Merck's ($MRK) incoming CEO Kenneth Frazier (photo) is promising new innovation and continued focus on emerging-markets growth. No surprises there: Merck is just one of the Big Pharma crowd that needs to beef up pipelines and move into markets where drug sales are increasing fast, rather than stagnating as they are in the developing world.
But Frazier also tells the Financial Times that he's going to be focusing on "demonstrating value" in Merck's drug pricing as new meds make it onto the market in the coming months. Acknowledging that today's drug buyers are "extremely cost conscious," he told the FT that he'll make sure the outcomes data on his products will support the "right kind of price and volume requirements for a win-win."
Sounds a lot like Merck's planning to sell cut-price meds in certain markets where buyers may not be able to afford higher prices, hoping to pump up the volume enough to make the lower margins worthwhile. Meanwhile, Frazier told Bloomberg that Merck wants to sell its newest, most expensive drugs to the growing middle- and upper-classes in developing markets such as China and Brazil.
That sort of tiered-pricing approach has been taken by GlaxoSmithKline ($GSK) in emerging markets, too, and Sanofi-Aventis ($SNY) has said it will slash prices in developing countries to make its products more accessible. Makes sense for Merck to do the same, given its stated goal of growing emerging markets sales to 25 percent of its overall revenues by 2013, up from 18 percent now.