Charges related to taxes, lawsuits and lower sales of key drugs hit second-quarter earnings released yesterday by three big US pharmaceuticals companies.

Worldwide sales at Merck dropped 9 per cent in the second quarter to $5.5 billion, as the company continued to reel from its withdrawal of Vioxx. The former blockbuster pain drug - which generated $2.5 billion in revenue for Merck in 2003 - was pulled from shelves last year after a study showed an increase in heart risks.Schering-Plough, in the midst of a turnaround, reported that revenue jumped 18 per cent to $2.53 billion, largely on the strength of prescription drug sales. But losses widened in the second quarter to $70 million compared with losses of $65 million last year due to charges of $259 million for litigation reserves related to a government inquiry. A total of $500 million has been set aside.

Eli Lilly took a pre-tax charge of $1.07 billion in the second quarter to settle claims that Zyprexa, a schizophrenia drug, causes diabetes.