Merck & Co. 'transparency report' shows average percentage price hikes have mostly been in single digits

In an effort to face the public backlash over ever-rising drug prices, several global drugmakers have pledged to keep price hikes on their products under 10%. While making no pledge, Merck & Co. has now offered up a report card that shows, on an average basis at least, its percentage list price hikes in the U.S. exceeded that threshold only once in recent years.

Merck released a Pricing Action Transparency Report on Friday showing the average prices changes in the U.S., and the growing discounts in it has offered, from 2010 through last year. According to that report, Merck’s average list price change hit a high of 10.5% in 2014, a low of 7.4% in 2010 and between 9.2% and 9.8% every other year in the last seven.

“We have a long history of making our medicines and vaccines accessible and affordable through responsible pricing practices and industry-leading patient access programs. To help people better understand our pricing practices, we are disclosing information about our price actions in the United States," the report said.

Its average net price change—which was based on wholesale acquisition price minus discounts, rebates and returns—ranged from 3.4% to 6.2%. Its average discounts hit 40.9% in 2016.

Merck pointed out that its average annual discount rate has been steadily increasing over time, reflecting both “a competitive market for branded medicines and the impact of the Affordable Care Act.”  The pricing pressure of the ACA, however, may soon be gone since the new president and Congressional Republicans have pledged to dismantle the program for the country’s uninsured.

“Because price increases have become such an important issue, we felt we needed to provide greater transparency into list and net prices,” Merck's Robert McMahon, president of the U.S. market, told The Wall Street Journal. “The price increases we take are reasonable.”

McMahon said the company would not release individual drug prices because of competitive issues.

The drug pricing furor has been building for several years and now encompasses concerns not only about the high prices of new drugs but the steadily growing prices of aging branded drugs and generics. Presidential candidates Sen. Bernie Sanders and Secretary Hillary Clinton were joined by Donald Trump in denouncing the industry over price hikes during the election campaign. Since his election, Trump has said on Twitter that he intends to put a stop to pharma’s penchant for constantly raising prices.

Allergan, whose CEO Brent Saunders has been urging his peers to join in, and insulin specialist Novo Nordisk have made pledges to keep list price increases to only single digits as part of a social contract with patients. But other companies have not flocked to that idea.

The industry as a whole is taking a more standard approach, trying to convince Congress and the public that its pricing is justified because of what its pharmaceuticals mean for public health. Industry group PhRMA has pledged to spend tens of millions of dollars each year on a marketing campaign to burnish the industry’s image—one that focuses on the opportunity that exists to tackle the country’s most complex and devastating health conditions.  

Pfizer last year launched its own marketing campaign to show the complex path and high costs that come with bringing new meds to market. Pfizer CEO Ian Read has not been one to buy into the price pledge strategy, and in fact got into a heated debate at a public conference with Regeneron CEO  Len Schleifer over how large companies like Pfizer need a different pricing approach than smaller companies like Regeneron.