A Texas jury has found the pharmaceutical company Merck liable for the death of a man who took the painkiller Vioxx. The man's widow has been awarded $253.5 million in damages. Actually she will get some 10% of that amount because of a Texas's cap on punitive damage.

While that may have little or nothing to do with environmental issues, it has a lot to do with the principles upon which environmental regulation rests. In particular, the court's ruling stems from an extremistic application of the precautionary principle - its purpose is to "send a message" in the first place - and may have a dramatic impact on the incentives to innovate for both drug and other companies.

The man had taken Vioxx for some 8 months. At the moment of dying his arteries were 70% clogged. According to the death certificate, the cause of death was arrhytmia. There was no mention of heart attack. Alas, the doctor who authored the death certificate testified later that an undetected blood clot could have caused the death - it was just speculation, supported by no evidence.

Yet that was a key testimony: Vioxx had been retired from the market by Merck itself because the company's own research showed it might increase the risk of heart attack if taken in heavy doses for more than 18 months. No risk was found in taking it for less then 18 months, as it was the case of the Texas man.

Moreover, the commercialization of Vioxx had been authorized by FDA, and its withdrawal had not been requested. Merck gave up its blockbuster in the name of patients' safety, despite the negative reactions of shareholders.

Now, after the Texas ruling new suits are expected - over 4,000 in the US and others to come in Canada, Europe, Brazil, Israel, and Australia. Obviously Merck will have to face rising legal costs .

I am concerned of the unintended consequences that may stem from the ruling. The unwritten message is what follows: Beware of you, drug producers, because you may be held liable of the death of whoever has used a medicine that is not 100% safe. And of course no medicine is 100% safe. The obvious result is to deter companies from innovate and sell new drugs. Guess who's worse off - you and me, as actual or potential patients.

University of Chicago's Richard Epstein has a great piece in today's Wall Street Journal [Subscribers only]. He writes:

Understand that no future drug will be free of adverse side effects, nor reach market, without the tough calls that Merck had to make with Vioxx. Your implicit verdict is to shut down the entire quest for new medical therapies. Your verdict says you think that the American public is really better off with just hot-water bottles and leftover aspirin tablets.

Ah, you will say, but we're only after Vioxx, and not those good drugs. Sorry, the investment community won't take you at your word. It realizes that any new drug which treats common chronic conditions can generate the same ruinous financial losses as Vioxx, because the flimsy evidence on causation and malice you cobbled together in the Ernst case can be ginned up in any other. Clever lawyers like Mr. Lanier will be able to ambush enough large corporations in small, dusty towns where they will stand the same chance of survival that Custer had at Little Big Horn. Investors can multiply: They won't bet hundreds of millions of dollars in new therapies on the off-chance of being proved wrong. They know they'll go broke if they win 90% of the time.