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Merck & Co., Inc. : Lawsuit Claims Merck Overstated Mumps Vaccine Effectiveness

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06/22/2012 | 01:32pm EDT
   By Jon Kamp 

Two former Merck & Co. Inc. (MRK) employees have sued the company in federal court alleging Merck overstated the effectiveness of a mumps vaccine for which the U.S. government paid hundreds of millions of dollars.

Merck--which stressed that none of these allegations relate to the safety of its product--said the lawsuit is "completely without merit", and that it plans to "vigorously defend itself." The Whitehouse Station, N.J., drug maker also noted that the U.S. Department of Justice has thus far declined to participate in the case after its own two-year probe.

Mumps is a contagious disease that causes symptoms like fever, headache and swollen salivary glands. It was a common illness for kids and young adults before childhood vaccinations became common decades ago, according to the Centers for Disease Control and Prevention, although there were outbreaks in 2006 and 2009. The agency says vaccines are the best way to prevent mumps.

Merck introduced the first vaccine 45 years ago, and since the 1970s it's been part of a combination product that also immunizes children against rubella and measles. According to the lawsuit--filed by former Merck virologists Stephen Krahling and Joan Wlochowski--the company allegedly defrauded the U.S. for more than a decade by hiding the fact the vaccine had become less effective.

As a result, the former employees say the government has long paid for a product that doesn't live up to Merck's claims. The lawsuit seeks a judgment against Merck equal to three times the damages suffered by the U.S., plus the maximum allowable award for the former employees under federal whistleblower laws.

The suit was first filed in 2010 in the U.S. District Court for the Eastern District of Pennsylvania. It was unsealed Thursday after the government declined to get involved in the case.

Merck confirmed Krahling and Wlochowski were former employees, but it said they haven't worked at the company for a decade.

"It's important to understand that none of the allegations in the complaint relate to the safety of M-M-R II"--the vaccine in question--"and we remain confident that M-M-R II helps protect against measles, mumps and rubella as described in the labeling for the vaccine," Merck said in a statement.

"M-M-R II continues to be recommended for routine administration to children by public health authorities around the world, including the U.S. Centers for Disease Control and Prevention and the U.S. Food and Drug Administration," the company said.

Merck doesn't specifically break out sales for the vaccine, but the company reported combined U.S. sales of $1.1 billion last year for that product and two other childhood vaccines. Merck shares recently traded up 1.9% to $40.19 and have risen 6.6% this year.

Write to Jon Kamp at jon.kamp@dowjones.com

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Financials ($)
Sales 2019 44 422 M
EBIT 2019 14 946 M
Net income 2019 10 013 M
Debt 2019 17 055 M
Yield 2019 3,01%
P/E ratio 2019 18,56
P/E ratio 2020 15,73
EV / Sales 2019 4,64x
EV / Sales 2020 4,34x
Capitalization 189 B
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Mean consensus OUTPERFORM
Number of Analysts 17
Average target price 87,4 $
Spread / Average Target 19%
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Kenneth C. Frazier Chairman, President & Chief Executive Officer
Robert M. Davis CFO & Executive Vice President-Global Services
Sandy Tremps Vice President-R&D IT CIO
James H. Scholefield Chief Information & Digital Officer
Thomas Henry Glocer Independent Director
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