Reference no: EM132351326

Vioxx fails the test

On September 30, 2004, the share price of pharmaceutical firm Merck & Co. fell from $45.07 to $33, reducing its market capitalization by $26 billion. The drop followed Merck's decision to voluntarily withdraw Vioxx, its blockbuster painkilling drug, from the U.S. and worldwide markets. Vioxx's action was due to safety concerns of an increased risk of heart attack and stroke in patients taking the drug for an extended period. This was the largest recall of its kind in medical history.

Vioxx, which belongs to a class of drugs known as COX-2 inhibitors, was approved for the treatment of acute pain and chronic pain from arthritis and other problems by the Food and Drug Administration in 1999. Although the drug was not more effective than cheaper, off-patent, painkillers already available on the market, Vioxx had fewer side-effects such as ulcers and gastrointestinal bleeding. Vioxx rapidly became a big money-maker for Merck with sales totaling $2.8 billion in the year 2003. Questions about risks associated with Vioxx arose soon after it was brought to market. In August 2002, Kaiser Permanente said that a review of its patient records indicated that prolonged use of Vioxx increased the chance of heart attacks and strokes. Merck contended that this and other such reports were not based on scientific clinical studies and announced that it would conduct one.

The results of its study prompted Merck's decision to withdraw Vioxx on September 30, 2004. In this study, a randomly selected group of 1300 arthritis patients was administered 25 milligrams of Vioxx every day for 18 months. Twenty patients in this group had suffered heart attack or stroke by the end of the 18 months. The rate of heart attack or strokes in a comparable group of arthritis patients on other painkilling medications was about 7.5 per for every 1,000.

Three years later, Merck reached a settlement under which it agreed to pay $4.85 billion to 47,000 plaintiffs who claimed they or their relatives suffered or died after taking Vioxx.

Questions

1. Set up a hypothesis test for the claim that the use of Vioxx over a long period (18 months or more) does not increase the risk of heart attack or stroke.

2. Do you reject or accept this claim at α = 0.05? α = 0.01? α = 0.001?

3. Would your decision in question 2 have been different if 15 out of 1300 patients in the sample suffered heart attack or stroke?

4. Would your decision in question 2 have been different if a sample of 200 Vioxx users (instead of 1300) was selected and 3 out of the 200 patients (about the same rate as 20 out of 1300) suffered heart attack or stroke? Can someone help me with these questions, especially with the first one.