Frazier defends R&D investment and attacks price pressure
pharmafile | December 14, 2011 | News story | Research and Development, Sales and Marketing | Merck, R&D productivity, prices
Merck & Co chief executive Kenneth Frazier has expressed concern that European governments increasingly want to pay unrealistically low prices for the drugs they use.
Frazier also defended his company’s decision to not cut its R&D budget, in contrast to many of its peers, saying the strategy will pay off in the long term.
Addressing the question of price pressure, he said: “Many countries are struggling to afford health care at the level they’ve promised their populations.”
Frazier told the Wall Street Journal: “I don’t think [drug prices are] a problem that needs to be fixed.”
In fact, Frazier argues, Europe and the US have a moral obligation to pay higher rates for drugs to subsidise pharma costs in the poorest nations.
“One of the challenges we have is what kind of marketplace will we have when we do come up with a new drug,” he commented.
Austerity measures in Europe are putting pressure on medicines prices, with more discounts being forced on companies.
Meanwhile, the 2010 US federal health law could also hit pricing. The law requires greater rebates from pharma, imposes new industry fees, and would create a new committee of health experts to help Congress introduce new measures to reduce federal health care spending, which could include demanding price cuts.
Frazier says some developed nations are in effect saying: “I don’t want new drugs” when they demanded ever-lower prices.
Last month Merck showcased its most promising drug candidates, and says it expects to make eight US filings in the next two years.
But like other manufacturers, it is under pressure from generic competitors as patents slip away – in particular on its biggest-selling asthma drug Singulair, which made the company $5 billion last year but loses US patent protection in 2012.
Merck is already facing up to last year’s losses of exclusivity on its two hypertension treatments Cozaar and Hyzaar, which together had sales of $3.6 billion in 2009.
Analysts at EvaluatePharma have already predicted Merck will slip down the pharma league table next year. The company is currently the fourth biggest drugmaker by revenue, but will fall to sixth place next year, with forecast annual growth of just 1%.
In 2009 it was second, just behind Pfizer.
Frazier remains bullish about the company’s prospects, however, telling the Wall Street Journal: “The most sustainable strategy is innovation.”
Merck’s late-stage pipeline consists of 32 phase II and phase III candidates including new molecular entities and combination programmes for Alzheimer’s disease, diabetes and hepatitis C.
The company highlighted 19 late-stage candidates at an investors’ meeting last month, and is aiming for FDA approval for eight new drugs by the end of 2013.
Many investors are not convinced the company’s pipelines are sufficiently promising, however, and fear its revenues will decline without further action.
Adam Hill
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