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How Does Merck Settlement Protect Consumers?

Recently, the pharmaceutical company Merck settled a major shareholders derivative lawsuit arising from their alleged suppression of a clinical study of the cholesterol drug Vytorin. The study was conducted with the intent to show that Vytorin was more effective than generic drugs such as Zacor, but the results of the study did not provide the evidence that Merck had hoped for, as they indicated that the drug was no more effective at reducing arterial blockage than some of its competitors. 

“In delaying the release of this study, the company may have deceived consumers as to the benefits of the drug,” explained California personal injury lawyer James Ballidis. 

The board of directors allegedly knew these disappointing results as early as 2005. Despite this inside knowledge, the results of the study were not publicly released until nearly two years later. When the information finally was revealed, the report damaged the credibility and image of the company and sent stock prices tumbling. This led many shareholders to believe that the delay in releasing the report resulted in share prices of the stock being artificially inflated.   

Shareholders who believed Merck and its board of directors had deceived them responded by filing a shareholder derivative lawsuit. A shareholder derivative lawsuit is a suit brought by a shareholder (partial owner) of a company against the company's board of directors.  Typically, shareholder derivative suits are class action suits brought by one or more shareholders on behalf of all other shareholders who have a stake in the company. 

The Merck Settlement

More than four years after the claims were initially made against Merck, a settlement was finally reached in the Merck shareholders derivative lawsuit and approved by a federal judge. The settlement does not award any monetary damages to shareholders. However, it does require Merck to reform their policies. These reforms are estimated to be valued at a cost of anywhere between $50 and $75 million. 

Under the settlement terms, Merck Research Labs, the division that conducts clinical trials for the company, must report any significant delays in releasing research to a Research Committee of the Board.  The reporting requirement is triggered when the results of a study are not released to be published within 12 months after the study is completed. When reporting the delays, the reasons for them must also be specified.  This reporting requirement applies to all research and trials conducted on any products marketed in the U.S. that are regulated by the Food and Drug Administration.  The research committee can then take appropriate action once notified of a delay, including investigating further if necessary. 

This reporting requirement will help to ensure that Merck does not delay in releasing information about research just because the research doesn't provide the results that they had hoped for. Avoiding suppression of unfavorable research is not just helpful to shareholders, but may also protect consumers. Countless patients likely purchased Merck's cholesterol drugs based on incorrect claims about the drug, paying a premium over generic brands when the drug was in fact no more effective. 

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