Merck suffers less than rivals on health reform

There's one Big Pharma that's not losing much to healthcare reform, relatively speaking. Merck (NYSE: MRK) says higher Medicaid rebates will cost it $170 million this year, and next year's tab will run $300 million to $350 million as Medicare discounts kick in. That's less than 1 percent of the company's global sales, Reuters points out, and about 1.5 percent of U.S. sales of some $21 billion.

And it's far less than than the estimates we've heard from other drugmakers. Eli Lilly (NYSE: LLY) projects up to $700 million in reform-related costs for 2011, or about 3 percent of global sales. For 2010, Abbott Laboratories (NYSE: ABT) is expecting a $230 million revenue hit, while Johnson & Johnson (NYSE: JNJ) predicted $400 million to $500 million.

Sanford Bernstein analyst Tim Anderson says in a note to investors that Merck's expected costs from healthcare reform are comparatively small, and that the overhaul law might have been expected to cut into earnings as much as 4 percent this year and 6 percent next, rather than the the 1 percent and 2 percent he now calculates. The impact is "less than what we might have otherwise guessed," Anderson writes (as quoted by the Wall Street Journal). Merck's shares rose on the news.

- read the WSJ piece
- get more from Reuters

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