Merck’s (NYSE:MRK) pain killer Vioxx allegedly caused a number of deaths and illnesses. Eventually 27,000 lawsuits were filed against the company, causing a potentially catastrophic liability.

Today, it appears that Merck will settle most claims for $4.85 billion. According to The Wall Street Journal “an agreement is expected to be announced Friday daylight in New Orleans, where a federal judge is overseeing the litigation.” The litigation by the effects of the drug have dragged on for six years. The paper adds that “the company currently has set aside $720 million for its Vioxx legal defense costs, which doesn’t include any potential damages to plaintiffs.”

Some suits are not part of the settlement, but the accord would end the great majority of cases.

Did Merck pay too much for

relief of its litigation problems? Perhaps. Based on the company’s financial knowledge, the Vioxx matter was costing the company by $600 million a year. And, it might have lost some of the cases. But, $4.85 billion covers a lot of legal fees by the next decade, and Merck has won several high profile Vioxx cases in the final year or so.

But, the settlement does give the company some peace and the chance to move forward with its normal commerce without the cloud of liabilities from Vioxx hanging by its head. From that standpoint, Merck may have gotten off cheap.

Douglas A. McIntyre can is an editor at 247wallst.com.

Original post by Douglas McIntyre

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