11/23/2005

Merck Lawsuits Hurting The Consumers

Merck is currently dealing with lawsuits resulting in deaths from a drug Vioxx that was recently pulled from the shelves. This being one of the reasons for their recent 7,000 job layoffs and after 6,000 more lawsuits to go more people are going to feel the effects. Everyone wants a claim on Merck's money and they want to give Merck 'what they deserve'. But after so many lawsuits the payouts are going to be coming out of their research and development fund. Meaning no more money to find better prescription medicines to treat illness. Also, this may lead to further job cuts and it has already driven their stock prices down 70%. Point of the story is, these lawsuits are going to effect more than just Merck, it's going to effect the consumers as well.

2 comments:

maddy said...

Because of Merck’s lack of responsibility they are not only hurting themselves, but the pharmaceuticals market all together. It is hard enough for consumers to trust drug companies because of issues such as Vioxx that have cause consumers to lose faith. Though I am not a big proponent of lawsuits something has to make these companies stop and consider the consequences of their actions.

Dr. Tufte said...

-1 on Maddy's comment for a spelling error.

Without seeming like I favor the drug companies, I recommend we take a step back and think about a few things.

1) Do Merck's patent make it more likely that they will make profits?
2) Would Merck make as much profits if it sold a good with more elastic demand?
3) If Merck was not making profits, would they be sued?

The answer to the first one is probably yes, and if they are given a "license to make profits" there should also be some ability to take that away.

The answer to the second is probably not. All the patents in the world won't help you if it is easy for competitors to come up with differentiated alternatives.

The answer to the last one is again, probably not.

So, Merck identified an exploitable market and followed through. There were problems and they are getting sued. I might have issues with the scale of the outcome, but the qualitative aspects seem just about right.