Sept. 6 (Bloomberg) -- Merck & Co. doesn't have to defend a national class-action lawsuit seeking as much as $9 billion over claims it misled health insurers about the safety of its painkiller Vioxx, the New Jersey Supreme Court ruled.

Insurers, health-maintenance organizations and union health plans claimed Merck defrauded them before withdrawing Vioxx in 2004. The court today reversed a lower court's class certification in a case brought by the International Union of Operating Engineers Local 68 Welfare Fund.

``Certification of a nationwide class is not appropriate because common questions of fact or law do not predominate and a class action is not superior to other available mechanisms,'' the Trenton-based court said. The unanimous ruling allows the Operating Engineers to pursue their claims individually, and not as a representative of groups from around the U.S.

A win for plaintiffs would have given them leverage to settle as a group. Instead, Whitehouse Station, New Jersey-based Merck continues a string of litigation victories, having won 10 cases at trial and lost five. Merck withdrew Vioxx when a study showed it raised the risk of heart attacks. The company, facing 27,000 lawsuits, set aside $1.8 billion for the litigation.

Merck's shares rose $1.07 to $50.47 in New York Stock Exchange composite trading. They increased as much as $1.11, or 2.2 percent, after news of the ruling. They've risen 15.7 percent this year.

2003 Lawsuit

The Operating Engineers, based in West Caldwell, New Jersey, sued in 2003. A New Jersey judge certified the case as a group lawsuit in 2005. An appellate court upheld the ruling, prompting Merck to go to the state supreme court.

The plaintiffs claimed Merck used a fraudulent marketing campaign aimed at sponsors of health-benefit plans known as third-party payors. Merck sought preferred status for Vioxx on the payors' approved list of drugs, known as formularies.

The supreme court concluded that third-party payors relied on advisers such as pharmacy benefits managers to make individual decisions about including Vioxx on formularies. Those separate considerations meant they couldn't proceed as a group in seeking damages under New Jersey's Consumer Fraud Act, the court ruled.

The plaintiffs also sought to prove that Merck engaged in a ``fraud on the market'' by overcharging for Vioxx, a legal theory not allowed under the Consumer Fraud Act, the court ruled.

``We're very pleased with the ruling,'' Merck attorney John Beisner of O'Melveny & Myers in Washington said in an interview. ``It really does put this class action to rest. If the class had been certified, it would have been a large lawsuit, there's no doubt about that.''

Own Lawsuits

Beisner, who argued the case before the supreme court, said the Operating Engineers are the only plaintiffs still in the case. Other third-party payors would have to file their own lawsuits to pursue their claims, he said.

``Our view is that this has been lawyer-driven litigation,'' Beisner said. ``It remains to be seen if anybody else has any interest in this.''

In November, U.S. District Judge Eldon Fallon in New Orleans refused to grant class-action status to Vioxx users and their relatives throughout the country who claim personal injury and wrongful death as a result of taking the drug.

``Merck clearly dodged a bullet for a day,'' said Operating Engineers attorney David Buchanan of Seeger Weiss in Newark, New Jersey. ``The question is what shape the next attack will take. The most efficient way to resolve the case was clearly by a class action. Now we're going to see tens or hundreds of individual cases to pursue the claims of the individual institutions affected by Merck's conduct.''

Under New Jersey's Consumer Fraud Act, companies are liable for triple damages if they use deceptive marketing practices to sell their products.

The insurers' case is International Union of Operating Engineers Local 68 Welfare Fund v. Merck, 59-588, New Jersey Supreme Court (Trenton).

To contact the reporter on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net.

Last Updated: September 6, 2007 16:26 EDT