Adam Schechter's Pricing Perspective from 2017

Published February 2017

Adam Schechter, president, Global Human Health, 2010 – 2018, shared his insights on our Pricing Transparency Report. Here are his thoughts from 2017, based on the Report’s 2016 findings.

At Merck – and many other drug companies – we talk about innovation, about how much we invest in research, about how our medicines and vaccines help patients. Help families. Help economies. Because that is, at the most foundational level, who we are, what we do, and why we come to work each day. Our mission has been to discover, develop and provide innovative medicines and vaccines that save and improve lives around the world, and we have not wavered from that mission for over 125 years.

Recently, there has been a lot of talk about price in the U.S. And we understand why. The price conversation over the past year has been driven and dominated by the justified public outrage in response to companies that hiked prices by triple digits, or had a business model based primarily on price increases. That is not true of Merck – and, to give credit to others, that is not true for many other innovative, R&D-based drug companies either.

Merck has increased prices, and in our view, we have been responsible in our approach. But we want to allow the public to judge for themselves by providing information for people to better understand our pricing practices – including the rebates and discounts that we provide to payers (insurers, pharmacy benefit managers, the government).

We decided to provide information publicly – specifically, how much Merck increased list prices across our portfolio each year, and how much net prices increased across our portfolio once you take discounts, rebates and returns into account. We also decided to share Merck’s “discount” rate in the U.S. – the average discount on Merck’s sales of its medicines and vaccines in the U.S. Today, we are sharing that information on the transparency section of our Corporate Responsibility Report – and not just about last year, but also for every year since 2010. We will update this information in January every year.

We’ve taken a close look at our pricing practices – and we believe we have a good track record. Since 2010, Merck’s average net price increase across our portfolio each year has been in the low to mid-single digits: specifically, 3.4 percent to 6.2 percent.

Our average discount rate has been steadily increasing, as we provide more discounts and rebates. In 2016, Merck’s discount rate was 40.9 percent.

Over the same time period for which we are disclosing our pricing data, 2010 to 2016, Merck spent more than $50 billion on R&D.

These are just a few aspects of what we do. Because of our unwavering commitment to both invent new medicines and vaccines, and make those medicines and vaccines affordable and accessible, we surprised a lot of people in January last year by introducing our hepatitis C medicine at a much lower list price than the standard of care at the time. We took this action because we believed that doing so would help enable more patients to be treated more quickly.

There are other examples of how we’re responding to concerns about affordability. We are incorporating biomarkers into our clinical studies. These biomarkers help identify the right medicine for the right patient, which is good for patients, and for payers. We also are exploring alternative pricing and contracting arrangements by entering into value based contracts with payers. It’s just the right thing to do to ensure health care dollars are spent wisely – by insurers, governments, and patients.

And because patients share in the cost of their care in the U.S. – more for pharmaceuticals than other aspects of health care – we have programs to help those who cannot afford their medications. We offer coupons and co-pay assistance for eligible patients.

For uninsured patients, we have been an industry leader with our now 55-year old patient assistance programs. In 2009, we expanded our entry criteria so that patients in the U.S. may be eligible for the program if their household income is at or below 400 percent of the Federal Poverty Level (FPL). A higher threshold of 500 percent of the FPL applies to some of our specialty products, where patients usually have higher co-pays. Because in the end, we don’t invent for the sake of inventing – we invent because we want patients to be able to benefit from our inventions.

We don’t expect this new information to change the conversation from price to innovation. But we hope it will help. We know that we can do more to reach more patients with the medicines we have today. We’re focused on that – and on ensuring that Merck can continue to invest in R&D to fight the diseases we all worry about – such as Alzheimer’s, cancer, and infectious diseases. Great progress has been made, but more needs to be done, and we want to be a part of the solution.