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On The Firing Line At Embattled Merck


Merck & Co. (MRK) general counsel Kenneth C. Frazier isn't scared off by tough odds. In 1991, when he was a partner at Philadelphia law firm Drinker Biddle & Reath LLP, Frazier and two colleagues took on the case of James Willie "Bo" Cochran, an Alabama man on death row for allegedly committing a 1976 murder. Frazier believed Cochran hadn't received a fair trial because African Americans were underrepresented on the juries that heard his case. Frazier and his team, working on a pro bono basis, won a new trial for Cochran, who was acquitted in 1997. "I thought: 'I finally got somebody who will help me,"' says Cochran of his first meeting with the aggressive Frazier and his colleagues.

As much of an uphill battle as Cochran's case proved to be, it was nothing compared to the challenge Frazier faces now. The 49-year-old lawyer will lead Merck's defense against a mounting avalanche of lawsuits surrounding its painkiller Vioxx. Merck yanked the drug off the market in September after a company study confirmed it raised the risk of heart attack and stroke. If Frazier has a soft spot for the underdog, he certainly has a doozy on his hands now. "This will be the most significant challenge I've ever faced," Frazier says, adding that he's confident in the legal team he leads.

AFFAIRS OF THE HEART

Concerns about Vioxx surfaced in 2000, when a study showed the risk of heart attack was higher in patients taking the drug than in those who took an older painkiller called naproxen. Merck scientists argued that the difference was that naproxen protected the heart, not that Vioxx harmed it. Yet Merck had an unpublished study showing an increased risk of cardiovascular problems with Vioxx -- proof, critics say, that the company was downplaying the risks. Merck says regulators had data on that study, which Frazier contends were not statistically significant. Still, Merck continued to market Vioxx aggressively to consumers, racking up $2.5 billion in sales in 2003.

Now, Merck's future is in question. The bill for settling Vioxx lawsuits could run as high as $18 billion, Merrill Lynch & Co. (MER) estimates. And if a Justice Dept. investigation finds criminal wrongdoing, the cost could be even higher. Merck's stock has plunged 38%, to $28, since September. And corporate governance experts slammed Merck's board for its recent approval of golden parachutes for the top 230 managers, including Frazier. The lawyer's ability to lessen the damage from Vioxx will help determine whether Merck is left with enough capital to regain its status as an innovative drugmaker or if it will be nothing more than an also-ran waiting to be snapped up by a stronger player.

Frazier has an ambitious plan for fighting the coming wave of claims. He says Merck will vigorously argue that the recent study only showed an increased risk of cardiovascular problems after 18 months of continuous Vioxx use. Furthermore, he says, many taking the drug may have had other risk factors for heart attack or stroke, including obesity or smoking habits. "They are going to have to produce [medical evidence] to exclude those other potential causative factors," Frazier insists. "And I don't think that is easy to do."

Frazier will also fight to prevent the cases from being consolidated in a class action -- preferring instead to take each one on separately. Legal experts say he's probably betting the company can settle the most troubling cases first and then bring a few cases to trial that it has a good shot at winning. If it does indeed win them, that might discourage other lawyers from going ahead with their claims.

UNASSUMING ROOTS

Merck's approach is fraught with peril, though. Some attorneys say juries might scoff at its argument that it's not responsible for heart damage in people who had other risk factors. In addition, Dr. Eric J. Topol, chairman of cardiovascular medicine at the Cleveland Clinic and a longtime Vioxx critic, calls Merck's argument that the increased cardiac risk only surfaces after 18 months on Vioxx "indefensible." He points out that the trial comparing Vioxx to naproxen showed a difference in heart attack rates starting after just one month of use. If any early cases go against Merck, trial lawyers will be emboldened to drive the cost of settling future cases through the roof.

Although he has kept a low profile, Frazier is no stranger to high-profile cases. During his 14 years as a litigator and then partner at Drinker Biddle & Reath, he represented companies such as AlliedSignal and Lorillard Tobacco Co. (CG) in asbestos claims. He also handled a number of cases for Merck. One of the toughest was brought by the family of a girl who developed a fatal neurological disease after being injected with Merck's vaccine for measles, mumps, and rubella. Frazier won the case by arguing that Merck had contracted to provide the vaccine to the Centers for Disease Control & Prevention, which in turn was responsible for warning the public about its risks. Frazier's success in such cases prompted Merck to hire him as general counsel at its Astra Merck joint venture in 1992. He joined Merck in 1994.

Frazier's rise to the upper ranks at Merck belies his unassuming roots. His father, the son of a sharecropper, moved to Philadelphia as a teen with the equivalent of a third-grade education. Frazier's mother died when he was 12, leaving his dad to raise three children alone in a rough North Philadelphia neighborhood on a modest salary from United Parcel Service (UPS), where he worked as a janitor. Frazier's father set lofty goals for his children, insisting they study hard and strive for excellence. "His view of what was possible was unconstrained by the circumstances we lived in," says Frazier, who once raised pocket money during college by catching newts and tadpoles and selling them to a local aquarium store. "We were raised to think we could do anything."

FUN-LOVING STREAK

Throughout the Vioxx battle, Frazier will rely on his trademark intensity and relentlessness. Colleagues describe him as a high-energy manager who has a tough time sitting still. Shortly after he joined Astra Merck, Frazier felt meetings lasted too long. When his supervisor noted that Frazier seemed fidgety in the meetings, Frazier suggested they get rid of the chairs in the conference room to speed the meetings along. The demanding lawyer has a fun-loving streak, too -- he often trolls the halls to chat with his colleagues about sports. And in his spare time, Frazier, who is married with two children, volunteers for organizations that serve the underprivileged. In the late 1990s he helped run the Cornerstone Christian Academy, an inner-city Philadelphia school that was racked with financial trouble and staff turnover. "Kenny was instrumental in saving the school," says Drinker Chairman and Cornerstone co-founder Jim Sweet.

Some who have worked with Frazier speculate the lawyer will eventually abandon corporate life to devote himself to his favorite social causes. Frazier says he wouldn't dream of leaving anytime soon. "I'm committed to seeing this through," he says of the Vioxx cases. How he handles the Vioxx morass will surely determine how long Merck remains on the critical list.

By Amy Barrett in Whitehouse Station, N.J.


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