Management Mistakes and Successes, Tenth Edition

Chapter 20. Merck's Vioxx Catastrophe and Other Problems

Newton Acker, 71, was on a bicycling vacation with his wife in southern France. While he had some arthritis, he was otherwise exceptionally healthy, with low blood pressure and cholesterol. Indicative of his fitness, he bicycled 5,000 miles a year. Indicative of his longevity potential, his parents had lived to age 90. Yet on September 3, 2004, this paragon of good health suddenly died of a stroke.

On September 30, four weeks later, Merck pulled Vioxx from the market after a study showed it doubled the risk of heart attacks and strokes. "That's the answer," Acker's son, a F-16 pilot, immediately thought, as his dad had been taking Vioxx for 14 months before his death. He blamed Merck for failing to act sooner, and planned to sue.^[310]

Vioxx was a $2.5-billion-a-year arthritis drug and provided well over 10 percent of the $22 billion revenues of the pharmaceutical giant. Some 20 million Americans had taken Vioxx by the time of the recall. Tort lawyers salivated at the tens of thousands who may have had "major adverse events" attributable to the drug, and they rushed to set up toll-free numbers to solicit potential clients. The cost of settling the lawsuits could well run into the tens of billions of dollars, which would be the biggest legal onslaught the drug industry had ever seen. Merck's stock dropped $33 billion in value between September 30 and November 1.

Let us examine how Merck got into this mess, whether it was fully ...