Merck's Vioxx Woes Snowball

Merck disclosed last week that the Justice Department has launched a criminal investigation into its handling of the COX-2 inhibitor Vioxx, which the drug company removed from the market in September in light of a study linking the drug to increased risk of heart attack and stroke. Merck also said that the Securities & Exchange Commission has begun an informal inquiry into the withdrawal.

The announcement follows a week punctuated by articles in the Wall Street Journal and Lancet, a British medical weekly, alleging that Merck knew about health risks associated with the painkiller years before pulling it off the market. Lancet criticized Merck for not removing the drug in 2000, shortly after it was commercialized, based on evidence of potential dangers that the journal claims Merck knew of at the time.

Last week, Merck published on its website a detailed "scientific critique" of the Lancet article. The drug company claims that early data on Vioxx showed no significant difference in cardiovascular risk between the drug and either a placebo or nonsteroidal anti-inflammatory drugs other than naproxen.

The SEC inquiry is likely to focus on whether Merck provided investors with adequate information about Vioxx's risks.

In addition to government inquiries, Merck faces consumer lawsuits alleging improper conduct. Standard &a Poor's Equity Research estimates that Merck's product liability could top $10 billion. CEO Raymond V. Gilmartin said last week that the company acted appropriately in withdrawing the drug in September and that Merck will survive the Vioxx crisis.

The case has prompted congressional inquiries into FDA's oversight of health concerns in the drug approval process. Meanwhile, preliminary results of a study of a Pfizer COX-2 drug, Bextra, presented at a meeting of the American Heart Association on Nov. 9, suggest a similar elevated risk of heart attacks and strokes. Pfizer warned last month that Bextra posed an elevated heart problem risk for certain heart surgery patients.