Merck shows no sympathy for Vioxx victims
Merck & Co., Inc. today announced that earnings per share for 2004 were hurt due to the company's Sept. 30 voluntary worldwide withdrawal of VIOXX. In addition, 2004 results include an additional $604 million reserve recorded in the fourth quarter solely for future legal defense costs for VIOXX litigation. The company has not established any reserves for any potential liability relating to the VIOXX litigation. The results were also negatively affected by approximately $700 to $750 million in foregone sales in the fourth quarter related to the VIOXX withdrawal.
With the charge taken in the fourth quarter, the company's reserve solely for its future legal defense costs related to the VIOXX litigation is now $675 million. This reserve is based on certain assumptions and is the minimum amount that the company believes at this time it can reasonably estimate will be spent over a multi-year period. Or in other words, Merck is not reserving any funds for its Vioxx liabilities that analysts estimate could be as high as $55 billion. (Related article: Merck's Vioxx liabilities)
"We have stated previously that we intend to defend these lawsuits vigorously," said Kenneth C. Frazier, Merck Senior Vice President and General Counsel. "This reserve is consistent with our commitment to defend the company." This is a line that the company has been repeating since the recall of Vioxx and it has definitely not pleased Vioxx victims and family members of those who passed away after taking Vioxx. According to latest estimate from Dr. David Graham, the FDA expert, as many as 140,000 Americans alone may have been injured by Vioxx. (Related article: Merck continues its ferocious attack on Vioxx victims)
"As a company, we are moving beyond the VIOXX withdrawal. We are focused on renewing growth and accelerating the process of change to position Merck to best meet the demands of the market and the challenges of the environment," said Merck Chairman, President and Chief Executive Officer Raymond V. Gilmartin. "We continue to streamline our business processes, allocate resources to the areas of highest potential growth and accelerate the speed at which we develop products. We are also driving growth through new and established products, new indications and formulations, and clinical trials that bolster our products' safety and efficacy profiles. In addition, our financial strength supports our ability to grow both internally and through licensing agreements and targeted acquisitions."
In other words, the company does not care that tens of thousands of people are dead worldwide. Rather than showing any sympathy for the dead and kind words for the injured, the words of Gilmartin have a tone that indicate a callous attitude towards human life in general. It almost appears that Gilmartin is irritated that Vioxx victims should bother him for deaths and injuries caused by Merck. There are reports that the pharmaceutical industry is actively helping the Bush administration to change the laws of the United States in the current session of Congress (the bill has been declared as one of the top three priorities of Republicans along with privatization of Social Security) so that no matter how many Americans are killed by lethal drugs, Americans will not be able to bring the drugmaker to justice. (Related article: Rights of Vioxx victims to sue Merck may be taken away soon by the Bush administration)
In October 2003, Merck announced plans to eliminate 4,400 positions as part of a cost-reduction initiative which is now complete. As of Dec. 31, the company had eliminated 5,100 positions, as the company identified additional opportunities to eliminate positions and reduce costs. Most of the additional eliminations came from contractor positions. In 2005, this action is expected to lower the company's annual payroll and benefit costs by approximately $300 million without impacting either key productivity initiatives or Merck's ability to meet its business objectives. Merck has also redeployed sales representatives that had previously supported VIOXX to capitalize on opportunities to grow its in-line products and support upcoming launches.
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