Effect of lawsuits on stock price compared to product withdrawal: a focus on the consequences of Vioxx's adverse effects
Watson, Kimberly S.
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Pharmaceutical companies are plagued with lawsuits in today’s society. Some companies will hastily remove a product from the market before the negative side effects of the drug can be fully established for fear of severe losses due to lawsuits. Lawsuits will occur whether the drug is left on the market or not, as seen with the multiple cases both decided and pending against Merck for their drug, Vioxx. Using stock analysis as a measurement, it is evident in the case of Vioxx that removing a product from market will have a more detrimental effect on the manufacturer than the lawsuits will. In the cases where a drug could ethically be left on the market with additional warnings for those that may experience negative side effects, it is better for the company to continue to market the product and endure the lawsuits than remove the product and face the lawsuits alone.