Date of Award

5-2007

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Legacy Department

Applied Economics

Advisor

Maloney, Michael T

Abstract

Merck & Co., Inc. pulled Vioxx, a $2.5 billon a year nonsteroidal anti-inflammatory drug, off the shelf in September 2004. The removal followed a study that was published reporting Vioxx increased the risk of cardiovascular events after long-term use. In the years since then, many lawsuits have been filed against Merck. This paper examines the incentive to recall a product and the effects of Merck pulling Vioxx from the shelves. Using the market's expected internal rate of return for Merck, I calculate the expected profits from future Vioxx sales. I then use data on financial effects, along with the outcomes of cases already heard, to show how the market value of Merck reflects their probability of winning legal cases concerning Vioxx.

Included in

Economics Commons

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