Merck & Co. continues to be liable for its talc-related litigation, despite attempts to shift responsibility to Bayer. A Delaware judge dismissed Merck’s suit against Bayer in which it tried to hand off much of the blame due to Bayer’s 2014 purchase of Merck’s consumer care unit for $14.2 billion.
The companies are on the hook for potentially billions in talc-related lawsuits from consumers who allege that talc-based products such as Dr. Scholl’s foot powder contain cancer-causing asbestos.
Merck, which acquired Dr. Scholl’s products in 2009 through its $41.1 billion merger with Schering-Plough, claimed in the suit that its liability ended on Oct. 1, 2021, seven years after the sale of Merck's consumer business to Bayer.
But “nothing” in the agreement indicates that Bayer was to assume liability for “all of Merck’s products for the period during which it formulated, marketed and sold the products,” wrote Vice Chancellor Nathan Cook of the Delaware Chancery Court in a 37-page decision (PDF).
Merck's seven years argument comes from one of the provisions in the agreement, in which it stipulated that liability obligations will survive through the seventh anniversary of the closing date on the deal. However, Bayer agreed to take on all liabilities other than specified retained liabilities. In another section of the contract, Merck agreed to retain liabilities that it might incur from product claims for products sold before the closing date of the deal.
According to the judge, the 2014 purchase agreement “clearly and unambiguously” left Merck responsible for claims stemming from products sold before the deal closed. Cook added that Bayer’s interpretation of the terms of the agreement is “the only reasonable one.”
Bayer is “pleased” with the decision to dismiss Merck’s “meritless” case, a company spokesperson said in an emailed statement to Fierce Pharma. While it expects Merck to take full responsibility for the claims, it will “continue to defend itself against any further efforts by Merck to avoid or improperly transfer its liabilities to Bayer.”
Merck is “disappointed” with the decision and does in fact plan to appeal, a company spokesperson told Fierce Pharma in an email.
Of course, when it comes to talc litigation and attempts to ditch it, Johnson & Johnson takes the cake. The Big Pharma just last week lost a bid to delay an order dismissing the bankruptcy it utilized in its so-called Texas two-step strategy.
By using the two-step, J&J in theory avoids thousands of talc-related claims by creating a firm to take on the claims and then declaring the subsidiary bankrupt. But, after a judge last February affirmed J&J’s legal move, a court of appeals overturned the ruling. The company recently said that it will take the case directly to the Supreme Court for review.