New York Tag-Teams Merck

New York City residents and those who live upstate finally have something in common: They -- or at least their governments -- both think that Merck (NYSE: MRK) owes them a bunch of money.

The city and state of New York are suing Merck for allegedly defrauding Medicaid and other government agencies, by hiding problems related to its Vioxx painkilling drug. The suit says that the agencies paid millions of dollars for Vioxx that went to patients with heart conditions -- money that those agencies never would have spent had Merck disclosed to them that Vioxx raises the risk of heart attacks. Merck, of course, has countered that it couldn't disclose something it didn't even know until right before it pulled the drug off the market.

A couple of things have me puzzled about this lawsuit. First, what took them so long? I thought New Yorkers were supposed to be fast-paced, but Merck pulled Vioxx off the market almost three years ago. Other states, including Alaska, Louisiana, Mississippi, Montana, Texas, and Utah, filed similar suits more than a year ago.

Second, what are the governments going to do with the money they want back? They would have spent the money on other pain relievers, so I guess they could just hand it over to rival cox-2 inhibitor maker Pfizer (NYSE: PFE) -- or maybe to Novartis (NYSE: NVS) for its Prexige, which isn't even approved yet. You know, if Vioxx wasn't marketed, maybe Novartis would have developed the drug sooner...

All kidding aside, I'm not sure that one more lawsuit added onto the roughly 27,000 suits Merck currently faces will really make much difference. As long as the drugmaker remains able to fight those suits one at a time, it will be a long time before Merck has to pay out a dime.