Vioxx Verdict is Justice, Not a Jackpot
A Texas jury of twelve men and women recently awarded $253 million to the widow of a man whose death was contributed to by Vioxx. The verdict is a victory for all consumers put at risk by drugs that are improperly tested, marketed and absent warnings. However, proponents of tort reform use the verdict as an example of "jackpot justice." This is the idea that huge awards are handed out to unworthy plaintiffs. The truth is verdicts like these are almost always reduced, sometimes to the extent that it is questionable whether justice is served at all.
Consider closely the Vioxx verdict. The jury awarded $450,000 in economic damages for the deceased lost pay. $24 million for mental anguish and loss of companionship awarded to the widow for the loss of her husband. Finally, $229 awarded in punitive damages, designed to punish Merck for acting irresponsibly in testing and promoting Vioxx. It is important to note that the punitive award is the exact amount that Merck saved in delaying updating Vioxx's warning label of cardiovascular risks. Merck contested the FDA's request to update the Vioxx label, delaying the update for seven months in 2002 by inundating the FDA with irrelevant studies and paperwork. The estimated amount that Merck saved by this delay is the exact amount of the punitive award.
Due to tort reform laws in Texas, this punitive award will by reduced to $1.6 million. Considering Merck's revenue is in the billions of dollars, the $1.6 million is the monetary equivalent of a $30 parking ticket.
Interesting post on the punitive (or lack of punitive) effect of the Vioxx decision on Merck, William. However, the direct effect of the award of $1.6 million on Merck is even LESS than a $30 ticket on an average household!
As economists we are asked to do these types of punitive damage analyses all the time. Based on Merck's 2004 earnings of about $17 billion a year, the $1.6 million fine on Merck is equal to about a fine of about $3.17 for a household earning $35,000 a year. So all else equal, the punitive effect is even less.
Jeannie Elliott @ www.lostcompensation.com
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With the best regards, Tom Hughes
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