Pension funds win $688 million settlement with Merck

Merck settled a lawsuit concerning a failed trial to test the efficacy of cholesterol lowering drug Vytorin

Merck & Co. has agreed to a $688 million settlement in two combined class-action lawsuits led by public pension funds, including the $52 billion Massachusetts Pension Reserves Investment Management Board, Boston, and €281 billion ($374.6 billion) Stichting Pensioenfonds ABP, Heerlen, Netherlands.

The plaintiffs alleged Merck and Schering-Plough Corp. failed to report a drug trial was a failure more than a year before the results were released. Schering co-marketed the drug and co-sponsored the trial and has since merged with Merck. The plaintiffs were investors who bought securities from Merck and Schering between December 2006 and March 2008.

“We had very compelling evidence on an intentional delay of releasing results,” said Dan Berger, director at Grant & Eisenhofer, the law firm representing ABP and fellow plaintiff International Fund Management, a unit of of the DekaBank Group. He added the two clients lost “tens of millions of dollars” in the stock during the period in question.

Merck will pay $215 million and Schering-Plough, $473 million, in the largest settlement involving a pharmaceutical company and among the top 25 securities class-action settlements of all time, according to said Salvatore Graziano, partner at law firm Bernstein Litowitz Berger & Grossmann, which represented five U.S. public pension plans in the two lawsuits.

The case was set to go to trial March 4. The settlement is subject to approval by Judge Dennis M. Cavanaugh of the U.S. District Court in Newark, N.J.

“Hopefully, the size of the settlement makes other companies in the (pharmaceutical) space look up and take notice on reporting results,” Mr. Graziano said.

Mr. Graziano said his clients had “significant losses” in the millions of dollars. His law firm represented the $21 billion Mississippi Public Employees' Retirement System, $12.3 billion Arkansas Teacher Retirement System and $1.4 billion Louisiana Municipal Police Employees Retirement System in the Schering lawsuit; and the $2.4 billion Detroit General Retirement System and $1.1 billion Jacksonville (Fla.) Police & Fire Pension Fund in the Merck lawsuit.