Friday, January 27, 2017

Merck -- On Pricing, And Investing In R&D: New Disclosures -- "Incremental Improvements" Department

Kenilworth has (wisely I think) decided to get out ahead of the coming 45th President's onslaught -- on drug pricing.

It is true that drugs are less than ten per cent of the US cost of care, year to year. But drug prices are not the reason that half of all US hospitals are losing money. No, it is inefficiency -- and the fact that doctors in the US make 40 per cent more than their very capable EU counterparts. Even so, US drug prices are still a problem. [Just perhaps not the most important problem in the US health care delivery system -- as 45 would like to make them out to be. For him, every complex set of facts. . . is collapsed into a simple, false myth. But I repeat myself.]

From the release, then here is a bit -- but do go read it all:

. . . .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. . . .

Of course, as my graphic suggests, the aggregated, "on average" disclosures allow Merck no avoid disclosing data about certain products on which prices have been increased far more aggressively. Even so, I do respect the $50 billion invested in R&D. That is a powerful message. Onward, on a wonderful Friday -- with some sublimely great weekend fun. . . ahead!


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