The Recall of Vioxx

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Case Details:

Case Code : BECG046
Case Length : 13 Pages
Period : 1998-2004
Pub. Date : 2005
Teaching Note :Not Available
Organization : Vioxx
Industry : Pharma
Countries : US

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Rise and Fall of Vioxx

Merck promoted Vioxx aggressively during the early days of its launch. This included direct marketing to doctors, private clinics and hospitals through advertising campaigns both in print media and television. The drug was endorsed by celebrities including former athletes - Dorothy Hamill and Bruce Jenner.

Merck offered Vioxx to hospitals and doctors at discounted rates. According to William Larkin, senior vice president of pharmacy at GNYHA (Greater New York Hospital Association), "Such nominal pricing policies are employed by many drug companies as a way to get physicians in the habit of prescribing drugs." Termed as 'super aspirin,' Vioxx was promoted as a cure for everything from arthritis pain to menstrual cramps. It was projected as a painkiller, which was a boon for patients suffering from arthritis and that overcame gastrointestinal problems caused by the older generation of painkillers. Merck spent $160.8 mn in promoting Vioxx in 1999. It soon emerged as one of the fastest-selling drugs in the world...

The Aftermath

The sudden recall of Vioxx from the market was a big blow to Merck. Its share price fell from $45 to $33 per share wiping out $28 bn in market capitalization. Gilmartin announced that Merck's fiscal 2004 revenues could go down by 20%.

Merck also revealed that the way it handled the Vioxx issue was being investigated by the US Justice Department, the Securities Exchange Commission and the US Congress. A class action lawsuit was filed on October 01, 2004 against Merck on behalf of its shareholders who purchased Merck securities, including common stock, between October 30, 2003 and September 29, 2004 alleging that Merck failed to disclose material information during the Class Period concerning the safety profile of Vioxx. The lawsuit, filed in the District Court of New Jersey seeked to recover damages on behalf of all class members who purchased Merck stock during the class period. By October 31, 2004, the withdrawal of Vioxx had attracted 375 lawsuits against Merck...


Exhibit I: Vigor (Vioxx Gastrointestinal Outcome Research)
Exhibit II: Approve (Adenomatous Polyp Prevention on Vioxx)
Exhibit III: Final Results of Vigor
Exhibit IV: Summary of the FDA's Warning Letter to Merck
Exhibit V: Summary of Label Changes in Vioxx (2002)
Exhibit VI: Important Information for Patients Taking Vioxx


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