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					TRUJILLO RODRIGUEZ & RICHARDS, LLC
Lisa J. Rodriguez (LR6767)
8 Kings Highway West
Haddonfield, NJ 08033
Telephone: (856) 795-9002
Facsimile: (856) 795-9887
Liaison Counsel
                          UNITED STATES DISTRICT COURT
                         FOR THE DISTRICT OF NEW JERSEY

                                    )
IN RE MERCK & CO., INC. SECURITIES, )
DERIVATIVE & “ERISA” LITIGATION )          MDL NO. 1658 (SRC)
                                    )
                                    )
THIS DOCUMENT RELATES TO:           )      Case No: 3:05-CV-01151-SRC-TJB
                                    )      Case No: 3:05-CV-02369-SRC-TJB
THE CONSOLIDATED ERISA ACTION )
                                    )

        CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR
    VIOLATIONS OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT

SCHATZ & NOBEL, P.C.                           KELLER ROHRBACK L.L.P.
Robert A. Izard                                Lynn Lincoln Sarko
William Bernarduci                             Juli Farris Desper
Wayne T. Boulton                               Amy N.L. Hanson
One Corporate Center                           1201 Third Avenue, Suite 3200
20 Church Street                               Seattle, WA 98101
Hartford, CT 06103                             Tel: (206) 623-1900
Tel: (800) 797- 5499                           Fax: (206) 623-3384
Fax: (860) 493-6290                            Member of Lead Counsel Committee
Chair of Lead Counsel Committee

COHEN MILSTEIN HAUSFELD & TOLL, P.L.L.C.       SCHIFFRIN & BARROWAY, LLP
Marc I. Machiz                                 Joesph H. Meltzer
1 South Broad Street, Suite 1850               Tobias L. Milrood
Philadelphia, PA 19107                         Katherine B. Bornstein
Tel: (215) 825-4010                            280 King of Prussia Road
Fax: (215) 825-4001                            Radnor, PA
                                               Tel: (212) 907-0700
Bruce F. Rinaldi                               Fax: (212) 818-0477
Daniel W. Sigelman                             Member of Lead Counsel Committee
1100 New York Avenue, N.W.
Suite 500, West Tower
Washington, D.C. 20005
Tel: (202) 408-4600
Fax: (202) 408-4699
Member of Lead Counsel Committee
        For their Consolidated Amended Class Action Complaint for Violations of the

Employee Retirement Income Security Act (the “Complaint”), Plaintiffs allege as

follows:


                                   I. INTRODUCTION

        1.      This is a class action brought by participants in the Merck & Co., Inc.

Employee Savings & Security Plan (the “Salaried Plan”), the Merck & Co., Inc.

Employee Stock Purchase & Savings Plan (the “Hourly Plan”), the Merck Puerto Rico

Employee Savings & Security Plan (the “Puerto Rico Plan”) and the Merck-Medco

Managed Care, LLC 401(k) Savings Plan (the “Medco Plan”) (collectively the “Plans”),

pursuant to §§ 502(a)(2) and (a)(3) of the Employee Retirement Income Security Act

(“ERISA”), 29 U.S.C. §§ 1132(a)(2) and (a)(3), against the fiduciaries of the Plans for

the violations of ERISA.

        2.      The Salaried and Hourly Plans are sponsored by Merck & Co., Inc.

(“Merck” or the “Company”), the Puerto Rico Plan is sponsored by Merck Sharp &

Dohme Quimca De Puerto Rico (“Merck Sharp”) and the Medco Plan is sponsored by

Merck-Medco Managed Care, LLC (“Merck-Medco”).

        3.      Plaintiffs’ claims arise from the failure of Defendants, who are fiduciaries

of the Plans, to act solely in the interest of the participants and beneficiaries of the Plans,

and to exercise the required skill, care, prudence and diligence in administering the Plans

and the Plans’ assets during the period October 1, 1998 through September 30, 2004 (the

“Class Period”).




                                               1
       4.      During the Class Period, Defendants failed to take action to protect the

Plans from misrepresentations and omissions regarding the health and financial risks

associated with Vioxx, Merck’s prescription painkilling drug generically known as

rofecoxib. As a result of the undisclosed risks of heart attack and stroke that were caused

by Vioxx, the value of Merck stock and the Plans’ investments in the Merck Common

Stock Fund (“Fund” or “Stock”) have been substantially diminished. Plaintiffs allege

that it was imprudent for the Plans to invest in the Fund because the price of shares of the

Fund was artificially inflated as a result of undisclosed material adverse information

concerning the Vioxx risks. Plaintiffs also allege that Defendants breached their

fiduciary duties by negligently failing to disclose material information about Vioxx

necessary for participants to make informed decisions concerning the Plans’ assets and

benefits and investing in the Fund.

       5.      Specifically, Plaintiffs allege in Count I that the Defendants who were

responsible for the investment of the assets of the Plans breached their fiduciary duties to

Plaintiffs and the Plans, in violation of ERISA, by failing to manage the Plans’

investments in the Fund prudently and loyally. In Count II, Plaintiffs allege that the

Defendants who were responsible for communicating with participants regarding the

Plans’ assets failed to provide participants with complete and accurate information

regarding Merck sufficient to advise participants of the true risks of investing Plan assets

in the Fund. In Count III, Plaintiffs allege that the Defendants who were responsible for

the selection, removal, and, thus, monitoring of the Plans’ other fiduciaries failed to

monitor the performance of their fiduciary appointees properly and to remove and replace

those whose performance was inadequate. In Count IV, Plaintiffs allege that Defendants




                                              2
breached their duties and responsibilities as co-fiduciaries by failing to prevent breaches

by other fiduciaries of their duties of prudent and loyal management, complete and

accurate communications, and adequate monitoring. Finally, in Count V, Plaintiffs state

a claim against Merck for knowing participation in the fiduciary breaches alleged below.

          6.    This action is brought on behalf of the Plans and seeks losses to the Plans

for which Defendants are personally liable pursuant to ERISA §§ 409 and 502(a)(2), 29

U.S.C. §§ 1109, and 1132(a)(2). In addition, under § 502(a)(3) of ERISA, 29 U.S.C. §

1132(a)(3), Plaintiffs seek other equitable relief from Defendants, including, without

limitation, injunctive relief and, as available under applicable law, a constructive trust,

restitution, equitable tracing, and other monetary relief.

          7.    As a matter of substantive law, ERISA §§ 409(a) and 502(a)(2) authorize

participants such as Plaintiffs to sue in a representative capacity on behalf of the Plans for

losses suffered by the Plans as a result of breaches of fiduciary duty. Since an

appropriate procedural vehicle to assert such claims is a class action pursuant to Fed. R.

Civ. P. 23, Plaintiffs also bring this action as a class action on behalf of all participants

and beneficiaries of the Plans during the Class Period.

          8.    Because the information and documents on which Plaintiffs’ claims are

based are, for the most part, solely in Defendants’ possession, certain of Plaintiffs’

allegations are, by necessity, made upon information and belief. At such time as

Plaintiffs have had the opportunity to conduct sufficient discovery, Plaintiffs will, to the

extent necessary and appropriate, amend this Complaint, or, if required, seek leave to

amend, to add such other additional facts as are discovered that further support their

claims.




                                               3
                           II. JURISDICTION AND VENUE

       9.      Subject Matter Jurisdiction. This Court has subject matter jurisdiction

over this action pursuant to 28 U.S.C. § 1331 and ERISA § 502(e)(1), 29 U.S.C. §

1132(e)(1).

       10.     Personal Jurisdiction. ERISA provides for nation-wide service of

process. ERISA § 502(e)(2), 29 U.S.C. § 1132(e)(2). All of the Defendants are either

residents of the United States or subject to service in the United States, and this Court

therefore has personal jurisdiction over them. This Court also has personal jurisdiction

over them pursuant to Fed. R. Civ. P. 4(k)(1)(A) because they would all be subject to the

jurisdiction of a court of general jurisdiction in the State of New Jersey.

       11.     Venue. Venue is proper in this district pursuant to ERISA § 502(e)(2), 29

U.S.C. § 1132(e)(2), because the Plans are administered in this district, some or all of the

fiduciary breaches for which relief is sought occurred in this district, and/or some

Defendants reside and/or transact business in this district.


                                      III. PARTIES

A.     Plaintiffs

       12.     Plaintiff Cynthia Campbell (“Campbell ”) is a resident of the State of

Ohio and was at all relevant times and is a participant in the Medco Plan within the

meaning of ERISA § 3(7), 29 U.S.C. § 1002(7). She worked for Merck-Medco Managed

Care, LLC (renamed Medco Health Solutions, Inc. as of May 21, 2002 and spun-off from

Merck on August 29, 2003) (“Merck-Medco”) from January 1994 through June 2004.

During the Class Period, as a result of her and Merck-Medco’s contributions, Campbell

invested in shares of the Merck Common Stock Fund in her Plan account.



                                              4
       13.      Plaintiff Robert Cimato (“Cimato”) is a resident of the State of New

Jersey and was at all relevant times and is a participant in the Salaried Plan within the

meaning of ERISA § 3(7), 29 U.S.C. § 1002(7). He worked for Merck from

approximately 1974 through the present. During the Class Period, as a result of his and

the Company’s contributions, Cimato invested in shares of the Merck Common Stock

Fund in his Plan account.

       14.      Plaintiff Robert Mortensen (“Mortensen”) is a resident of the State of

Virginia and was at all relevant times and is a participant in the Hourly Plan within the

meaning of ERISA § 3(7), 29 U.S.C. § 1002(7). He worked for Merck from May 27,

1996 to the present. During the Class Period, as a result of his and the Company’s

contributions, Mortensen invested in shares of the Merck Common Stock Fund in his

Plan account.

       15.      Plaintiff Blossom Smith (“Smith”) is a resident of the State of Maryland

and was at all relevant times and is a participant in the Salaried Plan within the meaning

of ERISA § 3(7), 29 U.S.C. § 1002(7). She worked for Merck from May 1998 through

September 2004. During the Class Period, as a result of her and the Company’s

contributions, Smith invested in shares of the Merck Common Stock Fund in her Plan

account.


B.     Defendants

       16.      The Defendants are identified in paragraphs 17 to 27 below. All of the

Defendants are fiduciaries of the Plans within the meaning of ERISA, as is explained

below in Section V (“Defendants’ Fiduciary Status”), and all of them breached their

fiduciary duties in various ways as is explained in Section IX (“Causes of Action”).



                                              5
       17.    Defendant Merck is a New Jersey Corporation with its principal place of

business located at One Merck Drive, Whitehouse, NJ 08889-0100.

       18.    Defendant Merck-Medco Managed Care, LLC (“Merck-Medco”) was

a limited liability company and wholly-owned affiliate of Merck. As of May 21, 2002,

Merck-Medco was re-named Medco Health Solutions, Inc. and spun-off from Merck on

August 29, 2003.

       19.    Defendant Raymond V. Gilmartin (“Gilmartin”) was, at all times

during the Class Period, the Chief Executive Officer, President and Chairman of the

Board of Directors of Merck. Gilmartin also served as a member of the Management

Committee, as a director of the Company from 1994 to 2005 and as the Chairperson of

the Executive Committee during the Class Period. Gilmartin retired from these positions

on or about May 5, 2005.

       20.    Defendant Dr. Edward M. Scolnick (“Scolnick”) was the executive

Vice President for Science and Technology of Merck and President of Merck Research

Laboratories. Scolnick served as a director of the Company from 1997 to 2002 and

served as a member of the Merck Management Committee and member of the

Management Pension Investment Committee (the “MPIC”) from 1997 until 2002.

       21.    Defendant Judy C. Lewent (“Lewent”) was at all times during the Class

Period, the Executive Vice President and Chief Financial Officer of Merck. Lewent

served as a member of the Merck Management Committee, the Merck-Medco Board of

Managers and as a member of the MPIC during the Class Period.

       22.    Defendant Kenneth C. Frazier (“Frazier”) was Senior Vice President

and General Counsel from 1999 to the present, Vice President and Deputy General




                                           6
Counsel during 1999; Vice President, Public Affairs and Assistant General Counsel in

1998. Frazier served as a member of the Merck Management Committee and a member

of the Merck-Medco Board of Managers during the Class Period.

       23.     Members of the Merck Board of Directors (the “Board”). The Merck

Board of Directors is the governing body of Merck under its charter, its bylaws, and

applicable New Jersey law. The Board appointed the members of a subcommittee of the

Board, the Compensation and Benefits Committee (the “CBC”), through which the Board

had the authority to appoint, remove and accept the resignation of members of the

Management Pension Investment Committee (the “MPIC”). In addition to Defendants

Gilmartin and Scolnick, the members of the Board during the Class Period included:

               (a)    Defendant H. Brewster Atwater, Jr. (“Atwater”) served as a

director of the Company from 1988 until 2001 and served as the Chairperson of the

Compensation and Benefits Committee and as a member of the Finance and Executive

Committees during the Class Period.

               (b)    Defendant Sir Derek Birkin (“Birkin”) served as a director of

the Company from 1992 until 2000 and served as a member of the Audit Committee and

the Committee on Directors during the Class Period.

               (c)    Defendant Lawrence A. Bossidy (“Bossidy”) served as a director

of the Company from 1992 to the present, and served as the Chairperson of the

Compensation and Benefits Committee, and as a member of the Corporate Governance

Committee, the Executive Committee, the Finance Committee and the Committee on

Directors during the Class Period.




                                            7
               (d)   Defendant William G. Bowen (“Bowen”) served as a director of

the Company from 1986 to the present, and served as a member of the Compensation and

Benefits Committee, the Executive Committee, the Public Policy and Social

Responsibility Committee and the Chairperson of the Corporate Governance Committee

and the Committee on Directors during the Class Period.

               (e)   Defendant Erskin B. Bowles (“Bowles”) served as a director of

the Company from Apri1 2001 until October 2001 during the Class Period.

               (f)     Defendant Johnetta B. Cole (“Cole”) served as a director of the

Company from 1994 to the present and served as a member of the Compensation and

Benefits Committee, Finance Committee and the Public Policy and Social Responsibility

Committee during the Class Period.

               (g)   Defendant William M. Daley (“Daley”) served as a director of

the Company from 2002 to the present and served as a member of the Compensation and

Benefits Committee and the Public Policy and Social Responsibility Committee during

the Class Period.

               (h)   Defendant Carolyn K. Davis (“Davis”) served as a director of the

Company from 1989 until 2000 and served as a member of the Executive Committee and

Audit Committee during the Class Period.

               (i)   Defendant Lloyd C. Elam (“Elam”) served as a director of the

Company from 1973 until 2001 and served as a member of the Compensation and

Benefits Committee and the Executive Committee during the Class Period.




                                           8
                (j)   Defendant Charles E. Exley, Jr. (“Exley”) served as a director of

the Company from 1988 until 2000 and served as the Chairperson of the Audit

Committee and served as a member of the Finance Committee during the Class Period.

                (l)   Defendant Carleton S. Fiorina (“Fiorina”) served as a director

of the Company from 1999 until 2000 and served as a member of the Audit Committee

during the Class Period.

                (m)   Defendant Niall FitzGerald (“FitzGerald”) served as a director

of the Company from 2000 to 2002 and served as a member of the Finance Committee

during the Class Period.

                (n)   Defendant William B. Harrison (“Harrison”) served as a

director of the Company from 1999 to the present and served as member of the Public

Policy and Social Responsibility Committee during the Class Period.

                (o)   Defendant William N. Kelly (“Kelly”) served as a director of the

Company from 1992 to the present and served as a member of the Compensation and

Benefits Committee, the Audit Committee, the Corporate Governance Committee, the

Committee on Directors and as the Chairperson of the Research Committee during the

Class Period.

                (p)   Defendant Hedi G. Miller (“Miller”), on information and belief

served as a director of the Company from 2000 to 2005 and served as the Chairperson of

the Audit Committee and as a member of the Finance Committee during the Class Period.

                (q)   Defendant Thomas E. Shenk (“Shenk”) served as a director of

the Company from 2001 to the present and served as a member of the Research




                                           9
Committee, Audit Committee and the Public Policy and Social Responsibility Committee

during the Class Period.

                (r)    Defendant Anne M. Tatlock (“Tatlock”) served as a director of

the Company from 2000 to the present and served as the Chairperson of the Finance

Committee and as a member of the Corporate Governance Committee during the Class

Period.

                (s)    Defendant Samuel O. Thier (“Thier”) served as a director of the

Company from 1994 to the present and served as a member of the Executive Committee,

Research Committee, Corporate Governance Committee, Audit Committee and the

Chairperson of the Public Policy and Social Responsibility Committee during the Class

Period.

                (t)    Defendant Dennis Weatherstone (“Weatherstone”) served as a

director of the Company from 1988 to 2001 and served as the Chairperson of the Finance

Committee and as a member of the Committee on Directors during the Class Period

                (u)    Defendant Wendell P. Weeks (“Weeks”) served as a director of

the Company from 2004 to the present and served as a member of the Audit Committee

and the Finance Committee during the Class Period.

                (v)    Defendant Peter C. Wendell (“Wendell”) served as a director of

the Company from 2003 to the present and served as the Chairperson of the Audit

Committee and as a member of the Research Committee during the Class Period.

          24.   As is explained in more detail below, the Board had certain appointment

and oversight responsibilities with respect to the Plans. The Board and its members listed




                                            10
above, including Defendants Gilmartin and Scolnick are referred to as the “Merck

Director Defendants.”

       25.    Members of the Management Pension Investment Committee (the

“MPIC”). The MPIC was a committee responsible for selecting and monitoring

investments made by the Plans. The MPIC was established on December 5, 1981 by

Special Resolution of the Merck Board of Directors No. 84-1981.

       26.    Upon information and belief, in addition to Scolnick and Lewent, the

following individuals were members of the MPIC during the Class Period:

               (a)      Defendant Marcia J. Avedon (“Avedon”), Senior Vice President,

                        Human Resources, and Treasurer, Merck (appointed on March 23,

                        2004, added as the fourth committee member).

               (b)      Defendant Caroline Dorsa (“Dorsa”), Vice President and

                        Treasurer, Merck.

               (c)      Defendant Dr. Bradley T. Sheares (“Sheares”), President, U.S.

                        Human Health (replaced Scolnick on November 20, 2002).

               (d)      Defendants John and Jane Doe 1-10. Plaintiffs do not currently

                        know the identity of all the MPIC members during the Class

                        Period. Therefore, some of the members of the MPIC are named

                        fictitiously, as Defendants John and Jane Doe 1-10. Once their

                        true identities are ascertained, Plaintiffs will seek leave to join

                        them under their true names.

       27.    The members of the MPIC (Defendants Avedon, Dorsa, Lewent, Scolnick,

Sheares and John and Jane Does 1-10) are referred to as the “MPIC Defendants.”




                                             11
                                     IV. THE PLANS

A.     Nature of the Plans

       28.     The Plans are “employee pension benefit Plan[s]” within the meaning of

ERISA§ 3(2)(A), 29 U.S.C. § 1002(2)(A). Further, they are “eligible individual account

Plan[s]” within the meaning of ERISA § 407(d)(3), 29 U.S.C. § 1107(d)(3), and are also

“qualified cash or deferred arrangements” within the meaning of I.R.C. § 401(k), 26

U.S.C. § 401(k). While the Plans are not parties to this action, pursuant to ERISA, the

relief requested in this action is for the benefit of the Plans, pursuant to ERISA §

502(a)(2), 29 U.S.C. § 1132(a)(2).

       29.     At all relevant times, the Plans had two separate components: (1) a

contributory portion, which consisted of participant contributions, and (2) a matching

component, which consisted entirely of employer contributions.


B.     The Plan Documents

       30.     An employee benefit plan, including the Plans here, must be “established

and maintained pursuant to a written instrument.” ERISA § 402(a)(1), 29 U.S.C.

1102(a)(1). During the Class Period, the Plans were maintained under the following

instruments:

       x       the Merck & Co., Inc. Employee Savings and Security Plan, amended and
               restated as of January 1, 1997 (the “Salaried Plan”);

       x       the Merck & Co., Inc. Employee Stock Purchase and Savings Plan,
               amended and restated as of January 1, 1997 (the “Hourly Plan”);

       x       the Merck Puerto Rico Employee Savings Plan, effective as of July 1,
               1997 (the “Puerto Rico Plan”); and

       x       the Merck-Medco Managed Care, LLC 401(k) Savings Plan, As
               Amended and Restated as of January 1, 1998 (the “Medco Plan”).



                                             12
       31.     As required by ERISA, the Plan Administrators for the Plans, upon

information and belief, provided every participant with a Summary Plan Description

(“SPD”).

       32.     ERISA and the Internal Revenue Code require that Plan Administrators

file a Form 5500 with the Department of Labor and the Department of the Treasury,

which, upon information and belief, were filed by the Plans’ Administrators.

       33.     The assets of an employee benefit Plan, such as the Plans, must be “held in

trust by one or more trustees.” ERISA § 403(a), 29 U.S.C. § 1103(a).

       34.     During the Class Period, the assets of the Salaried and Hourly Plans were

held in trust by Fidelity Management Trust Company (“Fidelity”) pursuant to a Trust

Agreement dated December 15, 1989 (the “Salaried and Hourly Plan Trust Agreement”).

       35.     During the Class Period, the assets of the Medco Plan were held in two

trusts. Prior to January 1, 2003, the assets of the Medco Plan were commingled in a

Master Trust with the assets of the Salaried Plan and the Hourly Plan. However, on

December 31, 2002, the Medco Plan was separated from the Master Trust in preparation

for the planned spin-off of Merck-Medco. On January 1, 2003, Merck-Medco

established a separate trust with Fidelity and transferred the Medco Plan assets from the

Master Trust to the new trust.

       36.     During the Class Period, the assets of the Puerto Rico Plan were held in

trust by Banco Popular De Puerto Rico Trust pursuant to a Trust Agreement dated July

23, 1997 (the “Puerto Rico Plan Trust Agreement”).




                                            13
C.     Purpose of the Plans

       37.     The Salaried, Hourly and Puerto Rico Plans each stated the same purpose:

        The [respective Plan] is a profit-sharing plan designed to provide an opportunity
        for employees to become stockholders of Merck & Co., Inc. and to encourage
        them to save on a regular basis by setting aside part of their earnings.

( Salaried Plan, Hourly Plan Puerto Rico Plan, § 1.1.).

       38.     The Medco Plan stated “The Plan is a profit sharing plan designed to

provide an opportunity for employees to save on a regular basis by setting aside part of

their earnings.” (Medco Plan, Introduction).


D.     Plan Contributions

       1.      Participant Contributions

       39.     The Salaried, Hourly and Puerto Rico Plans contained a pre-tax savings (a

401(k)) feature and an after-tax savings feature, which permitted participants to

contribute on a pre-tax or after-tax basis. However, the Medco Plan only permitted

participants to contribute on a pre-tax basis.

               a. Salaried Plan

       40.     For the Salaried Plan, participants were able to contribute from 2% to 15%

of their base pay (Salaried Plan, § 5.2). Non-highly compensated employees -- those who

earned less than $85,000 in 2001 and $90,000 in 2002 -- could contribute a between 2%

and 18% of their base pay. The participants’ after-tax and pre-tax contributions vested

immediately and were nonforfeitable. (Salaried Plan, § 5.10).




               b. Hourly Plan



                                             14
       41.     For the Hourly Plan, participants were able to contribute from 2% to 15%

of their base pay, except that after-tax contributions could not exceed 10% of the

participant’s base pay. (Hourly Plan, § 5.2). Non-highly compensated employees --

those who earned less than $85,000 in 2001 and $90,000 in 2002 -- could contribute

between 2% and 18% of their base pay, except that after-tax contributions could not

exceed 10% of the participant’s base pay. The participant’s after-tax and pre-tax

contributions vested immediately and were nonforfeitable. (Hourly Plan, § 5.11).

According to the 2003 Update to the 2002 Annual Report, “[e]ffective, July 1, 2003, non-

highly compensated, hourly employees represented by the IUC [could] also contribute a

maximum of 25% of base pay plus Cost of Living Adjustment to the Plan.”

               c. Puerto Rico Plan

       42.     For the Puerto Rico Plan, participants were able to contribute from 2% to

15% of their base pay, except that pre-tax contributions could not exceed 10% of the

participant’s base pay. (Puerto Rico Plan, § 5.2). The participant’s after-tax and pre-tax

contributions vested immediately and were nonforfeitable. (Id. at § 5.11).

               d. Medco Plan

       43.     For the Medco Plan, participants were able to contribute from 1% to 15%

of their base pay. Howeverhighly compensated employees could not contribute more

than 10% of their base pay.




                                            15
       2.      Employer Contributions

       44.     Merck offered various company matching contributions depending on the

Plan. Each of the Plans’ matching contributions are reviewed below:

               a. Salaried Plan

       45.     For the Salaried Plan, Merck matched 75% of employee pre-tax and after-

tax contributions up to 4.5% of the participant’s base pay. (Salaried Plan, § 6.1).

       46.     The Company match was thereafter increased in that the 2002 Annual

Report indicates that, with respect to the Salaried Plan, “the Company matched 75% of

employee contributions up to 6% of base pay per pay period.”

       47.     The Company match was invested in the Merck Company Stock Fund as

follows: with respect to Salaried Plan participants under age 50, 50% of the matching

contribution was required under the Plan to be automatically invested in the Merck

Common Stock Fund and 50% was invested in the funds to which the participant

currently contributed. (Salaried Plan, §§ 8.1 and 8.2). If the participant was over age 50,

he or she could invest the entire match in any fund (including the Merck Common Stock

Fund). (Id.) However, the allocation remained the same (i.e. the age 50+ participant still

received the 50% of the Company match in the Merck Company Stock Fund). If the age

50+ participant wanted to change the allocation, he/she had to make a separate

designation.

       48.     The Company match in the Salaried Plan immediately vested and was

nonforteitable. (Salaried Plan, § 6.4.).




                                             16
               b. Hourly Plan

       49.      Prior to April 1, 1999, the Company matched 50% of a participant’s after-

tax and pre-tax contributions up to the lesser of (a) 2½% of a participant’s base

compensation or (b) that portion of the monthly cap set forth in the Collective Bargaining

Agreement (“CBA”) covering the participant. (Hourly Plan, § 6.1).

       50.     As of April 1, 1999, the maximum Company match varied under the

CBAs between 50% and 60% of the first 6% of a participant’s base compensation.

(Hourly Plan, § 6.1).

       51.     The Merck Employee Savings Plan 2002 Annual Report (the “2002

Annual Report”) indicates that with respect to the Hourly Plan, “the Company matched

60% of employee contributions up to 6% of base pay plus Cost of Living Adjustment per

pay period.”

       52.     According to the 2003 Update to the 2002 Annual Report, “[e]ffective

July 1, 2003, the Company matching contributions for IUC-represented employees

increased from 60% to 65% of employees’ contribution up to 6% of base pay plus Cost of

Living Adjustment.”

       53.     The Company match for the Hourly Plan was invested in the Merck

Company Stock Fund under similar conditions as set forth in the Salaried Plan. With

respect to Hourly Plan participants under age 50, 50% of the matching contribution was

required under Plan documents to be automatically invested in the Merck Common Stock

Fund and 50% was invested in the funds to which the participant currently contributed.

(Salaried Plan, §§ 8.1 and 8.2). If the participant was over age 50, he or she could invest

the entire match in any fund (including the Merck Common Stock Fund). (Id.) However,




                                            17
allocation remained the same (i.e. the age 50+ participant still received the 50% of the

Company match in the Merck Company Stock Fund). If the age 50+ participant wanted

to change the allocation, he/she had to make a separate designation

       54.        The Company match under the Hourly Plan immediately vested and was

nonforfeitable.

                  c. Puerto Rico Plan

       55.        For the Puerto Rico Plan, the Company matched 50% of each after-tax

contribution and pre-tax contribution up to 2½ % of each participant’s base

compensation. (Puerto Rico Plan, § 6.1).

       56.        The Company matching contribution under the Puerto Rico Plan was

thereafter increased in that the 2002 Annual Report indicates that “the Company matched

50% of employee contributions up to 5% of base pay per pay period.

       57.        Under the Puerto Rico Plan, the matching contribution was required under

Plan documents to be invested entirely in the Merck Common Stock Fund and could not

be reallocated into any other investment option. (Puerto Rico Plan, § 8.1).

       58.        The Company match under the Puerto Rico Plan immediately vested and

was nonforfeitable.

                  d. Medco Plan

       59.        With respect to the Medco Plan, the Company matched 100% of

participant contributions up to 3% of the participant’s base compensation per pay period

and 50% of participant contributions in excess of 3% of base pay up to 6% of pay per

base pay period. (Medco Plan, § 5.1). However, the company matching contribution




                                             18
could not exceed 4.5% of each participant’s base compensation applicable to the pay

period in which the participant made the pre-tax contribution.

       60.     Under the Medco Plan, the company matching contribution was paid to

the Trustee (Medco Plan, § 5.4), and participants could direct the Company matching

contributions into any of their available investment options.

       61.     Under the 1998 Medco Plan, the company matching contribution did not

immediately vest. The match vested upon the earliest occurrence of the following events:

(a) attainment of normal retirement age, (b) the participant’s death, (c) termination of

employment due to disability or (d) termination of the Plan. (Medco Plan, § 5.3).

       62.     The Medco Plan also established a schedule for vesting based on a

participant’s year of employment:

       Years of Employment                            Vesting Percentage
       Less than 2                                           Zero
       At least 2 but less than 3                            25%
       At least 3 but less than 4                            50%
       At least 4 but less than 5                            75%
       5 or more                                             100%

(Medco Plan, § 5.3).

       63.     As of the beginning of 2005, the Medco Plan abandoned its vesting

schedule and allowed all contributions to vest immediately. Effective January 1, 2005,

“Company contributions held in participants’ accounts and all Company matching

contributions vest immediately.” (2004 Form 11-K, dated June 10, 2005, at 7).




                                             19
E.     Investment Options

       64.     Effective January 1, 2002, the Salaried, Hourly and Puerto Rico Plans,

offered 21 investment options (20 mutual funds and the Merck Common Stock Fund).

On information and belief, the Medco Plan offered its participants similar investment

options.

       65.     The Merck Common Stock Fund holds the Plans’ shares of Merck stock.

The Fund was designed to invest primarily, not exclusively, in Merck stock and expressly

allows investment in cash and other short-term investment options.

       66.     Throughout the Class Period, over a billion dollars of Plan assets was

invested in the Fund.


F.     The Plans’ ESOP Status

       67.     In addition to being an “employee pension benefit plan,” as defined by

ERISA § 3(2)(A), 29 U.S.C. § 1002(2)(A), the Salaried Plan purports to be an Employee

Stock Ownership Plan (“ESOP”). Plan materials indicate that, as of January 15, 2001,

the Merck Common Stock Fund in the Salaried Plan was converted into an Employee

Stock Ownership Plan (“ESOP”).

       68.     An ESOP is an ERISA plan that invests primarily in “qualifying employer

securities.” 29 U.S.C. § 1107(d)(6)(A). For a plan to qualify as an ESOP, the plan must

meet numerous requirements set forth in both ERISA and the Internal Revenue Code.

Based on documents reviewed to date, it is not apparent that any of the Plans qualify as

an ESOP. Even if the Plans do qualify as an ESOP, the Plan fiduciaries may not invest in

employer securities regardless of the circumstances. To the contrary, while the duty to

diversify does not apply to company stock investments per se in an ESOP, the fiduciaries



                                            20
remain bound by the other core ERISA fiduciaries duties, including the duties to act

loyally, prudently and for the exclusive purpose of providing benefits to Plan participants.


                      V. DEFENDANTS’ FIDUCIARY STATUS

       69.     Named Fiduciaries. ERISA requires every Plan to provide for one or

more named fiduciaries of the Plans pursuant to ERISA § 402(a)(1), 29 U.S.C. §

1102(a)(1). The person named as the “administrator” in the Plans instrument is

automatically a named fiduciary, and in the absence of such a designation, the Sponsor is

the administrator. ERISA § 3(16)(A), 29 U.S.C. § 1002(16)(A).

       70.     De Facto Fiduciaries. ERISA treats as fiduciaries not only persons

explicitly named as fiduciaries under § 402(a)(1), but also any other persons who in fact

perform fiduciary functions. Thus, a person is a fiduciary to the extent: “(i) he exercises

any discretionary authority or discretionary control with respect to management of such

Plans or exercises any authority or control with respect to management or disposition of

its assets, (ii) he renders investment advice for a fee or other compensation, direct or

indirect, with respect to any moneys or other property of such Plans, or has any authority

or responsibility to do so, or (iii) he has any discretionary authority or discretionary

responsibility in the administration of such Plans.” ERISA § 3(21)(A)(i), 29 U.S.C. §

1002(21)(A)(i).

       71.     Each of the Defendants was a fiduciary with respect to the Plans and owed

fiduciary duties to the Plans and its participants under ERISA in the manner and to the

extent set forth in the Plans’ documents, through their conduct, and under ERISA.

       72.     As fiduciaries, Defendants were required by ERISA § 404(a)(1), 29

U.S.C. § 1104(a)(1) to manage and administer the Plans, and the Plans’ investments



                                              21
solely in the interest of the Plans’ participants and beneficiaries and with the care, skill,

prudence, and diligence under the circumstances then prevailing that a prudent man

acting in a like capacity and familiar with such matters would use in the conduct of an

enterprise of a like character and with like aims.

       73.      Instead of delegating fiduciary responsibility for the Plans to external

service providers, Merck chose to comply with the requirement of ERISA § 402(a)(1) by

assigning the appointment and removal of fiduciaries to its CEO, and members of its

Board of Directors. These persons and entities in turn selected Merck officers,

employees, and agents to perform relevant fiduciary functions. Although the Plans had

an institutional trustee unrelated to Merck, the Trust Agreement required the trustee to

take directions from Merck.


A.     Merck’s Fiduciary Status

       74.      The 2003 Form 5500 for the Salaried and Hourly Plans indicates that

Merck is the Plan Administrator of both the Salaried and Hourly Plans. (Salaried Plan

2003 Form Annual Return/Report filed with the Department of Labor (“DOL”), and the

Internal Revenue Service (“IRS”) dated October 15, 2004, Merck & Co., Inc.); (Hourly

Plan 2003 Form 5500 dated October 15, 2004).

       75.      Under the terms of the Salaried and Hourly Plans, Merck was designated

“the administrator of the Plan[s] only to the extent that such term is used in ERISA, and

in any regulations issued thereunder.” (Salaried Plan, § 15.1); (Hourly Plan, § 15.1

Hourly Plan).

       76.      The “Administrative Information” section within the Summary Plan

Description for the Salaried Plan also provided that Merck was the Plan Administrator:



                                              22
               The plan administrator for each of the plans under the Merck Benefits
               Program is Merck & Co., Inc.
                                                   ***
               Merck & Co. Inc., as Plan Administrator, has the exclusive
               discretionary authority to construe and interpret the plans, to decide all
               questions of eligibility for benefits and to determine the amount of
               such benefits, and its decisions on such matters are final and
               conclusive. Merck & Co., Inc., as plan administrator, has reserved the
               right to delegate its discretionary authority to construe and interpret the
               plans, to decide all questions of eligibility for benefits, and to
               determine the amount of such benefits to a representative . . . and such
               representative’s decisions on such matters are final and conclusive.
         77.      The “Administrative Information” section within the Summary Plan

Description for the Hourly Plan also provided that Merck was the Plan Administrator.

         78.      Under Section 14.1 of the Salaried and Hourly Plans, Merck was

responsible for entering into a trust agreement with the Trustee to be designated by the

Management Pension Investment Committee (the MPIC”). The Trust Agreement for the

Salaried and Hourly Plans provided Merck with the authority to remove the Trustee and

amend, modify or terminate the agreement.

         79.      Upon information and belief, at all times during the Class Period, Merck’s

SEC filings were incorporated into and a part of the SPDs, the Prospectus and/or the

Form S-8 registration statements.

         80.      Upon information and belief, Merck was responsible for preparing and

distributing communications to participants regarding the Plans, including the preparation

of (a) the Summary Plan Descriptions (“SPDs”), (b) the Prospectus, (c) the Form S-8

registration statement, (d) the SEC filings incorporated by reference into the SPDs, the

Prospectus and the Form S-8 registration statements and (e) other material related to the
Plans.

         81.      Merck exercised discretionary authority with respect to the Plans by

determining or participating in decisions about the substantive content of (a) the SPDs,

(b) the Prospectus, (c) the Form S-8 registration statements, (d) the SEC filings

incorporated by reference into the SPDs, the Prospectus and the Form S-8 registration


                                                 23
statements and (e) any other Plan material or communications, all of which were intended

to communicate to participants information necessary for participants to manage their

retirement benefits under the Plans.

       82.     Merck was not required under the Plans to cause the Plans to offer the

Fund as an investment option, or to incorporate all of Merck’s SEC filings into the Plan

documents, but once it elected to do so, it made the disclosures in those documents to the

Plan participants in a fiduciary capacity.

       83.     Merck was also a fiduciary to the extent that its employees served on Plan

committees within the scope of their employment and Merck possessed and exercised

control over their conduct as set forth in paragraphs 85, 87, 88. In particular, Merck

personnel participated in (a) appointing and monitoring those who administered the

Plans, (b) administering the Plans and Plan assets, (c) monitoring the Plans’ investment

options and (d) determining the substantive content of Plan communications, including

SEC filings that, upon information and belief, were incorporated by reference into the

Plan documents.

       84.      The Merck Director Defendants, the CBC Defendants and the MPIC

Defendants were Merck’s agents because these committee members acted on behalf of

Merck. On information and belief, all the MPIC Defendants were employees of Merck

who acted at the direction and control of and in the ordinary course of their duties with

Merck. Based on these facts, Merck had control over the actions of the MPIC and its

members and is liable for their actions.

       85.     Merck was also a fiduciary during the Class Period because the members

of its Board of Directors were fiduciaries during that time, and the Board is, by definition,

an agent of the corporation.

       86.     Upon information and belief, through the express and/or implied use of its

power to compensate, demote and discharge individuals working for Merck or its

subsidiaries, Merck made it clear, to all those who both served the Plans in a fiduciary


                                             24
capacity and became aware of the risk associated with Vioxx, that taking any steps on

behalf of the Plans, its participants and beneficiaries, or otherwise, that would jeopardize

the success of Vioxx was unacceptable and would lead to dire consequences for such

individual, thereby effectively precluding any action by any designated Plan fiduciary.

Such steps could have included (a) efforts to eliminate or at least limit the Plans’

investment in Merck stock, and (b) disclosure of the true health risks associated with

Vioxx, to fellow fiduciaries who were unaware of them or only partly aware of them, to

Plan participants and beneficiaries, and/or to the United States Department of Labor.

        87.     Further, on information and belief, the designated fiduciaries of the Plans

understood that their separate designation as Plan fiduciaries with defined functions

under the documents and instruments governing the Plans was, in large measure, a

formality, and that in fact decisions concerning the Plans’ investments and the extent of

disclosures between and among fiduciaries and to participants and beneficiaries were

made on a routine basis by Merck’s regular chain of command. By making such

decisions through the Merck chain of command rather than in the designated fiduciary

committees, Merck became a de facto fiduciary of the Plans by, in fact, exercising

discretionary authority and control over the Plans’ administration and the investment and

disposition of their assets.

        88.     Consequently, in light of the foregoing duties, responsibilities, and

actions, Merck was both a named fiduciary of the Plans pursuant to ERISA § 402(a)(1),

29 U.S.C. § 1102(a)(1), and a de facto fiduciary within the meaning of ERISA § 3(21),

29 U.S.C. § 1002(21), in that it exercised discretionary authority or discretionary control

with respect to management of the Plans, exercised authority or control with respect to

management or disposition of the Plans’ assets, and/or had discretionary authority or

discretionary responsibility in the administration of the Plans.




                                             25
B.     Merck-Medco’s Fiduciary Status

       89.     In the Medco Plan Form 5500 for the years of 1999 and 2000, Merck-

Medco is listed as the Plan Administrator for the Medco Plan.

       90.     Under the terms of the 1998 Medco Plan, Merck-Medco was designated

“the administrator of the Plan to the extent that such term is used in ERISA, and in any

regulations issued thereunder.” (Medco Plan, § 13.1). Under Section 12.1 of the Medco

Plan, Merck-Medco was responsible for entering into a trust agreement with the Trustee

to be designated by the Merck-Medco Board of Managers. (Medco Plan, § 12.1).

       91.     Upon information and belief, Merck-Medco was responsible for preparing

and distributing communications to participants regarding the Medco Plan, including the

preparation and distribution of (a) the Summary Plan Descriptions (“SPDs”), (b) the

Prospectus and (c) other material related to the Medco Plan.

       92.     Upon information and belief, at all times during the Class Period, Merck’s

SEC filings were incorporated into and a part of the (a) Medco Plan SPDs, (b) the Medco

Prospectus and (c) other material related to the Medco Plan.

       93.     Merck-Medco exercised discretionary authority with respect to the Medco

Plan by determining or participating in decisions about the substantive content of (a) the

SPDs, (b) the Prospectus, and (c) any other Plan material or communications, all of

which were intended to communicate to participants information necessary for

participants to manage their retirement benefits under the Plans.

       94.     Consequently, in light of the foregoing duties, responsibilities, and

actions, Merck-Medco was both a named fiduciary of the Medco Plan pursuant to ERISA

§ 402(a)(1), 29 U.S.C. § 1102(a)(1), and a de facto fiduciary within the meaning of




                                            26
ERISA § 3(21), 29 U.S.C. § 1002(21), in that it exercised discretionary authority or

discretionary control with respect to management of the Plans, exercised authority or

control with respect to management or disposition of the Plans’ assets, and/or had

discretionary authority or discretionary responsibility in the administration of the Plans.


C.      Defendant Gilmartin’s Fiduciary Status

        95.    As Chairman of the Board of Merck, Gilmartin’s responsibilities included

determining the “structure, composition and responsibilities” of the Committees of the

Board, including the composition of the Compensation and Benefits Committee of the

Board (the “CBC”), which appointed members of the MPIC, who were responsible for

selecting and monitoring investment options for each of the Plans.

        96.    Gilmartin, as Chief Executive Officer of Merck, had the responsibility of

meeting with the members of the CBC “as appropriate.”

        97.    Upon information and belief, Gilmartin exercised discretionary authority

with respect to the Plans as a result of his involvement in the selection of members of the

MPIC. During the Class Period, Gilmartin exercised his discretion in that he exerted his

influence over the CBC in connection with the CBC’s appointment of MPIC members.

Upon information and belief, Gilmartin took part in the appointment process by

recommending persons that the CBC should appoint to the MPIC. Thereafter, based -- at

least in part -- on Gilmartin’s recommendation, such persons were appointed to the

MPIC.

        98.    Gilmartin also exercised discretionary authority with respect to the Plans

by: (a) determining or participating in decisions about the substantive content of Merck’s

SEC filings, which, on information and belief, were incorporated by reference into the



                                             27
SPDs, Prospectus and Form S-8 registration statements, and (b) upon information and

belief, participating in Merck’s decision to incorporate these communications into

disclosures to Plan participants. Such filings were intended to communicate to

participants information necessary for participants to manage their retirement benefits

under the Plans.

       99.     With respect to the Salaried and Hourly Plans, Gilmartin, as the Chief

Executive Officer of Merck, had the responsibility for appointing and monitoring

members of the Salaried and Hourly Plan Employee Benefits Committee who

“administered” the Salaried and Hourly Plans. (Salaried Plan, § 2.1 (Definition of “Plan

Committee”)); (Hourly Plan, § 2.1 (Definition of “Plan Committee”)).

       100.    Consequently, in light of the foregoing duties, responsibilities, and

actions, Gilmartin, as the Company’s CEO, was a fiduciary of the Plans within the

meaning of ERISA § 3(21), 29 U.S.C. § 1002(21), during the Class Period in that he

exercised discretionary authority or discretionary control with respect to management of

the Plans, exercised authority or control with respect to management or disposition of the

Plans’ assets, and/or had discretionary authority or discretionary responsibility in the

administration of the Plans.


D.     Defendant Scolnick’s Fiduciary Status

       101.    From 1997 until 2002, Scolnick served as a member of the MPIC, a

named fiduciary under the Plans.

       102.    As a member of the MPIC, Scolnick was responsible for selecting and

monitoring investment alternatives and vehicles for each of the Plans, as further




                                             28
described below and was responsible for discharging his responsibilities and duties to the

Plans prudently and loyally.

       103.    In addition, under each of the Plans, Scolnick, as a member of the MPIC,

was given the authority to determine investments of the Merck Common Stock Fund,

including the amount the Fund would invest in Merck Common Stock and the amount the

Fund would invest in other short term or liquid investment media.

       104.    As a director of the Company, Scolnick, along with his fellow Board

members, was responsible for appointing and monitoring the members of the CBC,

through which the Board appointed members of the MPIC, who were responsible for

selecting and monitoring investment options for the Plans.

       105.    Scolnick also exercised discretionary authority with respect to the Plans

by: (a) determining or participating in decisions about the substantive content of Merck’s

SEC filings, which, on information and belief, were incorporated by reference into the

SPDs, Prospectus and Form S-8 registration statements, and (b) upon information and

belief, participating in Merck’s decision to incorporate these communications into

disclosures to Plan participants. Such filings were intended to communicate to

participants information necessary for participants to manage their retirement benefits

under the Plans.

       106.    Consequently, in light of the foregoing duties, responsibilities, and

actions, Scolnick was both a named fiduciary of the Plans pursuant to ERISA § 402(a)(1),

29 U.S.C. § 1102(a)(1), and a de facto fiduciary within the meaning of ERISA § 3(21),

29 U.S.C. § 1002(21), in that he exercised discretionary authority or discretionary control

with respect to management of the Plans, exercised authority or control with respect to




                                            29
management or disposition of the Plans’ assets, and/or had discretionary authority or

discretionary responsibility in the administration of the Plans.


E.     Defendant Lewent’s Fiduciary Status

       107.    During the Class Period, Lewent served as a member of the MPIC, a

named fiduciary under the Plans.

       108.    As a member of the MPIC, Lewent was responsible for selecting and

monitoring investment alternatives and vehicles for each of the Plans, as further

described below, and was responsible for discharging her responsibilities and duties to

the Plans prudently and loyally.

       109.    In addition, under each of the Plans, Lewent, as a member of the MPIC,

was given the authority to determine investments of the Merck Common Stock Fund,

including the amount the Fund would invest in Merck Common Stock and the amount the

Fund would invest in other short term or liquid investment media.

       110.    As Chief Financial Officer of Merck and a member of Merck’s

Management Committee, Lewent also exercised discretionary authority with respect to

the Plans by: (a) determining or participating in decisions about the substantive content of

Merck’s SEC filings, which, on information and belief, were incorporated by reference

into the SPDs, Prospectus and Form S-8 registration statements, and (b) upon information

and belief, participating in Merck’s decision to incorporate these communications into

disclosures to Plan participants. Such filings were intended to communicate to

participants information necessary for participants to manage their retirement benefits

under the Plans.




                                             30
       111.    As a member of the Merck-Medco Board of Managers (“Merck-Medco

Board”), Lewent had the authority to appoint members of the Savings Plan

Administrative Committee. The Savings Plan Administrative Committee was a named

fiduciary with the authority to administer the Medco Plan during the Class Period.

       112.    As a member of the Merck-Medco Board, Lewent also had the authority to

appoint members of the Merck-Medco Employee Benefits Committee (the “Medco

EBC”), a committee who had authority to administer the Medco Plan during the Class

Period. As a member of the Merck-Medco Board, Lewent was responsible for

designating and changing the Trustee for the Medco Plan. (Medco Plan, § 12.1).

       113.    Consequently, in light of the foregoing duties, responsibilities, and

actions, Lewent was both a named fiduciary of the Plans pursuant to ERISA § 402(a)(1),

29 U.S.C. § 1102(a)(1), and a de facto fiduciary within the meaning of ERISA § 3(21),

29 U.S.C. § 1002(21), in that she exercised discretionary authority or discretionary

control with respect to management of the Plans, exercised authority or control with

respect to management or disposition of the Plans’ assets, and/or had discretionary

authority or discretionary responsibility in the administration of the Plans.


F.     Defendant Frazier’s Fiduciary Status

       114.    As Senior Vice President and General Counsel and as a member of

Merck’s Management Committee, Frazier exercised discretionary authority with respect

to the Plans by: (a) determining or participating in decisions about the substantive content

of Merck’s SEC filings, which, on information and belief, were incorporated by reference

into the SPDs, Prospectus and Form S-8 registration statements, and (b) upon information

and belief, participating in Merck’s decision to incorporate these communications into



                                             31
disclosures to Plan participants. Such filings were intended to communicate to

participants information necessary for participants to manage their retirement benefits

under the Plans.

       115.    As a member of the Merck-Medco Board, Frazier had the authority to

appoint members of the Savings Plan Administrative Committee. The Savings Plan

Administrative Committee was a named fiduciary with the authority to administer the

Medco Plan during the Class Period.

       116.    As a member of the Merck-Medco Board, Frazier also had the authority to

appoint members of the Merck-Medco Employee Benefits Committee (the “Medco

EBC”), a committee who had authority to administer the Plan during the Class Period.

       117.    As a member of the Merck-Medco Board, Frazier was responsible for

designating and changing the Trustee for the Medco Plan.

       118.    Consequently, in light of the foregoing duties, responsibilities, and

actions, Frazier was a fiduciary of the Plans within the meaning of ERISA § 3(21), 29

U.S.C. § 1002(21), during the Class Period in that he exercised discretionary authority or

discretionary control with respect to management of the Plans, exercised authority or

control with respect to management or disposition of the Plans’ assets, and/or had

discretionary authority or discretionary responsibility in the administration of the Plans.


G.     Merck Director Defendants’ Fiduciary Status
       (Including Gilmartin and Scolnick as Directors)

       119.    Under relevant New Jersey law and Merck’s charter and bylaws, Merck’s

Board of Directors had the authority to manage the business and affairs of Merck.

Because Merck was, as alleged above, a fiduciary of the Plans during the Class Period,




                                             32
so, necessarily, was the Board and its members, which had the ultimate authority for the

affairs of Merck.

         120.   In addition, the Merck Director Defendants, including Gilmartin and

Scolnick, appointed and monitored the members of the Compensation and Benefits

Committee of the Board of Directors (“CBC”), which was a subcommittee of the Merck

Board that acted under the direction and control of the Merck Board. The CBC was

composed of three or more non-employee directors of Merck. With respect to each of the

Plans, the Board, through the CBC, had the authority to appoint, remove and accept the

resignation of members of the MPIC, who was a named fiduciary under each of the

Plans.

         121.   During the Class Period, the following Merck Director Defendants were

members of the CBC: (a) Defendant H. Brewster Atwater, Jr., (b) Defendant Lawrence

A. Bossidy, (c) Defendant William G. Bowen, (d) Defendant Johnetta B. Cole, (e)

Defendant William N. Kelly and (f) Defendant William M. Daley (the “CBC

Defendants”).

         122.   The Merck Director Defendants, acting through the CBC, had the duty to

monitor the performance of the MPIC. In particular, the CBC adopted guidelines for the

MPIC, provided approvals regarding the Plan determinations submitted by the MPIC and

reviewed reports prepared by the MPIC.

         123.   Each Merck Director Defendant exercised his or her discretionary

authority with respect to the Plans by determining or participating in decisions about the

substantive content of Merck’s SEC filings, which, on information and belief, were

incorporated by reference into the SPDs, Prospectus and Form S-8 registration




                                            33
statements. Such filings were intended to communicate to participants information

necessary for participants to manage their retirement benefits under the Plan.

       124.    Consequently, in light of the foregoing duties, responsibilities, and

actions, the Merck Director Defendants (including Gilmartin and Scolnick) and the CBC

Defendants were fiduciaries of the Plans within the meaning of ERISA § 3(21), 29 U.S.C.

§ 1002(21), during the Class Period, in that they exercised discretionary authority or

discretionary control with respect to management of the Plans, exercised authority or

control with respect to management or disposition of the Plans’ assets, and/or had

discretionary authority or discretionary responsibility in the administration of the Plans,

including the appointment, removal and monitoring of the CBC and the MPIC.


H.     MPIC Defendants’ Fiduciary Status

       125.    The Management Pension Investment Committee (the “MPIC”) was

established on December 15, 1981, with the initial members appointed by the CBC. The

members of the MPIC were named fiduciaries of each of the Plans. (Salaried Plan, §

16.1); (Hourly Plan, § 16.1); (Puerto Rico Plan, § 16.1); (Medco Plan, § 14.1). During

2002, the Medco Health 401(k) Saving Plan was managed by the Benefits Department of

Medco Health Solutions; however, formal responsibility for investment related matters

remained with the MPIC.

       126.    Under the Salaried and Hourly Plans’ Trust Agreement, the members of

the MPIC were identified as named fiduciaries of the Plans.

       127.    Under each of the Plans, the MPIC was charged with the authority to

select investment alternatives and vehicles for the Plans. Section 9.1 of the Salaried,




                                             34
Hourly and Puerto Rico Plans and Section 8.1 of the Medco Plan contain identical

language that provides:

        MPIC shall determine from time to time which investments, funds and mutual
        funds offered by the Trustee or another party may be permitted investments
        under the Plan.

       128.    Section 15.1 of the Salaried and Hourly Plans also expressly states that the

MPIC had the authority to select the investment alternatives and vehicles for the Plans.

Under the Salaried Plan, Section 15.1 provides:

       MPIC shall have the authority to select investment alternatives and
       vehicles for the Plan and to designate the Trustee.

Under the Puerto Rico Plan, Section 15.1 states:

       The Management Pension Investment Committee of Merck (“MPIC”)
       shall have the authority to select investment alternatives and vehicles for
       the Plan.

       129.    The MPIC’s authority regarding the selection of investment options under

the Salaried, Hourly and Puerto Rico Plans was also confirmed in the 2002 Annual

Report for the Merck Employee Savings Plans.

       130.    In addition, under each of the Plans, the MPIC was given the authority to

determine the investments within the Merck Common Stock Fund, including the amount

the Fund would invest in Merck Common Stock and the amount the Fund would invest in

other short term or liquid investment media. Section 9.2 of the Salaried, Hourly and

Puerto Rico Plans and Section 8.2 of the Medco Plan contain identical language that

provides:

        [A] fund or investment which includes shares of Merck Common Stock,
        and such other investments (such as short term, liquid investments) as
        determined by the MPIC, shall be permitted under the plan.

(emphasis added).



                                            35
       131.    The duties of MPIC are described in the MPIC Administrative Procedures

as follows:

       (i) to direct the investment of assets; (ii) select appoint and remove the
       trustee or trustees; (iii) select and establish other funding media; (iv) set
       policy guidelines for and monitor results of the investment of Plan assets;
       and (v) establish a funding policy and method consistent with the
       objectives of the Company’s pension plans and the requirements of the
       law.

       132.    According to the Administrative Procedures, the MPIC was required to

hold regular quarterly meetings and report to the CBC. With respect to their reporting

requirements, the MPIC was required to provide the CBC with “quarterly and annual

reports covering the investment results on all pension assets” and provide information or

reports on the Investment Policy adopted by the Committee. The MPIC was to meet with

the CBC in accordance with the schedule determined by the CBC.

       133.    Moreover, the MPIC was required to receive and review the following

reports prepared by the Office of Vice President and Treasurer: (1) Quarterly Merck

Pension Trust Investment Report, (2) Annual Retirement Plan Report, (3) Annual

Medical/Dental/Long-Term Disability Trust (501(c)(9)) Report, and the (4) Annual

Summary Audit Report on Pension and Benefit Plans.

       134.    Consequently, in light of the foregoing duties, responsibilities, and

actions, the MPIC Defendants, including Scolnick and Lewent, were both named

fiduciaries of the Plans pursuant to ERISA § 402(a)(1), 29 U.S.C. § 1102(a)(1), and de

facto fiduciaries within the meaning of ERISA § 3(21), 29 U.S.C. § 1002(21), in that they

exercised discretionary authority or discretionary control with respect to management of

the Plans, exercised authority or control with respect to management or disposition of the




                                            36
Plans’ assets, and/or had discretionary authority or discretionary responsibility in the

administration of the Plans.


                    VI. FACTS BEARING ON FIDUCIARY BREACH

A.     Merck’s Decision to Bet Its Future on Vioxx

       135.    In the late 1980’s and early 1990’s, Merck faced a crisis because patents

on several of its major “blockbuster” drugs -- including Vasotec, Prinivil, Mevacor,

Pepcid, Prilosec, and Zocor -- were expiring. No pharmaceutical company had ever had

this many billion-dollar drugs going off patent at approximately the same time.

       136.    Raymond Gilmartin became Merck’s President and CEO in 1994.

Gilmartin, a Harvard-trained businessman, was the first non-doctor or non-scientist to run

Merck since Merck’s establishment in 1891. At the time he admitted that, while the “safe

thing would have been to seek a merger, emphasize generics, stay diversified and cut

costs across the board,” he “went against the conventional wisdom” and staked the

company's future on the productivity of its labs.

       137.    While paying lip service to Merck’s longstanding values, Gilmartin’s real

aim was that of a nearsighted entrepreneur. He sought to maximize short-term sales for

Merck drugs such as Vioxx through marketing -- regardless of the serious and sometimes

fatal risks to patients that would ultimately damage Merck’s reputation and long-term

financial health.

       138.    The appointment of Gilmartin signaled a culture change in Merck’s focus

from a science-driven to a marketing- and sales-driven company. Other changes

accompanied this shift. For example, traditionally, Merck’s marketing executives had not

been allowed to participate in scientific-planning meetings. Gilmartin's predecessor, P.



                                             37
Roy Vagelos, first persuaded scientists to accept the attendance of marketers at such

meetings by promising that they would not speak. Under Vagelos’s, and then

Gilmartin’s, tenure, marketing personnel became more active participants in scientists’

development decisions.

        139.    Dr. Edward Scolnick, President of Merck Research Laboratories, was

aware of Gilmartin’s intent to focus on development of profitable new drugs as the

driving force for the success of the company. With financial analysts declaring that

Merck might need to merge with another pharmaceutical company to avert or resolve a

looming financial crisis, Scolnick feared that Merck might not survive as an independent

company if new drugs were not discovered and put into the research and development

pipeline.

        140.    Merck desperately needed a “blockbuster” drug to fill the revenue vacuum

left by imminent patent expirations and to alleviate skepticism about the company’s

stability and future.

        141.    Vioxx was one such drug. In fact, in the latter half of the 1990’s, the

astonishing market success of Vioxx became so central to Merck’s fortunes that Scolnick

ultimately acknowledged that, had Merck not discovered and successfully shepherded the

drug through the FDA approval process, it would have become a very different company.


B.      The Discovery of COX-2 Inhibitors and Vioxx

        142.    Vioxx belongs to a class of drugs known as non-steroidal anti-

inflammatory drugs or “NSAIDs”, which are used to reduce pain and inflammation.

NSAIDs generally reduce pain and inflammation by blocking the production of an

enzyme called prostaglandin G/H synthase, which consists of two similar forms,



                                             38
cyclooxygenase-1 (“COX-1”) and cyclooxygenase-2 (“COX-2”). Vioxx is a selective

inhibitor of COX-2. Vioxx reduces inflammation and pain by selectively blocking the

production of COX-2.

        143.       Other, older NSAIDs (including aspirin and ibuprofen), which inhibit

COX-1 as well as COX-2, also effectively relieve pain and inflammation. In fact, Vioxx

has never been shown to have any greater analgesic or anti-inflammatory efficacy than

older, non-selective NSAIDs.

        144.       Because COX-1 inhibition can adversely affect the gastrointestinal tract,

traditional NSAIDs have been associated with potentially serious gastrointestinal toxicity,

including perforations of the gastrointestinal lining, ulcers, and gastrointestinal bleeding.

        145.       By the early 1990’s Merck researchers believed that by specifically

inhibiting only COX-2, they could reduce pain and inflammation while minimizing risk

to the GI tract.

        146.       In or about the summer of 1992, Merck began a COX-2 research program

at the Merck Frosst Centre for Therapeutic Research in Quebec, Canada, which

eventually led to the discovery and development of a compound that became Vioxx.

        147.       On or about December 20, 1994, Merck filed an Investigational New Drug

(IND) application with the FDA’s Division of Anti-inflammatory, Analgesic and

Opthalmic Drug Products (IND 46,894) to conduct clinical trials of Vioxx for the

treatment of osteoarthritis and acute pain in humans.




                                               39
C.      Merck’s Knowledge of Vioxx Problems

        148.    As early as 1996, Merck knew that, because Vioxx inhibited COX-2 but

not COX-1, use of the drug increased platelet aggregation (blood clotting) and thereby

increased the risk of heart attacks and strokes. Merck recognized that, as a result, use of

Vioxx posed a substantial risk of significantly higher rates of adverse cardiovascular

effects, particularly because, unlike aspirin, it lacked anti-platelet or anti-clotting

properties. In fact, Merck sponsored a study that demonstrated that Vioxx, in contrast to

several other NSAIDs against which it was tested, exerted no appreciable anti-platelet

effect (Protocol 061).

        149.    In or about February 1997, one Merck researcher, Briggs Morrison,

conceded that “without COX-1 inhibition you will get more thrombotic events and kill

drug [sic].” Responding to this concern, Alise Reicin, now a Merck vice president for

clinical research, observed: “This is a no win situation! . . . [T]he possibility of

increased CV [cardiovascular] events is of great concern (I just can’t wait to be the one to

present those results to senior management!).”

        150.    In or about 1997, based on a Merck-sponsored study (Protocol 023),

Merck’s own clinical investigators advised the company that by selectively inhibiting

COX-2, Vioxx might actually provoke the creation of blood clots by reducing levels of

prostacyclin—a COX-2 platelet inhibitor—in blood vessels. Thus, it appeared that Vioxx

not only lacked the anti-platelet effect of aspirin and other NSAIDs that inhibited COX-1

production, but also promoted clotting by blocking COX-2 while leaving COX-1

generally uninhibited.




                                               40
        151.    As a consequence of Protocol 023, these investigators, as well as other

consultants, recommended that Merck sponsor and/or undertake additional studies in

populations of patients already at heightened cardiovascular risk to investigate the

prothrombotic potential of Vioxx, precautions Merck persistently refused to take.

        152.    By or about October 1997, analysts were closely watching the

developments of Merck in COX 2 inhibitors, noting that Merck had several major drugs

that would lose their patent protections after the year 2000, and that it needed a

blockbuster drug to help take up the slack. If Merck successfully developed a COX-2

inhibitor, such a drug would offer such blockbuster potential.

        153.    On or about October 24, 1997, Scolnick announced that Merck would

discuss its drug pipeline at its December 1997 analyst meeting instead of waiting until the

next biannual update in the Spring of 1998. He sought to reassure investors that this

pipeline would fill the revenue gap that would be created by upcoming patent expirations

that would affect $5 billion of Merck’s annual revenue (one-quarter of its total sales),

stating: “No company has ever had this many billion-dollar drugs going off patent at the

same time. But we have other products in the pipeline that over the next year at public

meetings we hope to tell people about. We won't say anything public until we have clear-

cut results.”

        154.    As promised, at Merck’s December 1997 analyst meeting, Scolnick

revealed Merck’s drug pipeline, which included an announcement that Merck would

begin filing applications worldwide in late 1998 for approval of a COX-2 inhibitor for

inflammatory diseases, including osteoarthritis.




                                             41
       155.    Meanwhile, Merck’s secret concerns about the cardiotoxic potential of

Vioxx led a senior Merck epidemiologist, in or about early 1998, to conduct an analysis

of serious heart problems with Vioxx compared to placebo patients enrolled in studies of

other Merck drugs. This analysis revealed that, in women, Vioxx more than doubled the

cardiovascular risk in a statistically significant manner compared to people not taking any

drug in other Merck studies. Merck neither made these data public nor followed up on

their potential implications for the drug’s cardiovascular safety.

       156.    Concerns about the drug’s potential cardiovascular toxicity ran so high

that, in or about 1998, Merck initiated an “adjudication” protocol to be used in all future

clinical trials of Vioxx designed to determine whether reported adverse events qualified

as adverse cardiovascular events by meeting a prespecified definition for potential

thrombotic cardiovascular experiences.

       157.    In addition, data from a 1998 unpublished Merck clinical trial called

“Study 090” found that serious cardiovascular events occurred approximately six times

more often in patients taking Vioxx than in those taking other arthritis drugs or a placebo.

       158.    By 1998 Merck’s base business was eroding, and the company was

experiencing declining sales in key franchises. Merck was also encountering serious

difficulties in the development of its new drug for depression, MK-869. Eventually, in or

about January 1999, Merck announced that it would not begin Phase III trials for MK-

869.

       159.    In Merck’s 1998 Annual Report, Dr. Beth Seidenberg, Vice President,

Clinical Research, stated: “Everybody involved [in the Vioxx project] knew how

extraordinarily important Vioxx is to patients with osteoarthritis and to Merck.” In fact,




                                             42
during this period, Scolnick impressed upon company employees the critical importance

that Vioxx secure quick FDA approval.

       160.      Merck faced a significant competitive threat from Monsanto and Pfizer,

two other pharmaceutical companies that together were developing another COX-2

inhibitor, Celebrex. In the late stages of the Vioxx development program, Scolnick

became disturbed that Celebrex could reach the marketplace first. If it could not quickly

bring Vioxx to market, Merck stood to lose billions of dollars in sales, to say nothing of

the market niche it hoped to create for the drug.

       161.      On or about November 23, 1998, Merck filed its long-awaited New Drug

Application (“NDA”) with the FDA (NDA 21-042) to sell Vioxx 12.5 mg and 25 mg

tablets to treat the signs and symptoms of osteoarthritis, the management of acute pain,

and the treatment of primary dysmenorrhea. Data to support this NDA were included in

IND 46,894.

       162.      In response to this application, an independent drug industry analyst noted

that “Vioxx is very critical for Merck,” and that “[e]verything depends on how well this

product does.”

       163.      On or about December 31, 1998, while the Vioxx NDA was still pending,

the FDA approved the Celebrex NDA, permitting Celebrex to become the first selective

COX-2 inhibitor marketed in the United States.

       164.      On or about January 6, 1999, Merck started an 8,000-patient, 12-month

trial named the Vioxx Gastrointestinal Outcomes Research (hereafter “VIGOR”) study to

try to demonstrate the drug’s gastrointestinal safety benefits. The trial compared




                                             43
rheumatoid arthritis patients taking a high dose (50 mg) of Vioxx with those taking

another pain reliever, naproxen (marketed over-the-counter as Aleve).

        165.   Critical to Merck’s marketing plan for Vioxx was the ability to claim that

Vioxx was just as effective as, but safer for the gastrointestinal tract than, traditional

NSAIDs and Celebrex. Merck commissioned the VIGOR study, not to study the

cardiovascular toxicity of Vioxx, but rather in the hope of generating favorable data on

the gastrointestinal toxicity of Vioxx to distinguish it from all other NSAIDs. Such a

distinction would allow Merck to snatch market share from Searle/Pfizer, which had

beaten Merck to market with their own COX-2-inhibitor, Celebrex.

        166.   In designing the VIGOR study, Merck researchers faced a dilemma: to

lessen the risk of Vioxx-induced cardiovascular toxicity, trial patients likely required

prophylactic, low-dose aspirin. However, aspirin use during the trial could undo any

purported gastrointestinal safety advantage Vioxx might confer.

        167.   To minimize the potential for the VIGOR study to implicate Vioxx in

heightened cardiovascular risk, Merck excluded “high” cardiovascular risk patients from

the trial. Merck hoped that it would thereby decrease the cardiovascular event rate and,

as a consequence, obscure any differences in safety risks between the Vioxx and

naproxen control groups.

        168.   In April 1999, more than four months after the FDA approved Celebrex

for marketing, the FDA’s Arthritis Advisory Committee met to advise the FDA on

whether Vioxx should be approved for marketing. Industry analysts observed at this time

that “[i]t will be very, very difficult” for Vioxx to penetrate the market, noting that “[t]o

be able to displace Celebrex, [Vioxx] needs to have some significant superiority in its




                                              44
product label, such as a clearly enhanced safety profile . . . And it doesn't look like it will

get it.”

           169.   Merck failed to gain a clearly enhanced safety profile over Celebrex and

other pain relievers on the market. Because Merck failed to conduct any study prior to

approval demonstrating that Vioxx reduced the incidence of clinically meaningful

gastrointestinal side effects typical of NSAID therapy, the FDA determined that Vioxx

had not been proven safe enough to be sold without the warnings of gastrointestinal

problems that Celebrex and other pain relievers carry.

           170.   Despite all the preclinical and clinical data generated on the potential

cardiovascular hazards of Vioxx and repeated expressions of concern from its own

researchers as well as its consultants, Merck told FDA’s Arthritis Advisory Committee

(AAC) in a backgrounder prepared for its April 20, 1999, meeting on Vioxx that “there is

no evidence, preclinically or clinically, to suggest that rofecoxib [Vioxx] carries any

increased risk for cardiovascular events.”

           171.   One month later, on or about May 20, 1999, the FDA approved Vioxx for

the relief of the signs and symptoms of acute pain, dysmenorrhea and osteoarthritis.

           172.   When studies on Vioxx and the competing drug, Celebrex, became

available in 1998, many doctors were disappointed. Neither drug alleviated pain any

better than the older medicines and the drugs cost close to $3 a pill. In contrast, over-the-

counter pain relievers, cost pennies a dose.

           173.   Even without FDA approval for labeling that allowed it to legitimately

claim superiority, Merck did just that with the medical community and health care

providers. For example, on or about November 1, 1999, Merck issued two press release,




                                               45
entitled “TEN REASONS WHY VIOXX IS BETTER THAN CELEBREX,” and

“VIOXX v. Celebrex Poem.” On or about December 16, 1999, the FDA advised Merck

that these statements were false and misleading, in that they misrepresented the drug’s

“safety profile,” made “unsubstantiated comparative claims,” and were “lacking in fair

balance.” Specifically, the FDA concluded that Merck misrepresented (1) the drug’s

“safety profile” by claiming that it was “safer than a placebo” and (2) the drug’s efficacy

through “unsubstantiated” comparisons to the COX-2 inhibitor, Celebrex and other

NSAIDs.

       174.    Thereafter, Merck persisted in misrepresenting the safety profile of Vioxx

by concealing and minimizing the significantly increased risk of cardiovascular toxicity

attendant upon the drug’s use.

       175.    On or about January 26, 2000, Merck issued a press release announcing its

fourth quarter 1999 and full-year 2000 financial results. Gilmartin was quoted as saying:

“Sales growth for the quarter and year was led by the established major products, the

newer products, including VIOXX, as well as growth from the Merck-Medco Managed

Care business. VIOXX is the fastest growing prescription arthritis and pain medicine in

the United States and represents one of the most successful product introductions in the

pharmaceutical industry’s history.”

       176.    Despite its best efforts to pre-ordain a clean cardiovascular bill of health,

the VIGOR study results Merck finally received in or about early March 2000

devastatingly reinforced cardiovascular safety concerns its employees and consultants

had repeatedly voiced for several years. The trial revealed, among other things, that,

notwithstanding that patients at high cardiovascular risk were not allowed entry into the




                                             46
trial, Vioxx users were five times more likely to suffer heart attacks than those taking

naproxen. In addition, patients taking VIOXX were 2.3 times more likely to suffer

serious cardiovascular disease (including heart attacks, ischemic stroke, unstable angina,

and sudden unexplained death) than naproxen patients.

       177.    Upon receiving the VIGOR study results on or about March 9, 2000,

Scolnick concluded that the “CV [cardiovascular] events are clearly there” and stated that

Vioxx’s cardiovascular toxicity is “mechanism based as we worried it was” and as some

of the company’s consultants, based on the Protocol 023 study, had maintained.

       178.    “We were stunned” by the VIGOR findings, Dr. Alise S. Reicin, the

Merck researcher who ran the VIGOR study, later admitted. “It’s fair to say that we were

all concerned.”

       179.    Within weeks—for example, in a March 27, 2000, press release—Merck,

determined to protect the image and marketability of its new blockbuster, seized upon

and thereafter widely and continuously disseminated the post hoc rationalization that the

VIGOR study only showed that naproxen reduced cardiovascular risk (i.e., it exerted

“cardioprotective effects”), not that Vioxx posed a serious cardiovascular hazard.

       180.    Merck propagated its “naproxen theory” in Merck-authored or sponsored

articles in medical journals, press releases and news reports, and lectures by prominent

members of the medical community whom it financially supported. For example, this

theory was again advanced in an article on VIGOR that downplayed the incidence and

severity of cardiovascular risks associated with Vioxx, while principally touting the

favorable gastrointestinal safety results from the study that was published by Merck

researchers and others, on November 23, 2000, in The New England Journal of Medicine.




                                             47
       181.    At the same time that Merck publicly espoused its “naproxen theory,” it

internally acknowledged its lack of evidentiary support. Merck realized that the

magnitude of the anti-platelet or cardioprotective effect it ascribed to naproxen in the

VIGOR study exceeded that of aspirin, the well-known anti-platelet agent, and that no

prospectively defined cardiovascular outcomes study demonstrated that naproxen could

confer such a benefit. In fact, no randomized clinical studies had even been undertaken

to evaluate whether naproxen was cardioprotective.

       182.    Merck continued to publish and publicly insist that naproxen was

cardioprotective, even after Italian pharmacologist Carlo Patrono, one of Merck’s own

consultants and an expert in the platelet effects of cyclooxygenase-inhibiting drugs,

advised Merck in or about March 2000, that the dramatic cardiovascular effects observed

in the VIGOR study could not be attributed to naproxen.

       183.    Merck also knew that FDA reviewers did not find its “naproxen theory”

persuasive for a number of reasons, including the absence of support of naproxen’s

purported anti-platelet effects from prospective placebo-controlled trials and the

implausibility of assigning more cardioprotective effect to naproxen than aspirin. In fact,

as one consulting expert from FDA’s Division of Cardio-Renal Drug Products noted,

VIGOR may actually have established naproxen as the “preferred drug compared to

[Vioxx].”

       184.    Merck further maintained that most of the adverse cardiovascular events in

VIGOR occurred in patients who would have been on aspirin for cardioprotection had its

use been allowed in the study. Merck knew, however, as the FDA had observed, that




                                             48
Vioxx also placed patients who did not fall into its “aspirin-indicated” subgroup at a

statistically significant increased risk of developing serious cardiovascular events.

       185.    Merck’s stock price initially dropped when the investing public became

aware of the VIGOR results. In response, Merck publicly maintained that although

Vioxx was perfectly safe, patients at risk of heart disease might consider taking low-dose

aspirin while taking Vioxx. As the Wall Street Journal noted, however, such a step

would raise their risk of ulcers—the side-effect Vioxx was designed to prevent.

       186.    Merck continued to float its “naproxen theory” notwithstanding that

subsequently generated study data only reinforced the cardiovascular hazards of Vioxx

and discredited it. For example, in March 2000, the month it received results from

VIGOR, Merck also completed another comparative study of Vioxx and naproxen known

as the ADVANTAGE study. Consistent with VIGOR, in ADVANTAGE an excess in

serious cardiac thrombotic events occurred in the Vioxx group compared to the naproxen

group, with twice the number of Vioxx patients discontinuing use due to adverse

cardiovascular events. This was of particular concern to the FDA’s medical reviewer,

because ADVANTAGE was merely a 12-week study; the Vioxx dose of 25 mg/day was

only half of that used in VIGOR (while the naproxen dose was identical in the two

studies); the patients in ADVANTAGE suffered from osteoarthritis, a condition not

predisposing to cardiovascular disease and injury to the same degree as rheumatoid

arthritis, the condition featured in VIGOR; and patients in ADVANTAGE, unlike those

in VIGOR, were permitted to use aspirin if recommended to prevent heart disease.

       187.    During ADVANTAGE, eight patients taking Vioxx suffered heart attacks

or sudden cardiac death, compared to just one taking naproxen, according to the




                                             49
assessments of the FDA. This difference was statistically significant, but Merck never

disclosed the data this way.

       188.    The published results of the ADVANTAGE study only reported that five,

not eight, Vioxx patients, had suffered heart attacks during the trial, compared with one

taking naproxen, a difference that was not statistically significant. Dr. Jeffrey R. Lisse, a

University of Arizona rheumatologist, who was listed as the study’s first author, has

stated that Merck, which “designed the trial, paid for the trial, ran the trial” actually wrote

the published report of it. “Basically, I went with the cardiovascular data that was

presented to me,” he said. Harold Sox, editor for the Annals of Internal Medicine, which

published that report, has stated that “[i]f they had told us it was 8-to-1, it would have

been much different than 5-to-1.”

       189.    Arguing that the results of VIGOR merely signaled Vioxx’s lack of anti-

platelet activity, Merck publicly suggested the use of low-dose aspirin in high risk

patients to prevent cardiovascular thrombotic events. Merck knew from ADVANTAGE,

however, that concomitant aspirin use would not afford such protection, as the incidence

of such events remained substantially higher among Vioxx patients additionally taking

low-dose aspirin than naproxen patients also on low-dose aspirin. Given the established

anti-platelet properties of aspirin, this also suggested that the excess cardiovascular risk

confronting the Vioxx patients in VIGOR could not be explained by the antiplatelet

effects of naproxen, as Merck had insisted.

       190.    Merck also knew from ADVANTAGE that concomitant use of low-dose

aspirin could eliminate any gastrointestinal safety advantage of Vioxx over naproxen, as

such use in the trial increased the risk of serious gastrointestinal events among the Vioxx




                                              50
population while leaving that risk essentially unchanged in the naproxen arm. In

addition, Merck learned from its 12-week endoscopy study, Protocol 136, that the

cumulative incidence of gastroduodenal ulcers in patients who concurrently took Vioxx

with low-dose aspirin was substantially higher than in patients who took low-dose aspirin

or placebo.

       191.    As was ultimately revealed, while reviewing the results of

ADVANTAGE, amid rising concerns that its painkiller Vioxx posed heart risks, Merck

even overruled one of its own scientists after he suggested that a patient in a clinical trial

had probably died of a heart attack. A senior Merck scientist repeatedly urged the

researcher to change his findings about the death “so that we don’t raise concerns.”

       192.    The discussion of the death and its implications is contained in several

Merck records, including e-mail messages from Scolnick and from Dr. Alise S. Reicin, a

vice president for clinical research, that indicate Merck’s knowledge of data contradicting

its public statements that Vioxx was safe. In one e-mail message, Scolnick said the drug

trial that included the woman’s death had “put us in a terrible situation.” In others,

Scolnick fiercely criticized the FDA and said he would personally pressure senior

officials at the agency if it took action unfavorable to Vioxx. In still another email

message from Scolnick to Dr. Douglas Greene, an Executive Vice President at Merck

Research Laboratories, Scolnick wrote that he was especially angry because the

ADVANTAGE trial had no scientific purpose. In theory, Merck set up the trial to show

that Vioxx caused fewer stomach problems than naproxen. But Merck had already

demonstrated that with the VIGOR trial. “This course is just stupid,” Scolnick wrote.

“Small marketing studies which are intellectually redundant are extremely dangerous.”




                                              51
Scolnick also expressed his concern in e-mail messages to other senior Merck scientists

that the ADVANTAGE results would encourage the FDA to demand that Vioxx’s label

highlight its cardiac risks. Such a change would have damaged Vioxx’s sales, especially

because a competing drug, Celebrex, did not have heart risks prominently displayed on

its warning label.

       193.    During the month of May 2000, Merck’s top research and marketing

executives met to consider whether to develop a study to directly test a disturbing

possibility: that Vioxx might pose a heart risk in light of the results from its other clinical

trials that suggested such concerns.

       194.    The Merck executives rejected pursuing a study focused on Vioxx's

cardiovascular risks. Merck's marketers feared it could send the wrong signal about the

company's confidence in Vioxx, which already faced fierce competition from a rival

drug, Celebrex. “At present, there is no compelling marketing need for such a study,”’

said a slide prepared for the meeting. “Data would not be available during the critical

period. The implied message is not favorable.”

       195.    On or about June 29, 2000, Merck submitted the results of the VIGOR

trial, which evidenced that Vioxx significantly reduced the risk of developing

gastrointestinal complications compared to naproxen, in support of a request for revised

labeling to reflect Vioxx’s purportedly favorable gastrointestinal safety profile.

       196.    In mid-2000, Merck also submitted data from Studies 085 and 090 -- two

relatively small, six-week, studies comparing osteoarthritis patients taking Vioxx,

nabumetone or placebo -- to the FDA. Despite the small sample size, the use of the

lowest FDA-approved dose for Vioxx (12.5 mg/day), and permitted use of aspirin, the




                                              52
trend for adverse cardiovascular events was against Vioxx, with more Vioxx patients

experiencing heart attacks and discontinuing due to adverse cardiovascular experiences

than in the nabumetone or placebo groups. In fact, notwithstanding its small size, in

Study 090, it was later revealed that there was a statistically significant increased

incidence of heart attacks and strokes in the Vioxx group relative to a placebo.

       197.    Dr. Juni and colleagues published a cumulative meta-analysis of

randomized clinical trials of Vioxx in The Lancet in December 2004 in which they

demonstrated that “an increased risk of myocardial infarction was evident from 2000

onwards” and that “[a]t the end of 2000, the effect was both substantial and unlikely to be

a chance finding.” An increased risk of heart attacks surfaced in trials of both short and

long duration, and they found no evidence that the drug’s cardiovascular toxicity was

dose-dependent. The authors concluded that Vioxx should have been removed from the

market “as early as 2000 because studies of the drug had clearly shown that it doubled the

risk of heart attacks among users.”

       198.    According to Dr. Eric Topol, the Cleveland Clinic’s chairman of

cardiovascular medicine, when the unpublished results of Merck’s unpublished “090”

study was combined with Merck’s VIGOR study, it showed that Merck had evidence by

2000 that Vioxx was not safe. Topol said that when he tried to express his concerns

about Vioxx to top Merck officials, including Gilmartin, they refused to take his call.

       199.    By at least 2000, Merck was internally attempting to cure the problems

with Vioxx that it refused to publicly acknowledge.     According to a 2000 Merck internal

document entitled “Confidential Memorandum of Invention,” Merck discussed and

pursued a patent to try to reduce heart-attack risks for users of Vioxx while continuing to




                                             53
publicly deny that Vioxx could cause heart attacks. Merck officials stated in that

document that the way in which Vioxx reduces pain might also increase cardiovascular

problems; specifically, they noted that Vioxx might reduce the production of a substance

that prevents platelet aggregation or clotting called prostacyclin, thereby increasing the

risk of cardiac and cerebral adverse events. They raised the idea of seeking a patent for a

method of combining Vioxx with another agent to lessen the risk. The patent application,

dated May 14, 2001, and obtained from the U.S. Patent and Trademark Office, lists its

top inventor as Scolnick. Scolnick also was involved in writing the confidential internal

memo.

        200.    While the conclusion that Vioxx carried a significant cardiovascular risk

was obvious to Merck, it was not obvious to the market. The market accepted Merck’s

representation that Vioxx was safe despite the results of VIGOR, and between June 30,

2000, and December 2000, Merck’s stock price rose 19 percent, and second and third

quarter profits exceeded analysts’ estimates, helped by increasing sales of Vioxx.

Scolnick and Merck Chief Financial Officer Judy Lewent assured the market that Merck

could repeat that kind of performance in the future.

        201.    Merck enjoyed $2.2 billion in Vioxx sales for the year 2000. Its launch

was the industry's second-best ever.

        202.    As analysts recognized, the success of Vioxx continued to be critical to

Merck. The patents on several popular Merck drugs expired in 2000 and 2001, opening

them to generic competition. As one drug industry analyst noted: ''Vioxx was Merck's

savior, it's as simple as that.”




                                             54
       203.    In February 2001, FDA’s Arthritis Advisory Committee met to consider

the gastrointestinal benefits and cardiovascular safety of Vioxx. In briefing materials

prepared for that meeting, the FDA’s staff, noting an increased risk of developing

cardiovascular thrombotic events in VIGOR, recommended that information regarding

such events be added to the Vioxx label. Merck countered that aggregate data from the

Vioxx development program “supports the cardiovascular safety” of Vioxx and that the

VIGOR study results “are most consistent with naproxen having provided a

cardioprotective benefit to patients at risk for these events.”

       204.    In response to news and analyst reports of data from VIGOR, Merck

issued a press release on May 22, 2001, reconfirming the favorable cardiovascular safety

profile of Vioxx.

       205.    Despite the May 2001 press release, Merck Chief Financial Officer

Lewent knew by at least June 2001 that Merck would never meet analysts’ forecasts for

2001 profits, and that results for 2002 would be grim as well. On June 22, 2001, Merck

issued a statement that 2001 earnings would grow no faster than 10% instead of the 12%

expected.. The stock fell 9% in a day.

       206.    Merck learned in August 2001 that The Journal of the American Medical

Association (JAMA) intended to run an article by prominent researchers from the

Cleveland Clinic that raised concern about the serious cardiovascular risks of COX-2

inhibitors like Vioxx.

       207.    One day before, and in anticipation of publication of, the JAMA article,

Laura Demopoulos, Merck’s Senior Director of Cardiovascular Clinical Research, issued

a preemptive press release: “We have additional data beyond what they cite, and the




                                              55
findings are very, very reassuring. Vioxx does not result in any increase in

cardiovascular events compared to placebo.”

       208.    Merck attempted, but ultimately failed, to persuade JAMA and the study’s

authors to withdraw or change the article (following face-to-face meetings with all

concerned). On or about August 22, 2001, cardiologists Deborah Mukherjee, M.D., Eric

J. Topol, M.D., and Steven E. Nessen, M.D., of the Cleveland Clinic Foundation reported

in JAMA that the Cleveland Clinic had evaluated four randomized trials concerning

selective COX-2 inhibitors involving more than 16,000 patients. Among other things,

they reported that the annualized myocardial infarction rate for Vioxx patients in VIGOR

was significantly higher than in the placebo group of a recent meta-analysis of patients in

primary prevention trials. They concluded: “Given the remarkable exposure and

popularity of this new class of medications, we believe that it is mandatory to conduct a

trial specifically assessing cardiovascular risk and benefit of these agents. Until then, we

urge caution in prescribing these agents to patients at risk for cardiovascular morbidity.”

       209.    On or about August 23, 2001, the day after the JAMA article was

published, Merck issued another press release, stating: “The Company stands behind the

overall and cardiovascular safety profile of Vioxx.” It also sent “Dear Doctor” letters to

physicians around the county, via Federal Express, attempting to denigrate the study’s

findings.

       210.    Merck’s attempt to attribute all of the negative results of VIGOR to the

purportedly cardioprotective properties of naproxen earned a rebuke from the FDA. On

or about September 17, 2001, the FDA issued a formal warning to Gilmartin regarding

Merck’s “promotional campaign for Vioxx that minimizes the potentially serious




                                             56
cardiovascular findings” that were observed in the VIGOR trial. The FDA specifically

objected to Merck’s dissemination of the “naproxen theory”, noting that Merck failed to

disclose that it was “hypothetical, ha[d] not been demonstrated by substantial evidence,

and that there [was] another reasonable explanation, that Vioxx may have pro-thrombotic

properties.” Identifying statements made in Merck audio conferences and by sales

representatives directed toward physicians, the FDA found the misrepresentations so

extreme as to constitute “significant public health and safety concerns.” Addressing

Merck’s public “reconfirm[ation]” of the cardiovascular safety of Vioxx in its May 22,

2001, press release, the FDA warned Merck that “your claim . . . that Vioxx has a

‘favorable cardiovascular profile’ is simply incomprehensible, given the rate of MI and

serious cardiovascular events compared to naproxen.” Additionally, the FDA

reproached Merck for improperly comparing VIGOR and the Celebrex study known as

CLASS (Celebrex Long-Term Arthritis Safety Study) to misrepresent that Vioxx was

more effective and safer than Celebrex.

       211.    Even after receiving this letter, and despite Merck’s knowledge of the

serious adverse cardiovascular risks of Vioxx, Merck continued to misrepresent the safety

of the drug in its public statements. Merck denied reports concerning the increased risk

of cardiovascular problems as inaccurate and inconclusive.

       212.    Rather than disclose the truth, Merck made numerous statements designed

to paint a positive picture about itself and Vioxx. While Merck knew of the

cardiovascular risks posed by Vioxx, it continued its deceptive promotional campaign to

falsely minimize the risks and dangers associated with the drug. Merck issued a number




                                            57
of press releases regarding Vioxx, which were misleading in that they did not include the

whole truth regarding its serious dangers.

       213.    On or about October 15, 2001, the FDA asked Merck to revise Vioxx’s

labeling to warn physicians that Vioxx could cause heart attacks and other cardiovascular

problems. The FDA proposed that the warning state the following:

         Vioxx should be used with caution in patients at risk of developing
         cardiovascular thrombotic events such as those with a history of
         myocardial infarction and angina and in patients with pre-existent
         hypertension and congestive heart failure.

         The risk of developing myocardial infarction in the VIGOR study was
         five fold higher in patients treated with Vioxx 50 mg (0.5%) as
         compared to patients treated with naproxen (0.1%) . . . . this finding
         was consistent in a smaller and shorter study using Vioxx 25 mg that
         allowed the use of low dose ASA [aspirin]. Prospective, well powered,
         long-term studies required to compare the incidence of serious CV
         events in patients taking Vioxx versus NSAID comparators other than
         naproxen have not been performed.

       214.    Concerned that a cardiovascular warning for Vioxx would adversely affect

sales and that, in the COX-2 inhibitor market, the company with the better label would

sell more drugs, Merck engaged in protracted negotiations with the FDA over labeling

from October 2001 until April 2002 in large measure because it refused to accept the

FDA’s request that a discussion concerning cardiovascular toxicity potential be included

in the “Warnings” section of the Vioxx labeling. Under the Food, Drug and Cosmetic

Act, the FDA lacks authority to require specific labeling changes and, therefore, must

negotiate with manufacturers to revise labeling. For approximately six months, Merck

resisted several of the FDA’s proposals, leading to a series of conference calls to

negotiate differences and extensive delay.




                                             58
        215.    Acknowledging analyst concerns about Merck’s future, Scolnick told The

Wall Street Journal on December 7, 2001: “The company is not blind to the fact that . . .

people are questioning whether we are fundamentally still sound.” However, Scolnick

sought to reassure the market, stating that “the smartest people in the company have

concluded that we're actually in good shape.” Scolnick’s answer to analyst concerns was

to produce new drugs, such as the COX-2 inhibitor Arcoxia (etoricoxib) within the

following year—a purportedly improved version of Vioxx. In so doing, Scolnick hoped

to reassure analysts that Merck's recent travails are “simply a bump in the road.”

        216.    Nevertheless, four days later, on December 11, 2001, Merck reduced its

estimate of Vioxx 2001 sales to about $2.6 billion from a high of $3.5 billion as concerns

grew about the drug. Gilmartin explained that Vioxx sales fell short of estimates this

year, pushing profit below forecasts, because of concerns that Vioxx might increase the

risk of heart attack in some patients. Dr. Scolnick elaborated that Merck would conduct

more research on Vioxx and Arcoxia so that it could be “100 percent sure” of the

medicines' safety. Scolnick concluded: “Whatever the answer is in these studies, we will

report it to the world.”

        217.    Merck was poised to begin a cardiovascular outcomes study in patients

with acute coronary syndrome in March 2002, but abruptly dropped the project just

before it was set to start. It was never revived.

        218.    Work on this cardiovascular outcomes trial was halted at the same time

that officials from Merck and the FDA were concluding lengthy and heated negotiations

over how Vioxx's label would reflect data from VIGOR, which indicated that Vioxx

posed potential cardiovascular risks.




                                             59
       219.    In a double-edged move for Merck, on April 12, 2002, the Vioxx labeling

was revised to state that the drug seemed to protect against ulcers but also added some

language suggesting that it might increase the risk of heart attacks. Although this revised

labeling contained language concerning the cardiovascular risks of Vioxx, Merck

downplayed the significance of those risks, stating, inter alia, that the “significance of the

cardiovascular findings from these 3 studies (VIGOR and 2 placebo-controlled studies) is

unknown.”

       220.    The evidence regarding the cardiovascular effect of Vioxx continued to

mount. On or about October 5, 2002, an observational study by Dr. Wayne Ray and

colleagues concerning Vioxx and other NSAIDs used in a Tennessee Medicaid

population published in The Lancet concluded that Vioxx at doses in excess of 25 mg/day

significantly increased the risk of serious coronary heart disease; in contrast, there was no

evidence of increased risk among users of Celebrex, naproxen or ibuprofen.

       221.    Likewise, in or about October 2003, researchers from Harvard University-

affiliated Brigham & Women’s Hospital presenting a Merck-funded study at the

American College of Rheumatology meeting in Orlando, Florida, reported an increased

risk of acute myocardial infarction in patients taking Vioxx compared with those taking

Celebrex, particularly in the first 90 days. Based on dose-specific comparisons between

the two drugs, the adjusted relative risk of heart attack associated with Vioxx increased in

a dose-related manner. This study was eventually published in May 2004 in Circulation.

       222.    Merck discounted the findings of the Brigham & Women’s study.

“Randomized clinical trials are the gold standard” and this is not such a trial, said Alise




                                             60
Reicin, Merck's executive director of clinical research. “In our placebo-controlled

randomized trials, we have found no significant difference between Vioxx and placebo.”

       223.    It was later reported that in addition to sponsoring the Brigham &

Women’s study, Merck’s epidemiologist Carolyn Cannuscio was originally the lead

author of this study and participated actively in the study design, statistical analysis, and

interpretation of the data. Seeking to distance itself from the study’s findings, however,

Merck ordered her name purged from the list of authors.

       224.    In an article appearing in the Archives of Internal Medicine in January

2005, Daniel Solomon and Jerry Avorn, who authored the Brigham and Women’s

Hospital study, observed that “even after funding and agreeing with the design of the

Study, Merck publicly discredited our findings.”

       225.    In or about November 2003, Merck received preliminary results of a study

it had commissioned performed by Merck personnel and Alex Walker, an executive at the

Ingenix unit of United Health Group. The study revealed a statistically significantly

greater incidence of myocardial infarction or unstable angina pectoris associated with use

of Vioxx compared to the NSAIDs ibuprofen or diclofenac. The risk did not vary

significantly by duration, use, or dose. By contrast, the risk of myocardial infarction or

unstable angina was not significantly greater with Celebrex than with ibuprofen or

diclofenac.

       226.    In or about March 2004 a population-based analysis by Whelton, et al.

presented at the American College of Cardiology meeting concluded that Vioxx

significantly increased the risk of heart attack or stroke compared with non-users of




                                              61
NSAIDs (RR 2.45, 95% CI 1.71, 3.51); no increased risk was reported among users of

Celebrex or non-selective NSAIDs.

       227.    On or about August 11, 2004, Dr. David Graham in FDA’s Office of Drug

Safety, together with Dr. Wayne Ray and other co-authors, presented a FDA-funded

observational study at an international epidemiology conference in France, which

compared the rate of cardiovascular events in patients taking Vioxx, Celebrex, and non-

selective NSAIDs. Based on Kaiser Permanente claims data, the study concluded that

heart attack rates tripled for patients taking Vioxx in doses higher than 25 mg/day.

       228.    On or about August 26, 2004, Peter Kim, President of Merck Research

Laboratories, issued a press release stating: “Merck strongly disagrees with the

conclusions of an observational analysis by Graham et al, presented at an international

medical meeting this week . . . Merck stands behind the efficacy and safety, including

cardiovascular safety, of VIOXX.”


D.     Merck’s Decision to Withdraw Vioxx

       229.    On or about September 23, 2004, an aide to Merck’s Dr. Peter Kim

received a call informing him that an outside panel overseeing a placebo-controlled

clinical trial of Vioxx urged Merck to halt the trial and take patients off the drug because

of trial findings implicating Vioxx in a significantly increased cardiovascular risk

       230.    This clinical study, known as the Adenomatous Polyp Prevention on

Vioxx (“APPROVe”) trial, was started in February 2000 and was intended to evaluate the

effectiveness of 25 mg/day of Vioxx in preventing colon polyps.

       231.    On or about September 17, 2004, the External Safety Monitoring Board

(“ESMB”) for the APPROVe trial noted that “the trend for excess risk” for heart attacks



                                             62
and strokes “has continued to grow at each meeting over the last 1-2 years.”

Consequently, the ESMB recommended that participating patients in APPROVe be

instructed to discontinue the study treatment. Merck abruptly discontinued the

APPROVe study in mid-September 2004.

       232.    William G. Bowen, a Merck director since 1986, said management met all

day on September 27, 2004 “to decide what they thought they should do” about the

results of APPROVE. Merck directors subsequently arrived on September 28, 2004, for

a regularly scheduled board meeting at the company's New Jersey headquarters. Over a

three-and-a-half-hour lunch session, Gilmartin and Dr. Kim presented the research

findings. The Directors spent nearly 40 minutes discussing the study's statistical

significance. But “the results were compelling,” Mr. Bowen said. Everyone in the

boardroom agreed that Merck should withdraw the drug.

       233.    On or about September 27, 2004, Merck advised the FDA that the ESMB

recommended discontinuation of the APPROVe study. The following day, Merck

informed the FDA that it was withdrawing Vioxx from the market.

       234.    On or about September 30, 2004, Merck publicly disclosed the outcome of

the APPROVe study and announced that it was withdrawing Vioxx from the market

because APPROVe had implicated Vioxx in a statistically significant increased risk of

confirmed cardiovascular events—principally heart attacks and strokes—in patients

taking Vioxx compared to those ingesting a placebo.

       235.    The APPROVe study demonstrated that Vioxx doubled the risk of heart

attack and stroke for patients who had taken the drug for a period in excess of 18 months,

as compared to subjects taking a placebo for the same period of time.




                                            63
       236.    In APPROVe, the relative risk for adverse cardiovascular events for Vioxx

patients already at heightened cardiovascular risk was particularly high. For example,

VIOXX patients with a history of symptomatic atherosclerotic cardiovascular disease

were approximately 9 ½ times more likely to suffer such events than their placebo

counterparts and those with a history of diabetes were approximately 6 times as likely to

experience such events as patients in the placebo arm.

       237.    Upon the announcement of the market withdrawal of Vioxx, Merck stock

plunged 27 percent, to $33 on very heavy trading. The closing price was the lowest since

$32.95 on Feb. 15, 1996—the same year that Merck first wrestled with the prospect of

Vioxx’s likely cardiovascular effects. The percentage decline was Merck's largest in at

least 20 years and the stock was the most active in U.S. trading that day.

       238.    Standard & Poor's Ratings Service downgraded its outlook on Merck’s

corporate rating from stable to negative. Moody's Investors Service warned that it might

cut ratings on Merck's senior unsecured debt, an action that would affect $4.9 billion in

borrowings.

       239.    Vioxx was the biggest drug by sales ever withdrawn from the market.

Immediately after the September 30th announcement, Merck’s drop in share price by 27

percent erased about $26.8 billion in market value for the company. As of November 1,

2004, the stock had fallen almost 13 percent more, and was down 39 percent for the year.

       240.    On November 8, 2004, Merck disclosed in a filing with the Securities and

Exchange Commission that the SEC was conducting an informal probe concerning

Vioxx. The following day, Merck & Co.'s long-term debt rating was lowered two levels

from AAA to AA2 by Moody's Investors Service, because the Sept. 30 withdrawal of the




                                            64
Vioxx painkiller reduced revenue and elevated the No. 2 U.S. drugmaker's litigation

risks. “Longer term, Moody's believes the rating could move into the A rating category if

Moody's estimates of the cash outflows for Vioxx litigation exceed $10 billion on a

pretax basis over the next three years.” As of November 8, 2004, Merck’s shares had lost

42% of their value since the Vioxx withdrawal was announced.

       241.    The New York Times reported on November 14, 2004 that Merck's stock

had a lowered market value of about $50 billion since Merck announced the recall of

Vioxx. Moreover, Merck's legal liability for injuries related to Vioxx use were estimated

to be as high as $18 billion, not including potential punitive damages.

       242.    The directors of Merck opened an independent investigation into whether

the company acted properly regarding Vioxx on December 8, 2004. According to the

leader of that investigation, “[t]he board concluded that its responsibilities to Merck

shareholders made it important to conduct an independent review in order to assure that

the company acted in an appropriate and ethical manner.”

       243.    In addition, the U.S. Justice Department began a criminal probe of Merck,

demanding the company turn over Vioxx sales and marketing materials in connection

with a federal criminal investigation.

       244.    On or about May 5, 2005, Merck named Richard Clark chief executive

officer, turning to an insider to succeed Gilmartin, after an 11-year tenure marred by the

Vioxx recall and the loss of the company's position as the world's largest drugmaker.




                                             65
                 VII. DEFENDANTS KNEW OR SHOULD HAVE
                    KNOWN THAT THE FINANCIAL AND HEALTH
               RISKS ASSOCIATED WITH VIOXX WERE NOT DISCLOSED

       245.    Upon information and belief, each of the Defendants, in the performance

of their fiduciary duties, knew or should have known that Merck had failed to disclose

material adverse information concerning the risks associated with Vioxx and that as a

consequence of such failure the price of Fund shares was artificially inflated, and

ultimately, that the Fund was an imprudent investment for the Plans.


A.     Defendants’ Knowledge

       1.      Gilmartin

       246.    Upon information and belief, Gilmartin had knowledge regarding the

undisclosed health and financial risks associated with Vioxx.

       247.    As CEO and President of the Merck’s Board of Directors, Gilmartin

orchestrated the change in Merck’s corporate culture, from a science-driven to a profit-

driven company. He was aware of the number of patents set to expire in the 1990’s and

the need for new patents for highly marketable, profitable “blockbuster” drugs to replace

them. He was instrumental in the development and marketing of Vioxx as one of the

company’s preeminent “blockbuster” drugs.

       248.    At all times material hereto, Gilmartin also knew that the commercial

success of Vioxx was essential to the future profitability and earnings growth upon which

Merck’s soaring stock prices were based.

       249.    By virtue of his position, Gilmartin was aware of public statements

regarding Vioxx that the Company disseminated to the medical and financial

communities as well as the reaction of analysts and others to this information. He was



                                            66
also aware of the inflationary effect such information had on Merck’s stock price and

profitability.

        250.     Throughout the Class Period, upon information and belief, Gilmartin knew

that use of Vioxx posed an unacceptably high risk of serious and even life-threatening

cardiovascular toxicity. Yet he continued to issue false and misleading statements

regarding the drug and permitted others to do so, even though he knew or should have

known that, when the truth was ultimately revealed, Vioxx’s profitability would be

destroyed, taking with it much of the value of Merck’s stock.

        251.     Gilmartin personally benefited from the artificially inflated value of

Merck stock, having sold more than 600,000 shares of Merck stock during the Class

Period, with proceeds in excess of $30 million.

        252.     As explained above, throughout the class period, Gilmartin was a de facto

fiduciary for the Plans. As CEO and Chairman of the Board, and member of the

Management Committee and Executive Committees, Gilmartin was also responsible for

appointing and monitoring other Plan fiduciaries and administrators. Throughout this

period, Gilmartin was also aware of the precarious profitability of Merck stock, tied as it

was to the performance of a drug that Gilmartin knew to pose an unacceptably high risk

of serious and even life-threatening cardiovascular toxicity.

        253.     The precarious dependence of Merck stock on the risk-laden safety profile

of Vioxx throughout the Class Period made it an imprudent investment for a retirement

portfolio. Yet, Gilmartin failed to take appropriate measures to protect Plan participants

from the dangers of which he was aware, nor did he instruct others to do so.




                                              67
       2.      Scolnick

       254.     Upon information and belief, Scolnick had knowledge regarding the

undisclosed health and financial risks associated with Vioxx.

       255.    As Executive Vice President for Science and Technology of Merck and

President of Merck Research Laboratories, Dr. Edward Scolnick was instrumental in the

development of Vioxx and oversaw the Company’s research and development of the

drug. By virtue of his position and his participation in the development of Vioxx, at all

times material hereto, he was aware of emerging study data evidencing the unacceptable

cardiovascular risks posed by use of Vioxx.

       256.    Dr. Scolnick knew, from the time Vioxx was introduced and throughout

the Class Period, that its success was essential to the future profitability and earnings

growth upon which Merck’s soaring stock prices were based. Yet he continued to issue

false and misleading statements regarding the drug and its safety and permitted others to

do so, even though he knew or should have known that, when the truth was ultimately

revealed, Vioxx’s profitability would be destroyed, taking with it much of the value of

Merck’s stock. He was also aware of public statements regarding Vioxx the Company

disseminated to the medical and financial communities as well as the reaction of analysts

and others to this information. He was also aware of the inflationary effect such

information had on Merck’s stock price and profitability.

       257.    Dr. Scolnick personally benefited from the artificially inflated value of

Merck stock, having sold more than 380,000 shares of stock and/or exercised stock

options during the Class Period with proceeds exceeding $32 million.




                                              68
       258.    As explained above, throughout the class period, Scolnick was a named

and de facto fiduciary for the Plans. By virtue of his position and membership on the

Merck Board of Directors, Management Committee and Management Pension

Investment Committee, Scolnick was also responsible for appointing and monitoring

other Plan fiduciaries and administrators. Throughout this period, Scolnick was also

aware of the precarious profitability of Merck stock, tied as it was to the performance of a

drug that Scolnick knew to pose an unacceptably high risk of serious and even life-

threatening cardiovascular toxicity.

       259.    The precarious dependence of Merck stock on the risk-laden safety profile

of Vioxx throughout the Class Period made it an imprudent investment for a retirement

portfolio. Yet, Scolnick failed to take appropriate measures to protect Plan participants

from the dangers of which he was aware, nor did he instruct others to do so


       3.      Lewent

       260.    Upon information and belief, Lewent had knowledge regarding the

undisclosed health and financial risks associated with Vioxx.

       261.    As Executive Vice President and Chief Financial Officer of Merck,

Lewent bore primary responsibility for all financial matters at Merck, particularly the

preparation of publicly filed and disseminated statements regarding Merck’s financial

performance, including SEC filings incorporated by reference in Plan documents. As

CFO, Lewent was personally responsible for the accuracy of such filings and statements.

By virtue of her position, upon information and belief, Lewent knew about public

statements regarding Vioxx the Company disseminated to the medical and financial

communities, as well as the reaction of analysts and others to this information. She was



                                            69
also aware of the inflationary effect such information had on Merck’s stock price and

profitability. On several occasions during the Class Period, as explained above, Lewent

made or caused to be made, false and misleading statements about the future profitability

of Vioxx and anticipated performance of Merck stock, statements she knew or should

have known to be false and misleading at the time they were made.

       262.    Lewent personally benefited from the artificially inflated value of Merck

stock, having sold more than 200,000 shares of stock and/or exercised stock options

during the Class Period with net proceeds exceeding $16 million.

       263.    As explained above, throughout the class period, Lewent was a named and

de facto fiduciary for the Plans. By virtue of her position and membership on the Merck

Management Committee, Management Pension Investment Committee, and Merck-

Medco Board of Managers, Lewent was also responsible for appointing and monitoring

other Plan fiduciaries and administrators. Throughout this period, Lewent was also aware

of the precarious profitability of Merck stock, tied as it was to the performance of a drug

that Lewent knew to pose an unacceptably high risk of serious and even life-threatening

cardiovascular toxicity.

       264.    The precarious dependence of Merck stock on the risk-laden safety profile

of Vioxx throughout the Class Period made it an imprudent investment for a retirement

portfolio. Yet, Lewent failed to take appropriate measures to protect Plan participants

from the dangers of which she was aware, nor did she instruct others, at Merck or Merck-

Medco, to do so.




                                            70
       4.      Frazier

       265.    Upon information and belief, Frazier had knowledge regarding the

undisclosed health and financial risks associated with Vioxx.

       266.    As described above, during the Class Period, Frazier served as Vice

President, Public Affairs and Assistant General Counsel, Vice President and Deputy

General Counsel and ultimately, Senior Vice President and General Counsel of Merck,

and served as a member of the Merck Management Committee and member of the

Merck-Medco Board of Managers. Throughout the Class Period, Frazier participated in

the preparation and dissemination of public documents, filings and statements regarding

Merck's financial performance, including SEC filings incorporated by reference into Plan

documents and was responsible for the accuracy of such filings and statements.

       267.    By virtue of his position, upon information and belief, Frazier knew about

public statements regarding Vioxx that the Company disseminated to the medical and

financial communities, as well as the reaction of analysts and others to this

information. He was also aware of the inflationary effect such information had on

Merck's stock price and profitability. On several occasions during the Class Period,

Frazier made or caused to be made, false and misleading statements about Vioxx and

Merck's future profitability and the anticipated performance of Merck stock, statements

he knew or should have known to be false and misleading at the time they were

made. For example, Frazier signed Merck's Form 10-Q's filed with the SEC for the first,

second and third quarters of 2000-2003 and the second quarter of 2004.




                                             71
       268.    Frazier personally benefited from the artificially inflated value of Merck

stock, having sold more than 41,000 shares of stock and/or exercised stock options during

the Class Period, with proceeds exceeding $1.9 million.

       269.    As explained above, throughout the Class Period, Frazier was a de facto

fiduciary for the Plans. By virtue of his position and membership on the Merck

Management Committee and Merck-Medco Board of Managers, Frazier was also

responsible for appointing and monitoring other Plan fiduciaries and

administrators. Throughout this period, Frazier was also aware of the precarious

profitability of Merck stock, tied as it was to the performance of a drug that, upon

information and belief, Frazier knew to pose an unacceptably high risk of serious and

even life-threatening cardiovascular toxicity.

       270.    The precarious dependence of Merck stock on the risk-laden safety profile

of Vioxx throughout the Class Period made it an imprudent investment for a retirement

portfolio. Yet, Frazier failed to take appropriate measures to protect Plan participants

from the dangers of which he was aware, nor did he instruct others, at Merck or Merck-

Medco, to do so.


       5.      Merck

       271.    Merck knew all the material information about the health and financial

risks associated Vioxx. Any material information regarding the risks associated with

Vioxx that was possessed by Gilmartin, Scolnick, Lewent and Frazier and/or any other

employees or agents of Merck is imputed to Merck in its corporate capacity.


       6.          Merck-Medco




                                            72
       272.    Merck-Medco knew all the material information about Vioxx that any of

its directors, employees or agents knew, including Lewent and Frazier. Any material

information regarding the risks associated with Vioxx that was possessed by directors,

employees or agents of Merck-Medco is imputed to Merck-Medco in its corporate

capacity.


B.     Defendants’ Investigation

       273.    In the absence of discovery, Plaintiffs cannot now know the extent of each

Defendant’s actual knowledge of the Vioxx risks. However, in light of the health and

financial risks associated with Vioxx, Defendants did not conduct an appropriate

investigation into whether the Fund was a prudent investment for the Plans.

       274.    Such an adequate investigation by any of the Defendants would have

revealed to a reasonable fiduciary that investment by the Plans in the Fund, under the

circumstances described herein, was imprudent.


                 VIII. DEFENDANTS FAILED TO DISCLOSE
               THE IMPRUDENCE OF INVESTING IN THE FUND

A.     Defendants Were Required to Furnish Participants
       with Complete and Accurate Information
       275.    The fiduciaries of the Plans were required under ERISA to furnish certain

information to participants. For example, ERISA § 101, 29 U.S.C. § 1021, requires that

fiduciaries furnish a SPD to participants. ERISA § 102, 29 U.S.C. § 1022, provides that

the SPD must apprise participants of their rights under the Plan. The SPD and all

information contained or incorporated therein constitutes a representation in a fiduciary

capacity upon which participants were entitled to rely in determining the identity and

responsibilities of fiduciaries under the Plans and in making decisions concerning their

benefits and investment and management of assets allocated to their accounts:


                                            73
       The format of the summary plan description must not have the effect of
       misleading, misinforming or failing to inform participants and
       beneficiaries. Any description of exceptions, limitations, reductions, and
       other restrictions of plan benefits shall not be minimized, rendered obscure
       or otherwise made to appear unimportant. Such exceptions, limitations,
       reductions, or restrictions of plan benefits shall be described or
       summarized in a manner not less prominent than the style, captions,
       printing type, and prominence used to describe or summarize plan benefits.
       The advantages and disadvantages of the plan shall be presented without
       either exaggerating the benefits or minimizing the limitations. The
       description or summary of restrictive plan provisions need not be
       disclosed in the summary plan description in close conjunction with the
       description or summary of benefits, provided that adjacent to the benefit
       description the page on which the restrictions are described is noted.

29 C.F.R. § 2520.102-2(b).

       276.    Upon information and belief, Defendants regularly communicated with

employees, including Plan participants, about Merck’s performance, future financial and

business prospects, and Merck stock, the largest single asset in the Plans. These

communications were directed specifically at employees/Plan participants at all-

employee meetings, on the Company’s website, and in Plan documents and materials

which were disseminated to all participants and beneficiaries, and which expressly

incorporated by reference the Company’s misrepresentations and nondisclosures

regarding the financial and health risks associated with Vioxx. These communications

were acts of Plans administration, and the persons responsible for the communications

were ERISA fiduciaries in this regard.

       277.    As a consequence of these communications, the Company fostered an

inaccurately rosy picture of the soundness of the Fund or Merck stock as a Plan
investment. Accordingly, Plan participants could not appreciate the true risks presented

by investments in the Fund and therefore could not make informed decisions regarding

investments in the Fund.




                                            74
       278.    Despite Defendants’ communications with participants regarding Merck

stock, Defendants failed to disclose the significant financial and health risks posed by

Vioxx. Defendants knew or should have known that this information was likely to have

an extreme impact on the Plans and the value of Plan assets. Therefore, under ERISA,

Defendants had an affirmative duty to disclose this information so that participants and

other Plan fiduciaries could make informed decisions regarding Plan assets.

       279.    Upon information and belief, Defendants communicated material

information necessary for participants to make informed decisions with respect to the

investment of Plan assets in the Fund and in an attempt to comply with ERISA Section

404(c) by referencing and incorporating Merck’s SEC filings into documents intended to

convey plan related information to participants. Upon information and belief, Merck’s

SEC filings were incorporated into Form S-8 registration statements, SPDs, prospectuses

and/or other fiduciary communications.

       280.    These SEC filings incorporated into Plan documents were representations

made to participants in a fiduciary capacity. Moreover, Defendants exercised discretion

in determining or participating in decisions regarding the substantive content of the SEC

filings which were incorporated into the SPDs, Prospectuses or S-8 Forms.

       281.    The SEC filings which were incorporated by reference into these Plan

communications negligently failed to disclose and/or negligently misrepresented the

safety profile and the financial risks associated with Vioxx. Negligent misrepresentations

and omissions were contained in at least the following SEC filings:

               a.      Forms 10-K filed with the SEC on 3/24/99, 3/22/00, 3/23/01,

                       3/21/02, 3/21/03 and 3/10/04;

               b.      Forms 10-Q filed with the SEC on 5/12/99, 8/12/99, 11/12/99,

                       5/12/00, 8/10/00, 11/13/00, 5/10/01, 8/10/01, 11/13/01, 5/13/02,

                       8/13/02, 11/13/03, 5/14/03, 8/13/03, 11/14/03, 5/7/04 and 8/6/04;




                                            75
                c.      Forms 8-K filed with the SEC on 12/09/98, 12/16/99, 10/20/00,

                        11/15/00, 12/12/00, 1/23/01, 4/20/01, 6/22/01, 7/20/01, 10/18/01,

                        12/12/01, 1/22/02, 4/18/02, 7/19/02, 10/18/02, 12/10/02, 1/28/03,

                        4/21/03, 7/21/03, 10/22/03, 1/27/04, 4/22/04 and 7/21/04.


        282.    The statements in these SEC filings were false and misleading because

they failed to disclose the all of the risks associated with Vioxx as alleged above in

Section VI. In particular, these misrepresentations and omissions concerned:

                a.      statements and omissions concerning the safety of Vioxx and,

specifically, the results of studies on the safety of Vioxx (e.g., the “VIGOR” study) which

presented only the Company’s positive “spin” on the data while simultaneously

mischaracterizing or omitting material facts which suggested significant health risks; and

                b.      statements and omissions concerning the results of Vioxx sales,

marketing and approvals together with optimistic forecasts for future growth made while

simultaneously mischaracterizing or omitting material facts about the financial risks and

the potential legal liabilities created by the drug’s health risks.

        283.    For example, the following statements about the safety of Vioxx and its
expected positive impact on the Company’s finances were made by Defendant Skolnick

in an 8-K filed with the SEC on 12/09/98:

               NEW PRODUCTS TO DRIVE REVENUE AND EARNINGS
                     GROWTH, MERCK TELLS ANALYSTS

         NEW DATA RELEASED ON INVESTIGATIONAL MEDICINE FOR
                      OSTEOARTHRITIS AND PAIN

        Whitehouse Station, N.J., December 9, 1998 -- Everything is in place for
        the company to achieve its long-term growth objectives and it is now a
        matter of "continuing to execute," Merck told 300 securities analysts today
        at its annual business briefing.


                                               76
        The company also revealed new data on VIOXX(TM) (rofecoxib)
-- its once-daily, anti-inflammatory COX-2-specific inhibitor for the
treatment of the signs and symptoms of osteoarthritis and the relief of pain
-- and confirmed it had submitted a New Drug Application to the U.S.
Food and Drug Administration on November 23. Merck expects to have
filed similar regulatory applications worldwide by the end of the year.
                                      ***
Dr. Scolnick presented for the first time results from two six-month safety
studies on VIOXX, the Company's investigational, once-daily, anti-
inflammatory COX-2 specific inhibitor. COX-2 specific inhibitors are
being studied to determine whether they cause fewer serious
gastrointestinal side effects than nonsteroidal anti-inflammatory drugs
(NSAIDs), the most commonly used therapy available for the treatment of
osteoarthritis (OA) and pain.
        In the two studies, which evaluated a total of 1,427 OA patients,
the cumulative rate of ulcers for once daily VIOXX (25 and 50 mg) was
similar to the rate on placebo and significantly less than the rate on
ibuprofen (800 mg, dosed three times a day), a widely used NSAID.
Ulcers were observed using an endoscope, a medical instrument that
allows physicians to view the esophagus, stomach and a small part of the
upper intestine. Endoscopies were performed at the start of the study, and
at weeks six, 12, and 24.
        At the primary endpoint of week 12, 7.3 percent of patients on
placebo had ulcers compared to 4.7 percent on VIOXX 25 mg and 8.1
percent on VIOXX 50 mg. Of patients on ibuprofen, 28.5 percent had
ulcers. At week 24, the cumulative ulcer rates for both doses of VIOXX
(9.7 percent for 25 mg and 13.5 percent for 50 mg) remained significantly
lower than the rate for ibuprofen (46.4 percent). The placebo arm of the
study was discontinued at week 16 by design.
Dr. Scolnick also summarized results from two acute pain studies in which
VIOXX relieved dental pain and post-orthopedic surgery pain comparable
to widely used prescription NSAIDs and superior to placebo. In the 151-
patient dental pain study, a single 50 mg dose of VIOXX was comparable
to a single 400 mg dose of ibuprofen and superior to placebo in relieving
pain at eight hours after dosing, and pain relief was sustained for the full
24-hour study period. In the 218-patient post-orthopedic surgery pain
study, a single dose of VIOXX 50 mg was comparable to a single dose of
naproxen sodium 550 mg and superior to placebo at eight hours, and pain
relief was sustained at 12 hours, the last time point measured. In both
studies, VIOXX was similar to NSAIDs in time to onset of action, with
pain relief occurring within 45 minutes. The primary endpoint in the two
studies was total pain relief at eight hours after dosing.
        Dr. Scolnick also noted that kidney effects seen with VIOXX are
comparable to those seen with other drugs, including NSAIDs, known to
act on similar biochemical targets. The incidence of mild fluid retention
was low and similar among those taking VIOXX (less than 3.5 percent)



                                    77
       and those taking ibuprofen (4 percent). Other specialized safety studies
       evaluating the effect of VIOXX on the kidney, joints and lower GI tract
       have been completed, as has a comprehensive analysis on GI outcomes
       such as perforations, ulcers and bleeds. Results of those studies will be
       presented at a later date.
       284. The SEC filings were false and misleading because they failed to disclose

all the health and financial risks associated with Vioxx as alleged above.


                               IX. CAUSES OF ACTION

A.     Count I: Failure to Prudently and Loyally Manage the Plans and Plans
                Assets And Share Material Information with Fellow Fiduciaries
       285.     Plaintiffs incorporate by reference the paragraphs above.

       286.     This Count alleges fiduciary breach against the following Defendants:

Merck, Gilmartin, Scolnick, Lewent and the MPIC Defendants (the “Prudence

Defendants”).

       287.     As alleged above, during the Class Period, Merck, Scolnick, Lewent and

the MPIC Defendants were named fiduciaries pursuant to ERISA § 402(a)(1), 29 U.S.C.

§ 1102(a)(1), and Gilmartin was a de facto fiduciary within the meaning of ERISA §

3(21)(A), 29 U.S.C. § 1002(21)(A), or both. Thus, they were bound by the duties of

loyalty, exclusive purpose, and prudence.

       288.     As alleged above, the scope of the fiduciary duties and responsibilities of

Scolnick, Lewent and the MPIC Defendants included managing the Plans’ assets for the

sole and exclusive benefit of the Plans’ participants and beneficiaries, and with the care,

skill, diligence, and prudence required by ERISA. Scolnick, Lewent and the MPIC

Defendants were directly responsible for, among other things, selecting prudent

investment options, eliminating imprudent options, determining how to invest the assets

of the Fund and directing the trustee regarding the same, evaluating the merits of the

Plans’ investments on an ongoing basis, and taking all necessary steps to ensure that the

Plans’ and the Funds’ assets were invested prudently.



                                             78
       289.    In the scope of its corporate capacity, Merck had control over the actions

of Scolnick, Lewent and the members of the MPIC, who were employees and agents of

Merck and who acted on behalf of Merck. As set forth previously, Merck actually

exercised control over these other defendants in the performance of their fiduciary

obligations.

       290.    In light of his position as the Chief Executive Officer of Merck which

exercised the control set forth above, his involvement in the selection of members of the

MPIC, his responsibilities for monitoring the members of the MPIC, Gilmartin had

discretionary authority and de facto responsibility over the management of Plan assets

and the investment decisions made by the MPIC. Notwithstanding these responsibilities,

Gilmartin failed to prudently manage the Plans or advise the MPIC of material adverse

information concerning the financial and health risks of Vioxx, which impeded the

prudent and loyal management of the Plans.

       291.    According to DOL regulations and ERISA case law, a fiduciary’s

investment or investment course of action is prudent if: (a) he has given appropriate

consideration to those facts and circumstances that, given the scope of such fiduciary's

investment duties, the fiduciary knows or should know are relevant to the particular

investment or investment course of action involved, including the role the investment or

investment course of action plays in that portion of the Plans' investment portfolio with

respect to which the fiduciary has investment duties; and (b) he has acted accordingly.

       292.    Again, according to DOL regulations, “appropriate consideration” in this

context includes, but is not necessarily limited to:

       x   A determination by the fiduciary that the particular investment or investment

           course of action is reasonably designed, as part of the portfolio (or, where

           applicable, that portion of the Plans portfolio with respect to which the

           fiduciary has investment duties), to further the purposes of the Plans, taking




                                             79
            into consideration the risk of loss and the opportunity for gain (or other return)

            associated with the investment or investment course of action; and

        x   Consideration of the following factors as they relate to such portion of the

            portfolio:

                o The composition of the portfolio with regard to diversification;

                o The liquidity and current return of the portfolio relative to the

                    anticipated cash flow requirements of the Plans; and

                o The projected return of the portfolio relative to the funding objectives

                    of the Plans.

        293.    Yet, contrary to their duties and obligations under the Plan documents and

ERISA, the Prudence Defendants failed to manage the assets of the Plans loyally and

prudently. Specifically, during the Class Period, these Defendants knew or should have

known (and, on information and belief, in the cases of Gilmartin, Scolnick, Lewent and

Merck knew) that the Fund and Merck stock were not suitable and appropriate

investments because the prices of Fund shares and Merck stock were artificially inflated

as a result of undisclosed material adverse information regarding the health risks of

Vioxx. Nonetheless, during the Class Period, these Defendants continued: (a) to offer the

Fund shares as an investment option for participant contributions; (b) to match employer

contributions in the Fund; (c) to require and/permit the Plans to invest in the Fund; (d) to

restrict the Plans’ ability to sell shares of the Fund, and; (e) to invest Fund assets in

Merck stock. They did so despite evidence that the Company was misrepresenting and

failing to disclose serious cardiovascular risks associated with Vioxx, and was issuing

misleading and inaccurate statements, that artificially inflated the value of the stock and

the Fund, and exposed the Plans’ investment in the Fund and the Fund’s investment in

Merck stock to huge risk and certain losses once the truth was revealed, all in violation of

their duty of prudence as set forth in ERISA section 404(a)(1)(A) and (B).




                                              80
       294.    The Prudence Defendants were obliged to manage all of the Plans’ assets

prudently and loyally. Accordingly, the Prudence Defendants were obliged to have in

place a regular, systematic procedure for evaluating the prudence of company stock.

       295.    The Prudence Defendants had no such procedure. Moreover, they failed

to conduct an appropriate investigation of the merits of continued investment in the Fund

and Merck stock, even in light of the Company’s highly risky and inappropriate practices,

and the particular dangers that these practices posed to the Plans. Such an investigation

would have revealed to a reasonably prudent fiduciary the imprudence of continuing to

make and maintain such investments.

       296.    In connection with the duty to conduct such an investigation, and even if

no investigation were conducted, the members of the MPIC (including Defendants

Scolnick and Lewent) who had actual knowledge of the risks to the company and patients

posed by the marketing of Vioxx and Merck’s campaign to downplay those risks and

suppress knowledge of those risks, had a duty of prudence and loyalty, pursuant to

section 404(a)(1)(A) and (B) of ERISA, to disclose their knowledge of facts material to

the prudence of the Plans’ investment in Merck stock to their fellow fiduciaries

(including fellow MPIC members), so they could protect the Plans from continuing to

invest in inflated Merck stock, and failed to do so.

       297.    Likewise, any fiduciary of the Plans whose authority or de facto exercise

of fiduciary responsibility made him a fiduciary with responsibility for the Plans’

investments, disclosure to participants of information about those investments, or the

appointment and monitoring of fiduciaries who had such responsibilities, had a duty,

pursuant to 404(a)(1)(A) and (B) of ERISA, to disclose their knowledge to their fellow

fiduciaries who were in a position to protect the Plans from further investment in Merck

stock. On information and belief, Defendants Scolnick, Gilmartin, Lewent and Merck

had such knowledge and made no such disclosure to their fellow fiduciaries, which would




                                             81
have assisted them in taking action to protect the Plans from continuing to invest in

inflated Merck stock, in breach of their fiduciary duties.

         298.   The fiduciary duty of loyalty entails, among other things, a duty to avoid

conflicts of interest and to resolve them promptly when they occur. A fiduciary must

always administer a Plan with single-minded devotion to the interests of the participants

and beneficiaries, regardless of the interests of the fiduciaries themselves or the Plan

sponsor. On information and belief, the compensation and tenure of the Prudence

Defendants was tied to the performance of Merck stock and/or the publicly reported

financial performance of Merck. Fiduciaries laboring under such conflicts, must, in order

to comply with the duty of loyalty, make special efforts to assure that their decision-

making process is untainted by the conflict and conducted in a disinterested fashion,

typically by seeking independent financial and legal advice obtained only on behalf of the

Plans.

         299.   The Prudence Defendants breached their duty to avoid conflicts of interest

and to promptly resolve them by, inter alia: (a) failing to engage independent advisors

who could make independent judgments concerning the Plans’ investment in the Fund;

(b) failing to notify appropriate federal agencies, including the DOL, of the facts and

circumstances that made the Fund an unsuitable investment for the Plans; (c) failing to

take such other steps as were necessary to ensure that participants’ interests were loyally

and prudently served; (d) with respect to each of these above failures, doing so in order to

avoid adversely impacting their own compensation or drawing attention to Merck’s

inappropriate practices, and; (e) by otherwise placing their own and Merck’s improper

interests above the interests of the participants with respect to the Plans’ investment in the

Fund.

         300.   Moreover, a fiduciary’s duties of loyalty and prudence require it to

disregard Plan documents or directives that it knows or reasonably should know would

lead to an imprudent result or would otherwise harm Plan participants or beneficiaries.


                                             82
ERISA § 404(a)(1)(D), 29 U.S.C. § 1104(a)(1)(D). Thus, a fiduciary may not blindly

follow Plan documents or directives that would lead to an imprudent result or that would

harm Plan participants or beneficiaries, nor allow others, including those whom they

direct or who are directed by the Plans, to do so.

       301.    The Prudence Defendants breached this duty by: (a) continuing to offer

the Fund as an investment option for the Plans for participant contributions, and requiring

certain participants matching contributions to be invested in the Fund; (b) continuing to

invest employer matching contributions in the Fund; (c) permitting the Plans to invest

both employee and employer contributions in the Fund; (d) for employer contributions,

continuing to impose restrictions on the ability of participants to divest their Plan

accounts of holdings of Merck stock, and; (e) investing Fund assets in Merck common

stock and for each of these actions doing so when the Prudence Defendants knew or

should have known that Merck stock no longer was a prudent investment for participants’

retirement savings.

       302.    As a consequence of the Prudence Defendants’ breaches of fiduciary duty

alleged in this Count, the Plans suffered tremendous losses. If the Prudence Defendants

had discharged their fiduciary duties to invest the Plans’ assets prudently, the losses

suffered by the Plans would have been minimized or avoided. Therefore, as a direct and

proximate result of the breaches of fiduciary duty alleged herein, the Plans, and indirectly

Plaintiffs and the other Class members, lost millions of dollars of retirement savings.

       303.    Pursuant to ERISA §§ 409 and 502(a)(2) and (a)(3), 29 U.S.C. §§ 1109(a)

and 1132(a)(2) and (a)(3), the Prudence Defendants are liable to restore the losses to the

Plans caused by their breaches of fiduciary duties alleged in this Count and to provide

other equitable relief as appropriate.




                                             83
B.     Count II: Failure to Provide Complete and Accurate Information to
                 Participants and Beneficiaries
       304.     Plaintiffs incorporate by reference the allegations above.

       305.     This Count alleges fiduciary breach against Merck, Merck-Medco,

Gilmartin, Scolnick, Lewent, Frazier, the Merck Director Defendants, the MPIC

Defendants, and the Salaried and Hourly Plan EBC Defendants (the “Communications

Defendants”).

       306.     As alleged above, during the Class Period, the Communications

Defendants were named fiduciaries pursuant to ERISA § 402(a)(1), 29 U.S.C. §

1102(a)(1), or de facto fiduciaries within the meaning of ERISA § 3(21)(A), 29 U.S.C. §

1002(21)(A), or both. Thus, they were bound by the duties of loyalty, exclusive purpose,

and prudence.

       307.     As alleged above, the scope of the Communications Defendants’ duties

included disseminating Plan documents and/or Plan-related information to participants

regarding the Plans and/or assets of the Plans, including information as to whether the

Plans’ investments in the Fund were made prudently and at an appropriate price

reflecting available information about the risk and value of such investment. One way to

fulfill these duties was to make appropriate disclosures to each other and to the Plans'

participants.

       308.     The duty of loyalty under ERISA requires fiduciaries to speak truthfully to

participants, not to mislead them regarding the Plans or the Plans’ assets, and to disclose

information that participants need in order to exercise their rights and interests under the

Plans. This duty to inform participants includes an obligation to provide participants and

beneficiaries of the Plans with complete and accurate information, and to refrain from

providing false information or concealing material information regarding the Plans’

investment options, such that participants can make informed decisions with regard to




                                             84
investment options available under the Plans. This duty applies to all of the Plans’

investment options, including investment in the Fund and Merck stock.

        309.       The Communications Defendants breached their ERISA duty to inform

participants by failing to provide complete and accurate information, regarding the health

risks that accompanied Vioxx and the prudence of investing retirement contributions in

the Fund, which they knew or should have known.

        310.       These failures were particularly devastating to the Plans and the

participants, as a significant percentage of the Plans’ assets were invested in the Fund

during the Class Period, with acquisitions of Fund shares occurring at significantly

inflated prices. Thus, the Fund’s precipitous decline had an enormous impact on the

value of participants’ retirement assets. Had such disclosures been made to participants,

or Plan fiduciaries, if any, who were not aware of Vioxx health risks and the inevitable

impact of such risks on Merck’s stock price, they could have taken action to protect the

Plans. The disclosure to participants necessarily would have been accompanied by

disclosure to the market and would have assured that any further acquisitions of Merck

stock by the Plans would have occurred at an appropriate price.

        311.       As a consequence of the failure of the Communications Defendants to

satisfy their duty to provide complete and accurate information under ERISA,

participants lacked sufficient information to make informed choices regarding investment

of their retirement savings in the Fund.

        312.       The Communications Defendants’ failure to provide complete and

accurate information regarding Merck and the Fund was uniform and Plan-wide, and

impacted all Plan participants the same way, in that none of the participants received

crucial, material information regarding the risks of the Fund as a Plan investment option

and that all Plan acquisitions of employer stock during the Class Period occurred at

inflated prices.




                                                85
       313.    As a consequence of the Communications Defendants’ breaches of

fiduciary duty, the Plans suffered tremendous losses. If the Communications Defendants

had discharged their fiduciary duties to prudently disclose material information, the

losses suffered by the Plans would have been minimized or avoided. Therefore, as a

direct and proximate result of the breaches of fiduciary duty alleged herein, the Plans, and

indirectly Plaintiffs and the other Class members, lost millions of dollars of retirement

savings.

       314.    Pursuant to ERISA §§ 409 and 502(a)(2) and (a)(3), 29 U.S.C. §§ 1109(a)

and 1132(a)(2) and (a)(3), the Communications Defendants are liable to restore the losses

to the Plans caused by their breaches of fiduciary duties alleged in this Count and to

provide other equitable relief as appropriate.


C.     Count III: Failure to Monitor Fiduciaries
       315.    Plaintiffs incorporate by reference the allegations above.

       316.    This Count alleges fiduciary breach against the following Defendants:

Merck, Gilmartin, and the Director Defendants (the “Monitoring Defendants”).

       317.    As alleged above, during the Class Period the Monitoring Defendants

were named fiduciaries pursuant to ERISA § 402(a)(1), 29 U.S.C. § 1102(a)(1), or de
facto fiduciaries within the meaning of ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), or

both. Thus, they were bound by the duties of loyalty, exclusive purpose, and prudence.

       318.    As alleged above, the Monitoring Defendants assumed a duty to monitor

the performance of other fiduciaries through (a) their responsibility to appoint, and

remove those fiduciaries; (b) the discretionary authority obtained by their actions in

connection the Plans, or; (c) their actual control of their employees and agents in the

performance of their fiduciary duties and responsibilities under the Plans:




                                             86
              Monitoring Fiduciary           Monitored Fiduciary
              Defendant Merck                (1) the Merck Director
                                             Defendants, and
                                             (2) the MPIC Defendants

              Defendant Gilmartin            (1) the MPIC Defendants

              Merck Director Defendants      (1) the MPIC Defendants


       319.    Under ERISA, a monitoring fiduciary must ensure that the monitored

fiduciaries are performing their fiduciary obligations, including those with respect to the

investment and holding of Plan assets, and must take prompt and effective action to

protect the plan and participants when they are not.

       320.    The monitoring duty further requires that appointing fiduciaries have

procedures in place, so that on an ongoing basis they may review and evaluate whether

the “hands-on” fiduciaries are doing an adequate job (for example, by requiring periodic

reports on their work and the Plans’ performance, and by ensuring that the monitored

fiduciaries have an appropriate process for obtaining the information and resources they

need). In the absence of a sensible process for monitoring their appointees, the

appointing fiduciaries would have no basis for prudently concluding that their appointees

were faithfully and effectively performing their obligations to plan participants or for

deciding whether to retain or remove them.

       321.    Furthermore, a monitoring fiduciary must provide the monitored

fiduciaries with complete and accurate information in his/her possession that he/she

knows, or reasonably should know, that the monitored fiduciaries must have in order to

prudently manage the Plan and plan assets, or that may have an extreme impact on the

plan and the fiduciaries’ investment decisions regarding the plan.

       322.    The Monitoring Defendants breached their fiduciary monitoring duties by,

among other things: (a) failing, at least with respect to the Plans’ investment in the Fund,

to monitor their appointees, to evaluate their performance, or to have any system in place



                                             87
for doing so, and standing idly by as the Plans suffered enormous losses as a result of

their appointees’ imprudent actions and inaction with respect to company stock; (b)

failing to ensure that the monitored fiduciaries appreciated the true extent of Merck’s

misrepresentations and nondisclosures regarding the risks of Vioxx , and the likely

impact of such misrepresentations on the value of the Plans’ investment in the Fund; (c)

to the extent any appointee lacked such information, failing to provide complete and

accurate information to all of their appointees such that they could make sufficiently

informed fiduciary decisions with respect to the Plans’ assets, and; (d) failing to remove

appointees whose performance was inadequate in that they continued to make and

maintain huge investments in the Fund, despite their knowledge of misrepresentations

and nondisclosures that rendered the Fund an imprudent investment during the Class

Period for participants’ retirement savings in the Plans.

       323.    As a consequence of the Monitoring Defendants’ breaches of fiduciary

duty, the Plans suffered tremendous losses. If the Monitoring Defendants had discharged

their fiduciary monitoring duties as described above, the losses suffered by the Plans

would have been minimized or avoided. Therefore, as a direct and proximate result of

the breaches of fiduciary duty alleged herein, the Plans, and indirectly Plaintiffs and the

other Class members, lost millions of dollars of retirement savings.

       324.    Pursuant to ERISA §§ 409 and 502(a)(2) and (a)(3), 29 U.S.C. §§ 1109(a)

and 1132(a)(2) and (a)(3), the Monitoring Defendants are liable to restore the losses to

the Plans caused by their breaches of fiduciary duties alleged in this Count and to provide

other equitable relief as appropriate.




                                             88
D.     Count IV: Co-Fiduciary Liability
       325.    Plaintiffs incorporate by reference the allegations above.

       326.    This Count alleges co-fiduciary liability against the following Defendants:

Merck, Gilmartin, Scolnick, Lewent, Frazier, the MPIC Defendants, the Communications

Defendants, and the Monitoring Defendants (the “Co-Fiduciary Defendants”).

       327.    As alleged above, during the Class Period the Co-Fiduciary Defendants

were named fiduciaries pursuant to ERISA § 402(a)(1), 29 U.S.C. § 1102(a)(1), or de

facto fiduciaries within the meaning of ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), or

both. Thus, they were bound by the duties of loyalty, exclusive purpose, and prudence.

       328.    As alleged above, ERISA § 405(a), 29 U.S.C. § 1105, imposes liability on

a fiduciary, in addition to any liability which he may have under any other provision, for

a breach of fiduciary responsibility of another fiduciary with respect to the same Plan, if

he/she knows of a breach and fails to remedy it, knowingly participates in a breach, or

enables a breach.

       329.    Knowledge of a Breach and Failure to Remedy. ERISA § 405(a)(3), 29

U.S.C. § 1105, imposes co-fiduciary liability on a fiduciary for a fiduciary breach by

another fiduciary if, he has knowledge of a breach by such other fiduciary, unless he/she

makes reasonable efforts under the circumstances to remedy the breach. Upon

information and belief, Merck and Defendants Gilmartin, Scolnick, Lewent and Frazier

knew of the breaches by the other fiduciaries and made no efforts, much less reasonable

ones, to remedy those breaches. In particular, they did not communicate their knowledge

of the Company’s illegal activity to the other fiduciaries.

       330.    Merck, through its officers and employees withheld material information

from the market, provided the market with misleading disclosures, and profited from such

practices, and, thus, knowledge of such practices is imputed to Merck as a matter of law.

       331.    In particular, Defendants Gilmartin, Scolnick, Lewent and Frazier -- by

virtue of their positions at Merck, and by virtue of their knowledge of significant studies



                                             89
that indicated extensive cardiovascular risks that resulted from the use of Vioxx --

participated in and/or knew about the Company’s misrepresentations regarding Vioxx

and its consequences, including the artificial inflation of the value of Merck stock.

       332.    Because Merck and Defendants Gilmartin, Scolnick, Lewent and Frazier

knew of the Company’s misrepresentations, they also knew: (a) that the Prudence

Defendants were breaching their duties by continuing to invest in company stock, and;

(b) that the Communication Defendants were breaching their duties by providing

incomplete and inaccurate information to participants. Yet, they failed to undertake any

effort to remedy these breaches. Instead, they compounded them by downplaying the

significance of the health risks associated with Vioxx, and obfuscating the risk that Vioxx

posed to the Company, and, thus, to the Plans.

       333.    Knowing Participation in a Breach. ERISA § 405(a)(1), 29 U.S.C. §

1105(1), imposes liability on a fiduciary for a breach of fiduciary responsibility of

another fiduciary with respect to the same Plan, if he/she participates knowingly in, or

knowingly undertakes to conceal, an act or omission of such other fiduciary, knowing

such act or omission is a breach. Merck knowingly participated in the fiduciary breaches

of the Prudence Defendants in that it benefited from the sale or contribution of its stock at

artificially inflated prices. Merck also, as a de facto fiduciary, as alleged above,

participated in all aspects of the fiduciary breaches of the other Defendants, which it

controlled. Likewise, Defendants Gilmartin, Scolnick, Lewent and Frazier knowingly

participated in the breaches of the Communications and Prudence Defendants because, as

alleged above, they had actual knowledge of the Company’s misrepresentations and

nondisclosures regarding the health risks of Vioxx and the impact such disclosure would

have on Company’s stock price. Yet, ignoring their fiduciary responsibilities, Defendants

Gilmartin, Scolnick, Lewent and Frazier permitted the Prudence and Communications

Defendants to breach their duties.




                                             90
         334.   Enabling a Breach. ERISA § 405(a)(2), 29 U.S.C. § 1105(2), imposes

liability on a fiduciary if, by failing to comply with ERISA § 404(a)(1), 29 U.S.C.

§1104(a)(1), in the administration of his specific responsibilities which give rise to his

status as a fiduciary, he has enabled another fiduciary to commit a breach.

         335.   The Communications Defendants enabled the breaches of the MPIC

Defendants, because they failed to provide complete and accurate information to the

MPIC or the participants that would have protected the Plans and Plan participants from

harm.

         336.   The Monitoring Defendants failure to monitor the Director Defendants,

and the MPIC Defendants enabled those Defendants to breach their duties.

         337.   As a direct and proximate result of the breaches of fiduciary duties alleged

herein, the Plans, and indirectly Plaintiffs lost millions of dollars of retirement savings.

         338.   Pursuant to ERISA §§ 409 and 502(a)(2) and (a)(3), 29 U.S.C. §§ 1109(a)

and 1132(a)(2) and (a)(3), the Co-Fiduciary Defendants are liable to restore the losses to

the Plans caused by their breaches of fiduciary duties alleged in this Count and to provide

other equitable relief as appropriate.



E.       Count V: Knowing Participation in a Breach of Fiduciary Duty
         339.   Plaintiffs incorporate by reference the allegations above.

         340.   This Count alleges knowing participation in a fiduciary breach against

Merck.

         341.   To the extent that Merck is found not to have been a fiduciary, or not to

have acted in a fiduciary capacity with respect to the conduct alleged to have violated

ERISA, Merck knowingly participated in the breaches of those Defendants who were

fiduciaries and acted in a fiduciary capacity and, as such, is liable for equitable relief as a

result of participating in such breaches.




                                              91
          342.   By virtue of Merck’s inflated stock price, Merck benefited from the

breaches of fiduciary duty in the following manner: (a) on information and belief, Merck

discharged its obligations to make contributions to the Plans in amounts specified by the

Plans, and; (b) upon information and belief, Merck contributed or sold stock to the Plans

while the value of the stock was inflated, as the result of Merck’s materially misleading

statements and omissions regarding the risks associated with Vioxx.

          343.   Accordingly, Merck should be required to disgorge this benefit or a

constructive trust should be imposed on treasury shares of Merck stock which would
have been contributed to the Plans, but for Merck’s participation in the foregoing

breaches of fiduciary duty.

                                      X. CAUSATION
          344.   The Plans suffered hundreds of millions of dollars in losses because

substantial assets of the Plans were imprudently invested or allowed to be invested by

Defendants in the Fund during the Class Period, in breach of Defendants’ fiduciary

duties.

          345.   Defendants are liable for the Plans’ losses in this case because: (a) a

significant portion of the Plans’ investment in the Fund was the result of the Prudence

Defendants’ decisions to invest matching contributions in Merck stock, and to severely

restrict the ability of certain participants under the age of 50 to sell or diversify the

Company’s matching contribution in the Merck Stock Fund, and; (b) as to the portion of

Plans assets invested in Merck stock as a result of participant contributions, the Prudence

Defendants are liable for the losses because they failed to take the necessary and required

steps to ensure effective and informed independent participant control over the

investment decision-making process, as required by ERISA § 404(c), 29 U.S.C.

§ 1104(c), and the regulations promulgated thereunder. The Communications Defendants

withheld material, non-public facts from participants, and provided inaccurate and




                                               92
incomplete information to them regarding the health risks of Vioxx, the ongoing

profitability of Merck, and the soundness of Merck stock as an investment vehicle.

        346.    As a result, the participants made the decision to contribute to the Plans,

resulting in the Plans' purchase of Fund shares with both participant contributions and

matching contributions (or the contribution of stock as a matching contribution) with

incomplete information about the risks and value of the Fund, and the Fund itself

remained overvalued. Had the Communications Defendants made appropriate

disclosures, the Plans would not have purchased overvalued shares. The Prudence

Defendants also are liable for losses that resulted from their decision to invest nearly all

of the assets of the Merck Stock Fund in Merck stock rather than cash or other short-term

investment options, as authorized by the Plans, and clearly prudent under the

circumstances presented here.

        347.    Had the Defendants properly discharged their fiduciary and co-fiduciary

duties, including the provision of full and accurate disclosure of material facts concerning

investment in the Fund, eliminating the Fund as an investment alternative when it became

imprudent, and divesting the Plans of Fund shares when maintaining such an investment

became imprudent, the Plans would have avoided some or all of the losses that it, and

indirectly, the participants, suffered.

               XI. REMEDY FOR BREACHES OF FIDUCIARY DUTY
        348.    The Defendants breached their fiduciary duties in that they knew or should

have known the facts as alleged above, and therefore knew or should have known that the

Plans’ assets should not have been invested in the Fund during the Class Period.

        349.    As a consequence of the Defendants’ breaches, the Plans suffered

significant losses.

        350.    ERISA § 502(a)(2), 29 U.S.C. § 1132(a)(2) authorizes a Plan participant

to bring a civil action for appropriate relief under ERISA § 409, 29 U.S.C. § 1109.




                                             93
Section 409 requires “any person who is a fiduciary…who breaches any of the…duties

imposed upon fiduciaries…to make good to such Plan any losses to the Plan….” Section

409 also authorizes “such other equitable or remedial relief as the court may deem

appropriate….”

       351.    With respect to the calculation of the losses to the Plans, breaches of

fiduciary duty result in a presumption that, but for the breaches of fiduciary duty, the

Plans would not have made or maintained its investments in the challenged investment

and, instead, prudent fiduciaries would have invested the Plans’ assets in the most

profitable alternative investment available to them. Alternatively, losses may be

measured, not only with reference to the decline in Fund share price relative to alternative

investments, but also by calculating the additional Fund shares that the Plans would have

acquired had the Plan fiduciaries taken appropriate steps to protect the Plans. The Court

should adopt the measure of loss most advantageous to the Plans. In this way, the

remedy restores the Plans’ lost value and puts the participants in the position they would

have been in if the Plans had been properly administered.

       352.    Plaintiffs and the Class are therefore entitled to relief from the Defendants

in the form of: (1) a monetary payment to the Plans to make good to the Plans the losses

to the Plans resulting from the breaches of fiduciary duties alleged above, in an amount to

be proven at trial, based on the principles described above, as provided by ERISA §

409(a), 29 U.S.C. § 1109(a); (2) injunctive and other appropriate equitable relief to

remedy the breaches alleged above, as provided by ERISA §§ 409(a) and 502(a)(2) and

(3), 29 U.S.C. §§ 1109(a) and 1132(a)(2); (3) injunctive and other appropriate equitable

relief, pursuant to ERISA § 502(a)(3), 29 U.S.C. 1132(a)(3), for knowing participation by

a non-fiduciary in a fiduciary breach; (4) reasonable attorney fees and expenses, as

provided by ERISA § 502(g), 29 U.S.C. § 1132(g), the common fund doctrine, and other

applicable law; (5) taxable costs and interest on these amounts, as provided by law, and;

(6) such other legal or equitable relief as may be just and proper.


                                             94
       353.    Under ERISA, each Defendant is jointly and severally liable for the losses

suffered by the Plans in this case.

                        XII. CLASS ACTION ALLEGATIONS
       354.    Class Definition. Plaintiffs bring this action as a class action, pursuant to

Rules 23(a), (b)(1), (b)(2) and (b)(3) of the Federal Rules of Civil Procedure, on behalf of

themselves and the following class of persons similarly situated (the “Class”):

               All persons, other than Defendants, who were participants in, or
               beneficiaries of, the Plans at any time between October 1, 1998
               and September 30, 2004 and whose accounts included investments
               in Merck.
       355.    Class Period. The fiduciaries of the Plans knew or should have known at

least by the beginning of October 1998, that the Company’s improper conduct was so

pervasive that Merck stock could no longer be offered as a prudent investment for any of

the retirement Plans. On the other hand, with the disclosure of the withdrawal of Vioxx

from the market, the fiduciaries could have reasonably concluded that the

misrepresentation and omissions regarding Vioxx had been adequately disclosed and

addressed and that Merck stock could once again be offered as an investment option.

       356.    Numerosity. The members of the Class are so numerous that joinder of

all members is impracticable. While the exact number of Class members is unknown,
according to Merck’s Form 10-K for the fiscal year ended December 31, 2003, Merck

had 33,200 employees in the United States, including Puerto Rico. Plaintiffs believe that

a significant number of those employees participated in, or were beneficiaries of, the

Plans during the Class Period.

       357.    Commonality. Common questions of law and fact exist as to all members

of the Class and predominate over any questions solely affecting individual members of

the Class. Among the questions of law and fact common to the Class are:

       (a)     whether Defendants each owed a fiduciary duty to Plaintiffs and members

               of the Class;


                                            95
        (b)     whether Defendants breached their fiduciary duties to Plaintiffs and

                members of the Class, by failing to act prudently and solely in the interests

                of the Plans’ participants and beneficiaries;

        (c)     whether Defendants violated ERISA, and;

        (d)     whether the members of the Class have sustained damages and, if so, what

                is the proper measure of damages.

        358.    Typicality. Plaintiffs’ claims are typical of the claims of the members of

the Class because Plaintiffs’ and the other members of the Class each sustained damages

arising out of the Defendants’ wrongful conduct in violation of federal law as complained

of herein.

        359.    Adequacy. Plaintiffs will fairly and adequately protect the interests of the

members of the Class and have retained counsel competent and experienced in class

action, complex, and ERISA litigation. Plaintiffs have no interests antagonistic to or in

conflict with those of the Class.

        360.    Rule 23(b)(1)(B) Requirements. Class action status in this ERISA action

is warranted under Rule 23(b)(1)(B) because prosecution of separate actions by the

members of the Class would create a risk of adjudications with respect to individual

members of the Class which would, as a practical matter, be dispositive of the interests of

the other members not parties to the actions, or substantially impair or impede their

ability to protect their interests.

        361.    Other Rule 23(b) Requirements. Class action status is also warranted

under the other subsections of Rule 23(b) because: (a) prosecution of separate actions by

the members of the Class would create a risk of establishing incompatible standards of

conduct for Defendants; (b) Defendants have acted or refused to act on grounds generally

applicable to the Class, thereby making appropriate final injunctive, declaratory, or other

appropriate equitable relief with respect to the Class as a whole, and; (c) questions of law

or fact common to members of the Class predominate over any questions affecting only


                                             96
individual members and a class action is superior to the other available methods for the

fair and efficient adjudication of this controversy.

                               XIII. PRAYER FOR RELIEF
          WHEREFORE, Plaintiffs pray for:

          A.      A Declaration that the Defendants, and each of them, have breached their

ERISA fiduciary duties to the participants;

          B.      A Declaration that the Defendants, and each of them, are not entitled to

the protection of ERISA § 404(c)(1)(B), 29 U.S.C. § 1104(c)(1)(B);

          C.      An Order compelling the Defendants to make good to the Plans all losses

to the Plans resulting from Defendants’ breaches of their fiduciary duties, including

losses to the Plans resulting from imprudent investment of the Plans’ assets, and to

restore to the Plans all profits that the Defendants made through use of the Plans’ assets,

and to restore to the Plans all profits which the participants would have made if the

Defendants had fulfilled their fiduciary obligations;

          D.      Imposition of a Constructive Trust on any amounts by which any

Defendant was unjustly enriched at the expense of the Plans as the result of breaches of

fiduciary duty;

          E.      An Order enjoining Defendants, and each of them, from any further

violations of their ERISA fiduciary obligations;

          F.      An Order requiring Defendants to appoint one or more independent

fiduciaries to participate in the management of the Plans’ investment in Merck stock;

          G.      Actual damages in the amount of any losses the Plans suffered, to be

allocated among the participants’ individual accounts in proportion to the accounts’

losses;

          H.      An Order awarding costs pursuant to 29 U.S.C. § 1132(g);




                                              97
       I.      An Order awarding attorneys’ fees pursuant to 29 U.S.C. § 1132(g) and

the common fund doctrine; and

       J.      An Order for equitable restitution and other appropriate equitable and

injunctive relief against the Defendants.

DATED: August 2, 2005.

                                             Respectfully submitted:


                                                 /s/ Lisa J. Rodriguez

                                            TRUJILLO RODRIGUEZ &
                                            RICHARDS, LLC
                                            Lisa J. Rodriguez (LR6767)
                                            8 Kings Highway West
                                            Haddonfield, NJ 08033
                                            Telephone: (856) 795-9002
                                            Facsimile: (856) 795-9887
                                            Liaison Counsel

                                            SCHATZ & NOBEL, P.C.
                                            Robert A. Izard
                                            William Bernarduci
                                            Wayne T. Boulton
                                            One Corporate Center
                                            20 Church Street
                                            Hartford, CT 06103
                                            Tel: (800) 797- 5499
                                            Fax: (860) 493-6290
                                            Chair of Lead Counsel Committee

                                             KELLER ROHRBACK L.L.P.
                                             Lynn Lincoln Sarko
                                             Juli Farris Desper
                                             Amy N.L. Hanson
                                             1201 Third Avenue, Suite 3200
                                             Seattle, WA 98101
                                             Tel: (206) 623-1900
                                             Fax: (206) 623-3384
                                             Member of Lead Counsel Committee




                                            98
                                      COHEN MILSTEIN HAUSFELD &
                                      TOLL, P.L.L.C.
                                      Marc I. Machiz
                                      1 South Broad Street, Suite 1850
                                      Philadelphia, PA 19107
                                      Tel: (215) 825-4010
                                      Fax: (215) 825-4001

                                     Bruce F. Rinaldi
                                     Daniel W. Sigelman
                                     1100 New York Avenue, N.W.
                                     Suite 500, West Tower
                                     Washington, D.C. 20005
                                     Tel: (202) 408-4600
                                     Fax: (202) 408-4699
                                     Member of Lead Counsel Committee

                                     SCHIFFRIN & BARROWAY, LLP
                                     Joesph H. Meltzer
                                     Tobias L. Milrood
                                     Katherine B. Bornstein
                                     280 King of Prussia Road
                                     Radnor, PA
                                     Tel: (212) 907-0700
                                     Fax: (212) 818-0477
                                     Member of Lead Counsel Committee




Members of the Discovery Committee

LITE DEPALMA GREENBERT &              LOCKRIDGE, GRINDAL & NAUEN
RIVAS, LLC                            Richard A. Lockridge
Joseph J. DePalma                     Sara L. Madsen
Two Gateway Center, 12th Floor        100 Washington Avenue South
Newark, NJ 07102                      Minneapolis, MN 55401
Tel: (973) 623-3300                   Tel: (612) 339-6900
Chair of the Discovery Committee      Fax: (612) 339-0981

JOHNSON & PERKINSON                   SCOTT & SCOTT LLC
Dennis Johnson                        David R. Scott
1690 Williston Road                   P.O. Box 192
South Burlington, VT 05403            108 Norwich Avenue
(802) 862-0030                        Colchester, CT 06415
(802) 862-0060



                                     99
Other Counsel


MANSFIELD, TANICK & COHEN,    STOLL STOLL BERNE LOKTING &
P.A.                          SHLACHTER P.C.
Seymour J. Mansfield          Keith A. Ketterling
Denise Y. Tataryn             Timothy S. DeJong
Jeremy L. Johnson             209 Southwest Oak Street
1700 U.S. Bank Plaza South    Portland, OR 97204
220 South Sixth Street        Tel.: (503) 227-1600
Minneapolis, MN 55401         Fax: (503) 227-6840
Tel.: (612) 339-4295          Counsel for Blossom Smith
Fax: (612) 339-3161
Counsel for Blossom Smith
ECKELL, SPARKS, LEVY,         M.H. DONSKY, P.C.
AUERBACK, MONTE, RAINER &     Marvin H. Donsky
SLOANE                        230 South Broad Street, 17th Floor
Murray Eckell                 Philadelphia , PA 19102
344 W. Front Street           Tel.: (215) 546-9500
Media, PA 19063               Counsel for Blossom Smith
(610) 565-3700
Counsel for Blossom Smith




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