Judge Tosses Schering-Plough Stock-Drop Suit

A federal judge has thrown out a stock-drop lawsuit against drugmaker Schering-Plough, but has permitted plaintiffs to strengthen its allegations of wrongdoing and refile it.

U.S. District Judge Dennis M. Cavanaugh of the U.S. District Court for the District of New Jersey said the action was necessary because participants’ initial attempt to levy fiduciary breach allegations fell short of proving the company had advance knowledge of clinical trial results for the drug Vytorin. Vytorin is a combination drug comprised of Merck & Co.’s cholesterol drug Zocor and Schering-Plough’s drug Zetia.

The retirement plan participants allege the drugmaker deliberately suppressed the results to inflate Schering-Plough stock and that eventual disclosure of the findings caused the share price to drop and participants with retirement investments in company stock to lose assets.

The study results were allegedly delayed on various occasions until Merck finally announced in January 2008 that the study had determined there was no statistically significant difference between patients treated with Vytorin versus patients treated with Zocor or Lipitor.

Cavanaugh said he was mindful that the court had refused to dismiss a similar lawsuit filed by Merck employees (see “Merck Loses Challenge to Company Stock Fiduciary Claims”), but contended the Merck stock-drop case put forward stronger, more compelling evidence than the Schering-Plough suit.

The case is In re Schering-Plough ERISA Litigation, D.N.J., No. 08-CV-1432 (DMC).