Product liability litigation: an issue of Merck and lawsuits over Vioxx

• Autores: Kurt W. Rotthoff
• Localización: Applied financial economics, ISSN 0960-3107, Vol. 20, Nº. 22-24, 2010, págs. 1867-1878
• Idioma: inglés
• Texto completo no disponible (Saber más ...)
• Resumen

  • Merck & Co., Inc. pulled Vioxx, a $2.5 billon a year nonsteroidal anti-inflammatory drug, off the shelf in September 2004. The removal followed a study that was published reporting Vioxx increased the risk of Cardiovascular Events (CE) after long-term use. In the years since then, many lawsuits have been filed against Merck. This article examines the incentive to recall a product and the effects of Merck pulling Vioxx from the shelves. Using the market's expected Internal Rate of Return (IRR) for Merck, I calculate the expected profits from future Vioxx sales. I then use data on financial effects to show how the Market Value (MV) of Merck reflects their probability of winning legal cases concerning Vioxx.