By any measure, Vioxx was a blockbuster drug. The painkiller, approved by the Food and Drug Administration in 1999, was used by some 84 million people around the world for arthritis and other conditions, and generated $2.5 billion in annual revenue for drugmaker Merck.

But that superstar status was short-lived. Reports of problems with Vioxx began to emerge in 2000, and by 2001 patients were filing lawsuits alleging they had suffered heart attacks and other ailments after taking the pills. Amid growing evidence of dangerous side effects, Merck pulled the medication from the market in September 2004. This year, the company is expected to finish paying out $4.85 billion to settle the claims of about 50,000 former Vioxx users.

People who took Vioxx aren’t the only ones who say they were hurt by the drug. Merck also faced the wrath of shareholders, who complain that they lost money when the dangers of Vioxx became known and the company’s share price dropped. In a lawsuit, they contend that the company committed securities fraud by misleading them about Vioxx’s safety.

Merck fought to block the class action suit, arguing that the unhappy investors waited too long to file it. The U.S. Supreme Court unanimously sided with shareholders on April 27, marking an important turning point in the Vioxx case and a rare win for investors at the high court.

“For the little guy, and for the plaintiffs’ lawyers who represent investors in securities class actions, this is a huge win,” says Lisa Casey, an associate professor at Notre Dame Law School who joined other law and business school professors in filing a friend-of-the-court brief on behalf of the shareholders.

Advocates for investors said that a high court decision in favor of Merck would have made it much more difficult for individuals to bring securities fraud cases to court. Combating fraud in the securities industry is especially important to older Americans, the frequent victims of such deception, AARP said in a friend-of-the-court brief on behalf of the investors.

The Merck case now returns to a lower court in New Jersey, where Merck is based. Bruce Kuhlik, Merck’s general counsel, said in a press release that the company is disappointed with the decision, “but believes that the allegations in the complaint are unfounded and will continue to defend itself vigorously.”

Following the trail of trouble

The Vioxx case has all the intrigue of a corporate crime thriller, mixing markets, medicine and insider e-mails. But at its heart is a federal law that gives investors a two-year window to file securities suits, and a debate about just when that clock should start ticking.

The shareholders in Merck v. Reynolds filed their suit on Nov. 6, 2003. A district court threw out the case, agreeing with Merck’s awkward position that investors should have been aware of the possibility that the company misrepresented Vioxx’s safety more than two years before they went to court. By not heeding warning signs and not launching an investigation and filing their case earlier, the investors had exceeded their two-year statute of limitations, the district court said.

Several early indications predicted possible problems with Vioxx. In March 2000, Merck announced the preliminary results of a study it conducted comparing Vioxx with naproxen, another painkiller. While Vioxx caused fewer gastrointestinal problems, patients who took it had more cardiovascular problems—a situation that Merck suggested might be explained by the way naproxen prevented blood clots, rather than by any harm caused by Vioxx.

The FDA issued a warning letter to the public in September 2001, calling Merck’s marketing statements about those results “false, lacking in fair balance, or otherwise misleading.” At about the same time, patients who experienced problems with the drug told courts that Merck had hidden information about Vioxx.