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Merck Charged with Fiduciary Breach in Company Stock Suit
Merck employee Martin Cobb claimed that the Employee Retirement Income Security Act (ERISA) violations occurred because the company delayed disclosure of potentially negative clinical tests on Vytorin that effectively artificially inflated the share price. The decrease in the value of Merck’s shares hurt participants in the company’s four 401(k) programs, the suit alleges.
Cobb says in the lawsuit filed in U.S. District Court in New Jersey that Merck put off releasing the Vytorin test results because they showed there was no statistically significant difference between patient use of Vytorin when compared to patients treated with other drugs. Company officials knew when they opted to delay the test results that doctors would abandon Vytorin for a less expensive alternative, the suit claims.
Within a week after Merck announced the test results in January 2008, Merck’s stock price dropped from $59.26 per share to $42.32.
The plummeting share price temporarily dropped its freefall when Merck put out its fourth-quarter 2007 earnings, but soon resumed its plunge after several medical journals began recommending doctors only turn to Vytorin if they had exhausted all other options for lowering their patients’ cholesterol, the suit says. By March 31, 2008, Merck’s stock had plunged another 14.7% to $37.95 per share.
Cobb charges the company and its officers with breaching their fiduciary duties by failing to provide participants with complete and accurate information regarding the results of the Vytorin study and the artificial inflation of the value of Merck stock.
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