law? If, as the article suggests, the law will require a later court to slash Merck's penalty, why wasn't the jury instructed that it must set the award and penalties in compliance with the law? If the judge was supposed to do that, but didn't, or the jury was supposed to obey that instruction, but didn't, why shouldn't he or they be sanctioned?

Reason #1,358 why I could never have been a lawyer.

UPDATE: My impression that the decision is outrageous is reinforced by the comments of Larry E. Ribstein and Ted Frank. (Also see Houston attorney Tom Kirkendall's post for lots more links and discussion.)

Ribstein: " . . . the plaintiff’s case featured resentment-mongering against executive pay and corporate profits, and exploitation of the average lay jury's innumeracy.  For example, responding to witness Gilmartin’s argument that the results of a study showing Vioxx users had six episodes of heart attacks or strokes to one for placebo users were not statistically significant, the lawyer asked:

have you got $6 on you? I'm going to give you a dollar and you give me the six. It is not statistically significant in the difference. What do you think, are you in or out?

The Door observes that his old statistics prof would have replied to that crap with an impassioned, "Lord, kill me now."

Frank:

This is perhaps because the Ernst v. Merck case did have causation problems that made it virtually unwinnable for plaintiffs in a fair trial. Plaintiffs simply got around the causation problem by presenting a parade of experts who simply asserted, without any scientific basis, that Vioxx caused Ernst's death. . . .

Texas effectively adopted a Daubert-like standard in Merrell Dow v. Havner. Havner presented the same fact-pattern as Ernst: an expert testifying based purely on speculation and conjecture that a drug was responsible for causation. The Texas Supreme Court noted "Reasonable probability cannot be created by the mere utterance of magic words by someone designated as an expert." A reasonable appellate court is going to strike the expert testimony, and reverse the case for retrial, and might even grant judgment for the defendants. A reasonable appellate court is not going to countenance the mass of irrelevant and prejudicial testimony that was introduced regarding executive wealth. I'll let others evaluate whether Texas law would also reverse based on the procedural shenanigans pulled with a surprise witness introduced after the opening statements, but it seems rather pointless to have procedural rules against such "sandbagging" if they aren't invoked in this circumstance. It might have to get to the Texas Supreme Court before a reversal happens, but I think it will.

Great. In the meantime, who makes Merck's stockholders whole? Who helps the thousands of people who are suffering because of Vioxx's withdrawal, and who will help the millions more if drug companies believe they face higher expected damages from just doing their jobs?

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Listed below are links to weblogs that reference Vioxx verdict seems outrageous:

» Murky future for Merck from Econbrowser

So what's the big deal? We'll just get some other company to take its place in the Dow Jones Industrial Average.

[Read More]

» Lying with Statistics - Ernst v. Merck edition, Part II from PointOfLaw Forum
Econbrowser's James Hamilton takes a detailed statistical look at the Graham et al. Lancet Vioxx study that was the subject of the now infamous cross-examination of Merck's CEO, where Mark Lanier argued (apparently successfully) that the concept of "st... [Read More]

» Merck and the Vioxx Decision from Outside The Beltway
James Hamilton has a very nice post on the dubious nature of this decision. Hamilton walks us through some of the statistical arguments and concludes the following, So how do you explain these issues to a Texas jury? Well, the defendants argued the... [Read More]

» Lying with Statistics - Ernst v. Merck edition, Part II from PointOfLaw Forum
Econbrowser's James Hamilton takes a detailed statistical look at the Graham et al. Lancet Vioxx study that was the subject of the now infamous cross-examination of Merck's CEO, where Mark Lanier argued (apparently successfully) that the concept of "st... [Read More]

» Murky future for Merck from Econbrowser
So what's the big deal? We'll just get some other company to take its place in the Dow Jones Industrial Average. [Read More]

» Murky future for Merck from Econbrowser
So what's the big deal? We'll just get some other company to take its place in the Dow Jones Industrial Average. [Read More]

Comments

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The Eclectic Econoclast

excellent digest of the material! Thanks for providing it.

James Hamilton

"I'm going to give you a dollar and you give me the six. It is not statistically significant in the difference."

Zounds! There's an example to bring in for levity in the middle of a bland statistics lecture. I don't know which is more mind-boggling-- that a lawyer made such a transparently stupid argument, or that a jury bought it.

Brock

There's basically two ways to regulate activity in this country: through a specialized regulatory agency (FCC, FTC, SEC, etc.) or through the general purpose Courts.

Within the Courts there are specialized bodies of law, such as Corporate law, Partnership law, etc., and then there's Torts. Torts is basically how Courts regulate un-contracted for interactions between people where one of them came to harm (actually, it's where one of them was exposed to un-contracted for risk, but without harm there's no damages, so no one ever sues over the bullet that misses).

The questions you asked at the end of your post are a round-about way of saying that general purpose Tort law, while appropriate for car accidents and slippery floors, does not properly account for the economic consequences of pharmaceutical torts. Your questions naturally lead down the path to an assertion: a specialized body of law is needed (legislated by Congress), or the FDA needs the authority to take these cases out of the Federal Courts and put them in special regulatory hearings (A "hearing" is just another way of saying a trial, but within an Agency instead of in a Court).

Michael Spencer

Like many economists you ignore the emotional side of "value" - it's very hard to quantify.

The evidence in the case showed that:
1. Merck suppressed studies which showed possible dangers from Vioxx;
2. Merck aggressively marketed Vioxx to the public;
3. Merck knew that there were serious questions as to the safety of the drug while they were aggressively pushing it;

The jury "punished" Merck for being a bunch of s.o.b.'s - which is exactly what punitive damages are designed to do. The size of the verdict is merely a measure of the jurors' outrage, it had very little to do with the economics of the underlying situation.

On the liability issue:
Merck says that Vioxx was not the cause of death, but given the evidence in #1-3 above, what reasonable man would believe them? Personally, I doubt that Vioxx was the cause of death, but once the plaintiff made a prima facie case on cause of death, how could Merck rebut? They had no credibility.

Things that make no economic sense can nevertheless be quite reasonable.

M. Sean Fosmire

The reason that the jury was not instructed to do as you suggest is that the procedure in most states with caps on damages is to have the court reduce the jury award in post-verdict proceedings. The jury in most states is never told that there is a cap.

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