Merck, the company that sold the infamous painkiller Vioxx, will soon be fighting off thousands of class-action suits by Americans who feel they were harmed by the drug.

Ever since the announcement that Vioxx could be linked to an increased risk of heart attack and stroke, lawyers have been “trolling for potential clients,” according to James Surowiecki, writing in The New Yorker. “The impending parade of jury verdicts and out-of-court settlements,” he says, “may render a kind of rough justice.”

Will it?

Experts in such matters are already predicting that Merck will eventually have to pay out between 10 and 50 billion dollars in settlements and legal fees. That could be enough to bankrupt the company.

If Merck does go belly up, thousands of people will lose jobs, and millions of future customers will be unable to buy medicine from this mega drug manufacturer. On the face of it, this doesn’t seem like a desirable result.

In defending itself, Merck will argue the fact that it voluntarily withdrew the drug from the market. But plaintiff lawyers will be arguing that evidence of Vioxx’s potential danger was known to Merck as early as five years ago. And that’s correct. In 2000, a study was released suggesting that Vioxx increased the risk of heart disease.

But the study wasn’t definitive. And the risk appeared to be very small. So Merck executives debated the risks and rewards while new studies were conducted and new results were brought in. In 2002, the company added a warning on the label. And then, early last fall, the discussion ended. Merck withdrew the drug and explained its reasons.

Seen from that perspective, Merck’s actions seem sensible — even prudent. It had created a new drug that was successful in relieving joint pain for thousands of arthritis patients who used it. It didn’t make sense to recall it simply because it had risks. (Virtually all drugs have risks. Even some natural medicines do.) As Surowiecki points out, Vioxx had been found to be less likely than aspirin and ibuprofen to cause internal bleeding. And internal bleeding causes thousands of people to die every year.

But the fact that it conducted sensible risks vs. benefits studies will not exculpate Merck. In fact, its efforts to do the right thing might condemn it. That’s because lawyers will suggest that in keeping the drug on the market, Merck was placing a value on human life.

In 1999, says Surowiecki, a California jury ordered General Motors to pay $4.8 billion to a couple whose 1979 Chevrolet Malibu caught fire. “The jurors made it plain that they did so because GM engineers had calculated how much it would cost to move the gas tank.” Studies show that jurors are inclined to give much larger fines to companies that conduct risk/reward analyses. “We’re just numbers to them,” a juror in the GM trial said. “That’s wrong.”

We all make risk/reward judgments every day, says Surowiecki. When we step into a busy intersection, when we get on a plane — even when we take a walk in the sunlight. “It’s just that the tradeoffs we make are seldom explicit. We don’t tell ourselves that a 65 mile-an-hour speed limit means a certain number of extra deaths, that buying this car instead of that car will affect our life expectancy.”

In awarding bigger damages to companies that take the time to do risk/reward analyses, juries are encouraging businesses to stay ignorant on the subject. That doesn’t do anybody any good. A better solution might be what Mr. Surowiecki suggests: Induce companies to spend more of their advertising dollars alerting potential users of the risks, rather than the rewards.

But that kind of advertising won’t achieve the primary goal of any advertising — which is selling the product. And that’s why the disclosure of the potential risk of any product (which is legally required) is always demoted to a box of nearly indecipherable language that nobody reads. Even when the warnings are significant.

I believe that responsible businesspeople should advertise the risks of their products in some way that is easy to access and understand. My recommendation would be to do it with a simple disclaimer that says something like, “To find out more about XYZ, including details on benefits, dangers, and limitations, go to www.findoutwhatyouwant.com.

A website would provide ample room to fully explain everything. It could be updated when new information is available and linked to a chat room or message board. It wouldn’t waste lots of space (and paper and money) in space ads and on packaging. And it would allow the manufacturer and/or marketer to give himself reasonable protection against lawsuits.

How many people would bother to go to such websites and read through all the disclosures? Probably about the same number that read the fine print now. In other words, almost nobody.

But it would be there for consumers who cared enough to find out. And once word got out that there was a better way to evaluate risks and reward regarding drugs, machinery, and even toys, the number of people who would be willing to be responsible might grow.

Seems like a pretty sensible solution to me. Website disclosures would free businesses to do what they should do (analyze their products carefully) and what they want to do (sell the benefits strongly). And consumers would have all the information they need to make reasonable decisions.

This is an idea that could be applied to all businesses — even those that don’t sell products with potential side effects. Martial arts academies could fully disclose the bad things that could happen as a result of punching and flipping (i.e., brain damage and paralysis). Information sellers could be more open about the likely results of the ideas contained in their books. And businesses that sell ideas about wealth building, self-improvement, and doing business (like Agora Learning Institute and Early to Rise) could disclose the kinds of warnings they’d rather omit from their advertising. (“You really can learn to write great advertising copy from our course. Experience shows that those who finish the program and put this information into action do succeed. Unfortunately, experience also shows that many people who buy it simply put it on the shelf and never even open it.”)

I’m going to recommend this idea to my clients. Maybe you can find some way to make it work for your business.

[Ed. Note.  Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]

Mark Morgan Ford

Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Wealth Builders Club. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.

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