A Case Study of Ernst v. Merck & Co. Inc. Michael W. Scott Pamela C. Hicks BEIRNE MAYNARD & PARSONS L.L.P. 1300 Post Oak Boulevard 25th Floor Houston, Texas 77056 (713) 623-0887 1 605169v.2 iManage 990999 The Backdrop The litigation climate for the pharmaceutical industry has become increasingly challenging as media reports of huge company profits, fast-tracked FDA approvals, product withdrawals, adverse drug reactions, increasing health care costs, and aggressive direct to consumer marketing have become commonplace in the American media. Headlines like: “Company Denies Claim By New England Journal of Medicine That It Withheld Damning Drug Information”; “New Legal Onslaught for Big Pharma?”; and “Strong Medicine – Drug Company Profits Up” are daily copy. The industry is not exempt from attention by politicians and regulators either. In the last two presidential elections, for example, candidates engaged in heated debates about plans for addressing the rising cost of prescription drugs. In addition, there is an increasingly negative overall public perception of corporate America. From the fall of Enron to the recent oil industry investigations by Congress, big business is an easy target for ridicule in many circles. There seems to be a new WorldCom or HealthSouth story every month, and each corporate accounting charge is now looked at with great scrutiny. The public is bombarded with reports of scandals, government initiated investigations, and criminal prosecutions that influence the perception of large companies and the executives who run them. Health care costs also influence juror perceptions. Most people feel that health care costs are continually on the increase, while health insurance benefits steadily decrease. Reportedly, prescription drug expenditures are the fastest growing component of health care costs, and Americans spend more than $200 billion a year on prescription drugs. Industry critic, Marcia Angell, claims that the cost of prescription drugs is rising three times faster than the inflation rate and that drug companies have a profit margin of about 17 percent, compared with the median of 2 605169v.2 iManage 990999 3.1 percent for Fortune 500 companies. 1 Regardless of whether that is true, there is no doubt that prescription drug sales generate staggering revenues, a fact of which the public is acutely aware. The increase in prescription drug usage is probably at least partially related to the rise in direct to consumer marketing and drug detailing to physicians. Television and magazine advertisements are the primary means of informing the public of new drug offerings. Prescription medications clearly have a brand identity, something that was unheard of 15 to 20 years ago. According to the Kaiser Family Foundation, direct to consumer marketing expenditures between 1994 and 2000 reportedly increased at an average rate of 45 percent per year, topping out at about $2.5 billion. This increase translated into direct, measurable increases in revenue from prescription drug sales. Merck allegedly spent as much as $160 million on marketing for Vioxx during its first full year on the market. Meanwhile, due to intense industry competition, the number of sales representatives for pharmaceutical companies has more than doubled in the last decade to more than 81,500 detail representatives, all vying for precious little face time with physicians. There is also a growing public perception that pharmaceutical manufacturers have too much influence over the FDA and academia. The attitudes that potential jurors develop as a result of the intense media attention and governmental scrutiny, as well as those they have from their own personal health care experiences make trying a pharmaceutical product liability case a challenging proposition. Nevertheless, Merck, following its “try every case” philosophy, went to the courthouse on its first Vioxx case last summer in Angleton, Texas. The panelists in this discussion will analyze that trial and discuss their thoughts concerning the lessons to be learned from the Ernst case. 1 Marcia Angell, The Truth About the Drug Companies, 45 Jurimetrics J. 465, 467 (2005). 3 605169v.2 iManage 990999 The Case Vioxx, known generically as rofecoxib, is a COX-2 inhibitor. It blocks production of cyclooxygenase, an enzyme produced by the body that stimulates chemicals which promote pain and inflammation. In September of 2001, the FDA warned Merck that its Vioxx campaign, which downplayed any cardiovascular dangers of the drug, was misleading to consumers. Then in 2002, after nearly two years of contention with the FDA, Merck added “black box” warnings about cardiovascular risks to the Vioxx label. In September of 2004, Merck voluntarily withdrew Vioxx from the market after one of its own long-term studies showed that the drug increased the risk of serious cardiovascular events in patients who took the drug for more than eighteen months. On the eve of the Ernst trial, Merck was facing well over 4,000 lawsuits – including more than one hundred class actions – filed by people claiming to have suffered heart attacks or strokes after taking Vioxx. In time, the number of claims could rise significantly, as more than 20 million people took Vioxx prior to its withdrawal from the market. Despite estimates of an additional 25,000 to 100,000 personal injury claims, Merck has voiced a strategy of trying every claim. Merck is also defending against lawsuits that seek damages for claims other than personal injury or death. The Texas Attorney General filed an action seeking $250 million in damages for Vioxx prescriptions covered under the Texas Medicaid program. The filing of that action just before the Ernst case was scheduled for trial prompted the defense team to file an unsuccessful motion for continuance. Merck has also been sued by uninjured Vioxx users making claims for 4 605169v.2 iManage 990999 consumer fraud, stockholders suing over deflated stock prices, and employees filing claims for shrinking retirement funds. Clearly, Merck had much at stake in the Ernst trial. The Parties Carol Ernst brought suit for the death of her husband, Robert Ernst. Ernst was 59 at the time of his death, and had taken Vioxx for less than eight months before dying from cardiac arrest. A native of St. Louis, Ernst managed restaurants before moving to Texas and changing jobs to work for the local Wal-Mart as a department manager and to teach aerobics classes. By all accounts, Ernst was in top physical condition, competing in both marathons and triathlons. Just one week before his death, Ernst and his wife competed in a 62 mile tandem bicycle ride. Carol and Bob Ernst were married for a little less than one year. Merck & Co., Inc. describes itself as a “global research-driven pharmaceutical company dedicated to putting patients first.” Founded in 1891, the New Jersey based company “discovers, develops, manufactures and markets vaccines and medicines in over 20 therapeutic categories.” Vioxx was a blockbuster drug for Merck, generating as much as $2.5 billion a year in sales before its withdrawal. Their Counsel Mark Lanier represented the plaintiff. Lanier, who is also a part-time Baptist preacher, has been named as one of the nation’s top 45 attorneys under the age of 45 by The American Lawyer magazine. His style is described as “folksy” and “charming.” During the course of the trial, he used multimedia techniques in his presentation to capture the jury’s attention. His opening statement incorporated Merck’s own documents into entertaining PowerPoint slides accompanied by simple computer graphics of bulldozers, piles of money, and shell games to 5 605169v.2 iManage 990999 reinforce his themes. Rather than introducing testimony in a chronological fashion, Lanier presented his case thematically – developing the “bad company case” and ideas of greed or aggression with testimony and documentary evidence from a variety of sources. Reporters lauded his “down home” story telling style, obviously appreciating the sound bytes that he gave them for their copy. Merck used defense lawyers from several large, well established firms to defend the case. Its defense team included attorneys from Williams & Connolly, Fulbright & Jaworski, and Hughes, Hubbard & Reed. At the forefront of the defense team were Gerry Lowry and David Kiernan, both senior litigation partners in their respective firms. The defense strategy hinged on specific causation, and the theme that science did not support the claim that Vioxx caused Ernst’s death. The defense team presented its case in a very matter-of-fact, logical manner focusing on the safety and health benefits of Vioxx over previous generations of pain medication and the extensive studies of the drug prior to its approval by the FDA. The chronological presentation of evidence by the defense was intended to have the jury focus on what Merck knew at the time of Mr. Ernst’s death, which occurred in 2001, several years prior to the time the drug was withdrawn from the market. David Kiernan, a partner with Washington based Williams & Connolly, made the opening statement for the defense. In contrast to Mr. Lanier’s more extemporaneous speaking style and attention-grabbing visual aids, Mr. Kiernan reportedly appeared to read portions of his opening. He illustrated his presentation with pie charts and long excerpts from FDA letters. The news media were harshly critical of the defense, suggesting that the defense presentations were dry, boring, soporific, and at times, insensitive. The Venue and Jury Panel 6 605169v.2 iManage 990999 The case was tried in Angleton, Texas, a semi-rural town of 18,000 people just south of Houston. While once known as a dangerous plaintiff’s forum, most defense attorneys familiar with the area agree that it has become more conservative in recent years. Lanier had a “mixed” track record with Angleton juries. In 1998, he won a $115 million verdict for 21 steel workers in an asbestos case tried before the same judge. Last year, however, he lost a case in the same venue. During voir dire Mr. Lanier questioned the potential jurors for about three hours. He referred to the panel members by their names, and often allowed them to speak at length. Rather than using a tightly scripted voir dire format, Lanier seemed to flow in the direction he was lead by the panel. Not surprisingly, Mr. Lanier used much of his voir dire to identify people who might be unwilling to award damages for mental anguish. Gerry Lowery of the Houston office of Fulbright & Jaworski conducted voir dire for Merck. During her ninety minute presentation, she used a much more formal and traditional style. Ms. Lowery referred to the panelists by their juror number, rather than by names. She chastised Mr. Lanier for promising the jurors to be entertaining and emphasized the serious nature of the case and the formalities of a court of law. In their challenges, the defense team struck panelists who appeared impressed by Mr. Lanier’s repeated references to his part-time preacher status. Several prospective jurors voiced concerns about lawsuit abuse and large amounts of non-economic damages, and Lanier was successful in excluding those panelists from the jury. The defense was unable to rehabilitate panel members who said they could never award large amounts for non-economic damage. From a pool of 93 potential jurors, a jury composed of 7 men and 5 women with middle and working class backgrounds was selected. Juror ages ranged from young adult to middle age. 7 605169v.2 iManage 990999 The Judge The Honorable Ben Hardin presided over the trial. He was appointed to the bench by Governor Bush in 1995, and won election in 2000 and 2004. In 2004, he received $15,000 in campaign contributions from Lanier and others at his firm. He also received $1,500 in campaign contributions from Fulbright & Jaworski. The Trial The Ernst trial lasted more than seven weeks with the plaintiff presenting 15 days of testimony and Merck presenting 6 days of testimony. The primary defense themes were notice to Merck and specific causation. Ernst died of an arrhythmia, or irregular heartbeat, yet no studies linked Vioxx to arrhythmia. The defense noted that the evidence linking Vioxx and other COX-2 inhibitor use to adverse cardiac events was based on the drug’s alleged propensity to promote blood clot related events – including thrombolitic heart attacks and strokes. The defense relied on the report of Dr. Maria Araneta, the pathologist who performed the autopsy, in support of the company’s causation defense. She had concluded that Mr. Ernst had undiagnosed, long-standing arthrosclerosis and that his sudden cardiac death was the result of an arrhythmia rather than thrombosis. The defense presented evidence that about 200,000 Americans die each year as a result of cardiac arrhythmias – most of them triggered by atherosclerosis like that discovered in Mr. Ernst’s autopsy. The plaintiff responded by arguing that Merck presented no credible theory as to why Mr. Ernst would have died in his sleep from an arrhythmia. Lanier pointed out that Mr. Ernst’s heart 8 605169v.2 iManage 990999 didn’t fail during any of his numerous long distance runs or bicycle rides. If arrhythmia triggered his death, Lanier argued that it would have been much more likely to have happened under physical exertion. He mocked Merck’s theory that sleep apnea might have triggered the arrhythmia when vigorous exercise seemed to have no adverse effect on Ernst. Lanier argued that the pathologist did not detect a thrombosis and record it in her report because of the techniques used in the autopsy. The pathologist’s deposition had not been taken during the pretrial discovery phase of the case because she had since moved to the United Arab Emirates, and lawyers for Merck had been unable to reach her. She did not respond to several defense team emails attempting to contact her, later claiming that she had never received them, possibly due to her spam filter. Mr. Lanier did locate Dr. Araneta and spent $15,000 to fly her from the Middle East to Houston to testify. In her deposition, taken in the middle of trial, the Araneta stated that arrhythmia does not spontaneously occur. She testified that Mr. Ernst probably had a myocardial infarction because a blood clot blocked blood flow to a partially occluded artery and that vigorous CPR administered to Ernst probably dislodged the clot, which is why it was not discovered in the autopsy. In her opinion, Mr. Ernst’s sudden death left no time for his heart to show damage from the thrombosis. When the deposition testimony was introduced to the jury, it dovetailed perfectly with Lanier’s theory that Ernst’s heart attack killed him too quickly to leave evidence of tissue damage. Lanier also used the Merck Manual in cross examination of Merck’s witnesses to establish that arrhythmia in some form occurs in more than 90% of myocardial infarctions. Lanier also argued that the Merck Manual describes how thromboses can dissolve in as short a 9 605169v.2 iManage 990999 time period as six to eight minutes, which explains the fact that a clot was not found in the autopsy. The defense focused the jury’s attention on Mr. Ernst’s short-term use of Vioxx. Studies showed increased risk of adverse cardiovascular events only in patients who had taken Vioxx for at least eighteen months. Mr. Ernst was on Vioxx for less than eight months. This evidence helped the defense to advance its theme that Vioxx, like all drugs, carries some risk, but did not cause the death of Mr. Ernst. Dr. Alan Nies, who was in charge of all Vioxx testing, testified that Vioxx was an important step in pain management therapy because it could relieve pain without causing stomach bleeding, a common side-effect of traditional pain medication. Merck’s alleged knowledge of the drug’s cardiovascular problems prior to release was another key issue at trial. Plaintiff presented emails from 1997, two years before Vioxx was released to the market, indicating that clinical trials should exclude patients with cardiovascular problems in order to decrease the cardiovascular event rate. Another document written in 2000 showed Merck’s top scientist stating that the clinical trials confirmed the heart risks. Lanier used this evidence to argue that Merck went forward with a drug it knew to be unsafe. In response, the defense team presented evidence that Vioxx underwent more clinical trials than many other prescription drugs. Lanier also emphasized that Vioxx need not be the producing cause of Mr. Ernst’s death in order to render a verdict for the plaintiff. From his opening statement through closing, the plaintiff reminded the jury that they need only find that Vioxx was a producing cause of Mr. Ernst’s death, not the only cause. This allowed the plaintiff to effectively deflect the defense team’s arguments that Mr. Ernst had unknown health problems, including atherosclerosis, which caused his death. 10 605169v.2 iManage 990999 Merck’s marketing strategy was also attacked by Mr. Lanier. Lanier argued that Merck intentionally deceived physicians about the adverse cardiovascular risks associated with Vioxx. The plaintiff was particularly effective in using documents from presentations made to Merck pharmaceutical representatives. The plaintiff introduced into evidence a document titled “Dodge!” and questioned Merck’s chief epidemiologist about the document. She testified that the document was a “game” used by the marketing department to teach drug representatives how to answer questions about Vioxx. Through skillful questioning, Lanier made the document appear to be a game of dodge ball developed by the corporation to teach Merck’s sales force to avoid questions from physicians about the safety problems of Vioxx. In post-verdict interviews, several jurors commented on the fact that no one from Merck’s marketing department testified at trial. In short, Lanier was able to characterize the evidence his way without being effectively checked by testimony from Merck’s own company representatives. The defense team handled this issue by arguing that the marketing strategy focused on informing doctors, not avoiding them. They characterized Merck as a cautious company that conducted more tests than necessary and worked in partnership with the FDA for approval. Merck witnesses sought to deflect accusations from Lanier that the marketing department was driving the development of Vioxx, and tried to reinforce the theme that Merck acted responsibly and believed Vioxx to be safe up until the final study that prompted its voluntary removal. The defense focused on Merck’s decision to voluntarily withdraw the drug from the market. That theme, however, appeared to ring hollow with jurors. In post verdict interviews, they reported that the withdrawal was not evidence of Merck’s corporate conscience. Instead, the jurors perceived it as a preemptive move and that the FDA would have recalled the drug had Merck not voluntarily done so. 11 605169v.2 iManage 990999 The defense elected to conduct a vigorous and aggressive cross examination of Mrs. Ernst. Defense counsel questioned Mrs. Ernst for more than 90 minutes, at times reportedly badgering the plaintiff, who was apparently a very sympathetic widow. Defense counsel questioned Mrs. Ernst at length about Mr. Ernst’s adult children from a previous marriage, whom plaintiff did not know and who were not parties to the lawsuit. In its closing statement, the defense suggested that a defense verdict would be good for Mrs. Ernst because it would alleviate some of her guilt – a reference to testimony given by the plaintiff that she felt guilty for recommending that her husband take Vioxx. In post verdict interviews, jurors said that they found the intense cross-examination of Mrs. Ernst insensitive and irrelevant. One juror said it “was wrong” for Merck’s lawyers to suggest that a defense verdict would be best for Mrs. Ernst. The Verdict The jury deliberated for a little more than ten hours before delivering a $253.5 million verdict for the plaintiff. The actual damage award to Mrs. Ernst totaled $24.5 million, consisting of $450,000 for pecuniary loss, $12 million for loss of companionship, and $12 million for mental anguish. An additional $229 million in punitive damages was awarded, which was the amount of additional profit Lanier suggested to the jury that Merck thought it could make by beating Pfizer’s Celebrex to the market. After the verdict, Merck shares fell 7.7%, erasing more than 5 billion dollars from its market capitalization. The jury’s verdict will be drastically reduced by Texas’s punitive damage caps. Texas law caps punitive damages at twice the economic damages and up to $750,000 in addition to non-economic damages. Thus, the maximum punitive damage award allowed would be $1.65 million, for a total judgment of $26.1 million for Carol Ernst. Lessons Learned 12 605169v.2 iManage 990999 Attorneys are responsible for setting the tone for their client’s case. The styles of these opposing counsels were a study in contrast. Mr. Lanier spoke in plain terms, using themes calculated to appeal to the jury’s emotions and their sense of justice. Throughout trial, he used entertaining and easy to understand visual aides that often contained barbs at Merck’s executives and corporate culture. He argued that Merck had once been a good company that went bad when Ray Gilmartin became CEO in 1994. Lanier argued that under Gilmartin, Merck lost its moral compass. He told jurors, “he took that company and made the needle always point to the dollar sign.” The plaintiff’s case was presented with passion, and supported by key evidence developed at the eleventh hour. The defense team – made up of several attorneys rather than one compelling and charismatic advocate – took the more traditional path of appealing to reason and logic. The defense asked the jurors to focus on the scientific evidence rather than the emotional themes of greed and corporate competitiveness emphasized by the plaintiff. Although the defense made efforts to humanize Merck, for example, by introducing evidence that many of its executives and top researchers used Vioxx, the jury was not presented with an emotional and impassioned defense of a drug that Merck argues had helped so many people live pain-free. Many of Merck’s key witnesses – including CEO Gilmartin – testified by deposition rather than as live witnesses. In contrast, the plaintiff presented most of its witnesses in person. One exception was the key testimony of the former coroner, Dr. Maria Araneta. This was a strategic decision by Lanier. He told the press that he presented Dr. Araneta’s videotaped deposition to reduce the chance that an appellate court would block her testimony or that the testimony would be grounds for error after a verdict was rendered. One must wonder too 13 605169v.2 iManage 990999 whether Merck held back on cross-examining Dr. Araneta in the deposition under the supposition that she would be called to testify live at trial. Lanier commented in a post-trial interview that the defense team’s scripted trial strategy changed his strategy for trying the case. He said “The defense also followed a script. Once we realized that, we changed our game plan a lot to see if they could adjust on the fly. It was hard for them.” Lanier was able to adapt to specific trial developments and incorporate them into the plaintiff’s theory of the case. For example, when Merck representatives testified at trial that the great majority of communications between the defendant and the FDA related to minor technical matters such as font size, he pointed to letters where the FDA criticized Merck for a continuing pattern and practice of corporate behavior to avoid complying with FDA disclosure requirements. Lanier used Merck’s testimony that the communications involved minor and technical matters to insinuate that the defense still downplayed the serious nature of its disagreements with the FDA. The press accused the defense of often being unable to react to unexpected events during trial. When the pathologist who conducted the autopsy testified by deposition and “expanded” on the autopsy report, Merck was unable to neutralize the testimony. In post verdict interviews, jurors cited the pathologist’s testimony as key evidence. Merck’s counsel had emphasized the neutrality of the witness and the importance of the autopsy report. However, that was prior to the deposition in which she changed her testimony to support the plaintiff’s theory of the case. Throughout the trial, Lanier and others on his team reached out to the news media. plaintiff’s counsel regularly gave interviews both before and during trial. Many articles quoted Mr. Lanier at length – allowing the plaintiffs to communicate directly with the public. In contrast, Merck’s defense team rarely spoke to the press. In short, the plaintiffs controlled their 14 605169v.2 iManage 990999 message in the media. The defense relied on reporters to accurately restate and report defense themes. After the Ernst verdict was issued, lawyers quoted by the press pointed out that Lanier had set out a roadmap for any plaintiff seeking to recover against Merck. In that first trial, key documents and witnesses were identified that painted the picture of a company that was more concerned with profits over the health of patients. That prediction proved to be untrue, at least in part, as Merck won the second Vioxx trial in New Jersey in November, 2005. Jurors in that case found that Merck properly alerted prescribing physicians to a link between Vioxx and an increased risk of cardiovascular events, and found unanimously that there were no consumer fraud violations in the way Merck marketed Vioxx to physicians. As a result, in the New Jersey case, the jury never reached the question of proximate cause. Some in the plaintiff’s bar faulted the trial strategy in that case for focusing on complicated scientific issues rather than on Merck’s marketing campaign. While it may still be too soon to understand the full effects of the Ernst verdict on the Vioxx litigation as a whole, much about defending pharmaceutical products cases can be learned from the trial. The trial strategy and style of the parties’ counsel was a study in contrasts. Plaintiff’s counsel refused to stick to a script and remained adaptable throughout the case. He was also very effective in delivering an impassioned story to the jury with strongly resonant “bad company” themes. The defense appeared rigid in its adherence to plan – to such an extent that their case appeared scripted to many observers. Of course, this might cause one to wonder to what extent trial counsel actually had control over the trial of the case, and whether they were able to bring their individual styles into play. Clearly, those who defend pharmaceutical manufacturers must effectively explore the FDA approval and warnings process with the jury, 15 605169v.2 iManage 990999 educate them on the science of general and specific causation, and explain the plaintiff’s attempts to paint the company bad – all in a way that connects with – not bores – jurors. While difficult, it may be more important, however, for counsel to elevate their case above the banalities of science and personalize their clients in a way that presents a passionate defense of the company and the product. 16 605169v.2 iManage 990999