Merck decides to review Vioxx recall steps

Since the recall of Vioxx, Merck has been accused of taking a very callous approach, particularly its attitude towards Vioxx-related deaths. Not a word of apology has been offered by the company. Instead, news reports indicate that Merck is taking a very antagonistic approach and is preparing for an ugly court battle.

None of this has helped the company. The stock price has dropped and there are reports that Merck employees are looking for new jobs as headhunters are now starting to call them. In the meantime, Merck management was able to convince the board to approve a severance package ostensibly to retain key executives, but it was a public relations disaster since everyone assumed that senior managers wanted to put their personal interests over those of its customers and lower level employees. (Related link: Merck management prepares for possible takeover by protecting the interests of senior managers)

The behavior of the board of directors has been criticized and it has been hypothesized that board members may have failed to comply with the spirit of the Sarbanes-Oxley Act by letting the company pursue a flawed Vioxx recall strategy. (Related article: Merck's directors not acting in the interests of the shareholders)

Looks as if Merck's board is finally acting and announced today that it has appointed a Special Board Committee to review the company's actions prior to Merck's voluntary withdrawal of VIOXX, to act for the Board in responding to shareholder litigation matters related to the withdrawal of VIOXX and to advise the Board with respect to any action that should be taken as a result of the review.

William G. Bowen, Ph.D., president of The Andrew W. Mellon Foundation and chair of the Merck Board's Committee on Corporate Governance, will chair the Special Committee. "Even though the FDA has noted that the company acted responsibly with respect to VIOXX, the Board concluded that its responsibilities to Merck shareholders made it important to conduct an independent review in order to ensure that the company acted in an appropriate and ethical manner," said Dr. Bowen. Merck Board members who also will serve on the Special Committee are: Lawrence A. Bossidy; William N. Kelley, M.D.; Rochelle B. Lazarus; Samuel O. Thier, M.D. and Peter C. Wendell.

"The Committee will have the complete cooperation of Merck management and the full resources it needs to conduct its assessment. Merck management looks forward to the results of the Special Committee's review and is convinced that it will show that the company acted responsibly and appropriately," said Raymond V. Gilmartin, chairman, president and CEO of Merck.

The Honorable John S. Martin, Jr., Of Counsel at Debevoise & Plimpton LLP, has been retained by the Special Committee to assist with the independent review. Prior to joining Debevoise in 2003, Judge Martin served for 13 years as the U.S. district judge for the Southern District of New York and for three years as the U.S. attorney for the Southern District of New York.

Recommended article: Merck is a classic example of shareholder value destruction