20 July, 2012


Merck Sharp & Dohme (Australia) Pty Limited v Peterson [2011] FCAFC 128


In brief


  • The Full Federal Court has overturned several adverse findings against Merck Sharp & Dohme (Australia) Pty Ltd in the Vioxx class action.
  • The judgment makes some important comments regarding the duties and obligations of pharmaceutical companies to consumers.
  • The Full Court's decision was specific to the individual class representative and may not absolve the Merck interests of responsibility for alleged harm suffered by other class members.
  • Proof of causation was of importance. Establishing that there was an increased risk of injury was not sufficient to prove causation in the absence of evidence that the risk actually eventuated and caused the injury.
  • The High Court has denied special leave to appeal the decision to dismiss this case.


Guidance on the duties and obligations of pharmaceutical companies to consumers", on the Federal Court decision in Peterson v Merck Sharpe & Dohme (Australia) Pty Ltd [2010] FCA 180 was previously reported.


On 12 October 2011, the Full Court of the Federal Court handed down its judgment on the appeal and cross-appeal. The Court found that the class representative, Mr Peterson, failed to prove that Merck Australia's arthritic drug Vioxx caused his heart attack. On that basis, the Full Court dismissed all of Mr Peterson's claims against Merck Australia.


No ruling has yet been made in respect of the other class participants, and the findings of the Full Court leave open the possibility that some members of the class may be able to establish claims for negligence and misleading or deceptive conduct.


There is also scope for class members to establish that Vioxx was not fit for purpose, and/or was not of merchantable quality in contravention of sections 74B and/or 74D of the Trade Practices Act 1974 (Cth) ("TPA") (as it then was). In large part, the evidence of causation for each of the class members will determine whether or not they are able to establish any of their claims.


The Full Court upheld Merck Australia's "state of the art" defence to the claim that Vioxx was a defective good, which conclusion applies to the claims made by Mr Peterson and all other class members.


It is expected that there will be an application for special leave to appeal to the High Court of Australia.




The anti-inflammatory drug Vioxx was marketed and sold in Australia by Merck Australia from January 2000 until it was voluntarily withdrawn from the market in September 2004.


In May 2001 the class representative, Graeme Peterson, was first prescribed Vioxx by his doctor to provide relief for arthritic back pain. Mr Peterson took the drug continuously until December 2003 when he suffered a myocardial infarction (heart attack). Mr Peterson contended that Vioxx had caused or contributed to the heart attack.


The proceedings were brought as representative proceedings under the Part IVA of the Federal Court of Australia Act 1976 (Cth). The class members were people who had consumed Vioxx after 30 June 1999 and, within 30 weeks of consuming Vioxx, suffered one or more of a number of pleaded cardiovascular conditions.


Causes of action


Mr Peterson brought claims against Merck Australia for:


  • negligence (that, prior to December 2003, Merck Australia knew or ought to have known that consumption of Vioxx increased the risk of heart attack and had failed to warn him of this risk);
  • misleading or deceptive conduct (section 52 of the TPA);
  • contravention of the requirements that goods be fit for purpose (section 74B of the TPA) and of merchantable quality (section 74D of the TPA); and
  • defective product liability (section 75AD of the TPA).


Decision at first instance


Jessup J at first instance found that Vioxx was not fit for purpose and not of merchantable quality because of its effect in increasing the risk of heart attack (but not other cardiovascular conditions).


Mr Peterson’s claims for damages in negligence and misleading or deceptive conduct were dismissed, despite some findings of breach of duty and misleading conduct. Jessup J found that Mr Peterson's injuries were not caused by Merck Australia's breach of duty of care as Mr Peterson would have continued to consume Vioxx even if sufficient warnings were provided about its risks.


Merck Australia defeated the claim for defective product liability by establishing a statutory defence that the state of scientific knowledge at the time the drug was supplied was not such as to enable its defect to be detected.


Decision on appeal


Negligence claim 


The primary issue for the Full Federal Court was whether consuming Vioxx had caused or materially contributed to Mr Peterson's heart attack (and, specifically, whether Mr Peterson's heart attack would not have occurred but for the taking of Vioxx).


The Full Court upheld Merck Australia's appeal on causation. The Court found that there was no medical "signature" for Vioxx which might indicate that Mr Peterson's heart attack was caused by Vioxx. The available evidence (based on patterns of disease in the population, rather than being specific to Mr Peterson) meant that it was possible that Vioxx was a cause of Mr Peterson’s heart attack but there were other strong potential causes (including age, gender, hypertension, obesity and history of smoking).


While Mr Peterson demonstrated that consuming Vioxx increased the relative risk of heart attack, he did not establish that the risk eventuated and caused his injury. The Full Court declined to follow the jurisprudence on "material contribution" to injury in Canada and the United Kingdom. In those jurisdictions it is accepted that, in some cases, an increased risk may itself be sufficient to establish a material contribution for the purposes of causation, even though it is not possible to say that the event would not have occurred but for the conduct which gave rise to the increased risk. Other class members may yet be able to establish causation, particularly those who did not have any other risk factors for a heart attack other than their consumption of Vioxx.


In relation to breach of duty of care, the Full Court considered that Merck Australia had taken reasonable steps to ensure that medical practitioners were sufficiently informed of the worrisome signal from the results of a Vioxx trial. The Court found that Mr Peterson's doctor was so informed, despite the absence of a "Dear Doctor" letter. Again, other class members may succeed if they establish that their doctors were not sufficiently informed of the dangers of Vioxx.


Finally, the Full Court concurred with the findings of the trial judge that compliance with the requirements of the Therapeutic Goods Act was not sufficient to discharge Merck Australia's duty of care, as that Act did not evince an intention to revoke common law consumer rights.


Trade Practices Act claims


Fitness for purpose – section 74B TPA


Section 74B provides, in effect, that goods must be reasonably fit for purpose where supplied to a consumer who acquired them for a particular subjective purpose known to the supplier. The Full Court held that Mr Peterson's known purpose was to use Vioxx to treat arthritic pain. The Full Court rejected the argument that there was an implied purpose that the product be safe and not dangerous to health (particularly as most medications have side effects).


Mr Peterson failed to show that he had suffered damage by reason that the goods were not reasonably fit for the identified purpose. The Full Court was not satisfied that consuming Vioxx was a necessary precondition of Mr Peterson's heart attack.


Merchantable quality –section 74D TPA


Section 74D provides that goods supplied must be of merchantable quality (which itself means fit for the purpose for which they are commonly bought having regard to any description applied by the supplier). The Court was not satisfied that Mr Peterson would not have had a heart attack but for the consumption of Vioxx and, therefore, that he suffered loss by reason that the goods were not of merchantable quality.


The Full Court declined to express a view as to whether or not Vioxx was, in fact, of merchantable quality, leaving this issue open for other class members. The Court did express the view that, whether Vioxx was not of merchantable quality is a complex question that is not answered by a simple mathematical comparison of an increase in a particular form of risk. The description of the goods, the price of the goods and "all other relevant circumstances" are to be taken into account in determining what was reasonable to expect about the products fitness for its objective purpose at the time of supply.


Defective goods – section 75AD TPA


Section 75AD gives individuals a right to compensation from a manufacturer for loss suffered as a result of injury caused by defective goods. Goods have a defect if their safety is not such as persons in the community are entitled to expect (section 75AC).


The Full Court held that Vioxx did have a defect in that by an unknown mechanism in some people it increased the risk of heart attack and no information, advice or warning was provided to that effect. Mr Peterson's claim failed nevertheless on causation as he did not establish that he suffered injuries because of the defect in Vioxx. For the other class members who may have been able to prove causation, the Full Court upheld Merck Australia's "state of the art" defence, finding that the objective state of scientific knowledge at the time of supply did not enable Merck Australia to discover the defect. Merck Australia was only able to discover that consuming Vioxx increased the risk of heart attack when it obtained the results of a study in September 2004, at which time Vioxx was withdrawn from the market. 




  • The Full Court's decision highlights the significance of proof of causation and the difficulties this may present for claimants.
  • The decision does leave open the possibility of successful claims being made by other class members.
  • The High Court has denied Mr Peterson special leave to appeal the decision to dismiss this case. Lessons
  • Manufacturers and suppliers of pharmaceuticals need to be constantly vigilant about the adequacy of information they have in circulation about their drugs, including their production information.
  • Pharmaceutical manufacturers must keep up to date with the advances in scientific knowledge after they put a product into circulation.
  • Most prescription pharmaceuticals have adverse side-effects and this does not of itself mean that the product is not fit for purpose or not of merchantable quality.
  • Compliance with the Therapeutic Goods Act requirements does not, of itself, meet the potential common law duty of care obligations of a pharmaceutical company to consumers.



For further information, please contact:


Ursula Adamiec, Ashurst


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