Investors suing Merck over Vioxx got a boost from the White House yesterday. In an amicus curiae brief filed with the Supreme Court, the Obama administration backed the investors' right to sue the drugmaker. You'll remember that Merck contended the shareholders should have sued earlier; information about Vioxx risks had been public for awhile by the time they filed suit in 2003. Vioxx wasn't withdrawn from the market until 2004.
Here's how the litigation has played out so far: A district court granted Merck's motion to dismiss, based on the two-year statute of limitations. This court found that enough information was public by November 2001 to tip off the investors to the Vioxx trouble. But the Third Circuit court reversed that ruling, saying that clues to Merck's alleged fraud weren't public for more than two years before the suit was filed. In fact, the court noted, Merck issued a series of reassuring statements that downplayed Vioxx risks.
Merck asked the Supreme Court to hear the case, arguing that the high court needed to decide just what information needs to be public to start the statute-of-limitations clock ticking. The justices took the case; now it's awaiting its high court hearing. The Obama Administration's backing of the investors is significant because it hints at a change in attitude toward investor suits; the Bush Administration tended to support the companies in these sorts of cases. Plus, a Supreme Court ruling could affect the several similar securities cases out there in pharma-land.
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