The pharmaceutical industry faces a variety of government policies and health care systems in developed countries. Each country has its own approach to balancing patient access to the best treatments with the constraint of limited budgets.

Despite differences in national approaches, we price our products in all OECD countries both to foster access and to ensure a reasonable return on our investment. Our prices around the world are determined by several factors, including the value that our products offer to patients, payers and physicians, relative to competitor products; the ability and willingness of various types of customers— including national, regional or local institutional payers, physicians, employers and patients— to pay for the product; and alternatives such as hospitalization. 

Other factors affecting the prices of our medicines and vaccines include government regulation and currency fluctuation. In most European countries and in Canada, the government both regulates and provides health care to its citizens. We understand the pressures on governments to ensure effective management of the limited resources allocated to health care, and, within health care, the limited resources allocated to medicines and vaccines.  While striving to maintain a consistent global approach, Merck also considers the national, competitive and regulatory conditions in each market individually. It is important to recognize that the price a consumer pays is also affected by duties and tariffs imposed on imported medicines and vaccines, as well as price mark-ups by intermediaries including wholesalers and pharmacies.

Given the multiple choices available within a class of drugs today, powerful and  sometimes monopsonistric buyers in the pharmaceutical marketplace — particularly  governments and national health systems — have intensified pricing  pressure throughout the developed world.   In price-controlled environments (particularly prevalent in Europe), most governments use international price comparisons as one of the levers to set their own purchasing price. In addition, in Europe and a growing number of other developed markets, the decision to allow access and reimbursement to medicines is increasingly being pushed down to regional payers, making the challenge of ensuring access to new treatments extend beyond price alone.

In the private sector, price competition has been spurred by managed care and private health plans, particularly in the United States.  These buyers in the developed world are able to negotiate significant rebates and discounts with pharmaceutical manufacturers. Where it exists, competition among managed care providers and health plans not only enables people to obtain health care and their medicines at competitive prices, but also results in numerous pharmacy service innovations that have improved the quality of pharmacy care. In the United States for example, as indicated in a Federal report published in 2008, the trustees of the U.S. Medicare program doubled their estimate of savings for the Medicare Part D program based on the ability of Part D drug plans to negotiate with manufacturers for rebates and discounts. The trustees forecast that Part D ( PDF*) plans will negotiate average manufacturer rebates of 9.2 percent off retail on all drugs through 2017.

For more information on our position on prescription drug pricing, click here.

The content on this page was last modified on September 15, 2009.

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