UPDATE:Obama Administration Sides With Investors In Merck Securities Case

The Obama administration sided with investors Monday in a U.S. Supreme Court case that examines whether shareholders of Merck & Co. Inc. (MRK) waited too long to file securities lawsuits alleging the drug maker misrepresented the safety of painkiller drug Vioxx, which it removed from the market in 2004.

U.S. Solicitor General Elena Kagan, the federal government's lawyer at the Supreme Court, argued in a friend-of-the court brief that the lawsuits weren't filed too late.

The brief is the latest sign that the solicitor general's office under the Obama administration is taking a friendlier approach to investor lawsuits. In June, the office filed a legal brief supporting investors in an important high-court dispute on mutual-fund fees.

The Bush administration had sided against investors in several Supreme Court cases.

Investors are seeking billions of dollars in damages from Merck. They filed the first of several securities lawsuits against the Whitehouse Station, N.J.-based drug maker in November 2003, alleging it misled them by downplaying the significance of clinical-trial results that appeared to show that patients taking Vioxx faced an increased risk of heart attack.

The investors said this alleged deception caused them to pay inflated prices for Merck's stock.

The central issue before the Supreme Court focuses on when investors should have known that there was a possible Vioxx fraud.

Merck argued that investors should have filed their lawsuits earlier because there was an overwhelming amount of public information available by late-2001 suggesting the possibility that the company made misstatements about the safety of Vioxx.

But Merck also has said it properly informed the U.S. Food and Drug Administration and the scientific community about Vioxx-related data as it emerged.

A loss for Merck could eliminate one line of defense that companies use to fend off shareholder lawsuits.

A Merck legal spokesman, Kent Jarrell, said the company would file its rebuttal to the solicitor general next month. Merck's actions, communications and disclosures concerning Vioxx were appropriate and timely, Jarrell said.

The case will be argued on Nov. 30, with a decision expected by the end of June.

-By Brent Kendall, Dow Jones Newswires; 202-862-9222; [e-mail]