Merck, Schering Win Initial OK For $42M Vytorin Deal

By Hilary Russ

Law360, New York (September 22, 2009) -- A federal judge has granted preliminary approval of a $41.5 million settlement in a multidistrict litigation asserting breach of contract and product liability claims against Schering-Plough Corp. and Merck & Co. Inc. over the marketing of cholesterol drug Vytorin.

Judge Dennis M. Cavanaugh of the U.S. District Court for the District of New Jersey on Thursday also approved the class for the purposes of the deal.

Both sides negotiated extensively for months and the settlement agreement was not the result of collusion, the order said.

The deal was sufficiently reasonable to allow the parties to give notice to members of the class for their approval of the proposal, Judge Cavanaugh said.

"We are pleased with the court's preliminary approval of the proposed settlement and believe it is in the best interests of the shareholders of Schering-Plough," said company spokesman Fred Malley.

In August, the pharmaceutical giants said they would pay $41.5 million but not admit any misconduct or liability in a proposal to settle a host of civil lawsuits over joint marketing and studies of cholesterol drugs Vytorin and Zetia.

More than 140 such lawsuits have been pending in New Jersey federal court, and the suits also made allegations about the safety and efficacy of the two drugs based on a clinical trial referred to as Enhance, Merck said in statements when the proposed deal was filed.

The suits were filed on behalf of purported classes of consumers, insurers and others, and by a separate group of independently represented health plans that bought or put money toward the purchase of the two drugs, Merck said.

The Enhance study ended in May 2006, and companies released partial results until January 2008, but didn't publish a full report, including unfavorable results, until April 2008.

The study found that the combination drug Vytorin is no more effective at reducing fat deposits in arteries than one of its components, Zocor, alone. Zocor, Merck’s older drug, is now available in a generic form and costs much less than Vytorin.

Prior to the Enhance results, the companies' joint marketing of Vytorin promoted it in advertisements directly to consumers.

In July, Merck and Schering settled with 35 states and the District of Columbia after attorneys general investigated the delayed release of the Enhance clinical trial results. That settlement was for $5.4 million, the Associated Press reported.

Executives from both companies have said in previous statements that the Enhance study was done in good faith and that the drugs were marketed according to the law. They have said they still believe the drugs, combined with a healthy diet, can help doctors treat patients with high cholesterol.

Attempts to solicit comment on the preliminary approval plaintiffs' lawyers were unsuccessful. A Merck spokesman declined to comment on the ruling.

Excluded from the class in the settlement are any of the defendants; their affiliates, successors or officers; any judge who has presided over the litigation and his or her family members; attorneys for the plaintiffs and their relatives; and several other categories of people, according to Judge Cavanaugh.

For the purposes of the settlement, Judge Cavanaugh also laid out the three main issues of law at stake in the case: whether the drugmakers concealed material information from the class and the public about the efficacy and safety of Zetia and Vytorin, whether any concealment was part of an orchestrated scheme of deception, and whether the companies engaged in a fraudulent sales marketing scheme for the drugs as treatment for high cholesterol and heart attack risk factors.

He scheduled a Feb. 8, 2010, hearing to consider final approval of the deal. Class members may object in writing to the court.

The plaintiffs are represented by law firms including Seeger Weiss LLP, Carella Byrne Bain Gilfillan Cecchi Stewart & Olstein, Hagens Berman Sobol Shapiro LLP and Wolf Haldenstein Adler Freeman & Herz LLC.

Merck and Schering-Plough are represented by Dechert LLP.

The case is In re: Vytorin/Zetia Marketing Sales Practices and Products Liability Litigation, case number 2:08-cv-00285-DMC-MF, in the U.S. District Court for the District of New Jersey.