Merck lowers prices of some drugs after Trump calls out industry

(Reuters) - Merck & Co on Thursday announced price cuts to some of its medicines, including a 60 percent reduction to a hepatitis C treatment, after U.S. President Donald Trump criticized drugmakers for failing to help reduce healthcare costs for consumers.

Amid heightened political scrutiny over the high cost of prescription medicines and promises by Trump that drug price reductions were coming, New Jersey-based Merck became the first major drugmaker to announce voluntary price decreases.

In addition to slashing the price of Zepatier, which owns a very small share of the hepatitis market, Merck said it would lower the list price by 10 percent of six other older drugs with minuscule sales. It also said it would not increase the average net price of other medicines in its portfolio of products by more than the inflation rate annually.

While that sounds like a substantial commitment, Evercore ISI analyst Umer Raffat noted that it does not amount to a significant change and “technically leaves the room open for increases where it would like to.”

“If we look back at Merck’s ‘net price increase’ across portfolio in 2017, it was already meeting the criteria that Merck outlined today.” he said.

Zepatier had total U.S. sales of $771 million in 2017. Merck’s overall annual sales exceed $40 billion. Its most important product, the cancer drug Keytruda, lists for about $150,000 a year.

Trump, who has vowed to help reduce the cost of prescription drugs to consumers, expressed anger at drugmakers over planned price hikes. In a tweet on July 9, he said they “should be ashamed” and that his administration would respond.

Under direct pressure from Trump, Pfizer Inc, the largest U.S. drugmaker, said it would delay July 1 price increases until the end of the year or until the president’s blueprint for lowering drug costs goes into effect.

Swiss drugmaker Novartis followed this week, saying it would not raise prices in the United States for the rest of the year.

Although Pfizer and Novartis only promised delays to price hikes, Trump said they decided to not increase prices. He has not yet commented on Merck’s announcement.

“This decision (by Merck) is a response to President Trump’s blueprint and reflects the industry’s understanding that the President is serious about bringing change to our drug markets,” U.S. Health and Human Services Secretary Alex Azar said in a statement.

Trump made lowering prescription drug prices a top 2016 presidential campaign issue.

In May, he unveiled a “blueprint” to lower drug prices that appeared to largely spare drugmakers and instead took aim at “middlemen,” such as health insurers and pharmacy benefits managers, which demand hefty rebates in exchange for broad access to patients. Pharmaceutical company stocks rose after the blueprint was announced.

The cost of healthcare is expected to be a major campaign issue ahead of November midterm elections, with control of the House of Representatives and the Senate, both currently controlled by Trump’s fellow Republicans, potentially up for grabs.

JULY 20, 2018

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