Merck Executive Explains Why Drug Prices Are Out of Control

Kenneth Frazier, a chief executive of Merck & Co. and chairman of the industry lobbying group Pharmaceutical Research and Manufacturers of America, wants you to know why drug prices have gotten so out of hand.

According to Frazier:

“Merck has increased the prices of its drugs on a yearly basis, but we’ve tried to be constrained in how we’ve done it, in a way we think doesn’t prevent people from affording our drugs. There’s a huge challenge we face between trying to optimize access to our drugs in whatever pricing we establish, and trying to ensure that you have the resources to continue to pursue the next generation of drugs. We try to take a responsible, balanced approach.”

When asked by the Wall Street Journal, “What would be a way to link the price of drugs to the value they bring?” Frazier replied:

“For example, charging people a price commensurate with the actual outcomes that drugs produce. Now, there are a lot of barriers in the system to sharing risk with some of our customers. The laws around what we can and cannot do in our pricing model were made for a different environment. They weren’t made for performance-based contracting or risk-sharing or any of those kinds of experimental approaches to pricing that Merck actually is very eager to try out with some of its customers.”

Taking a Closer Look

Let’s take a closer look at these claims by one of Merck’s highly paid executives:

• Merck recently spent $9.5 billion on marketing its drugs. The company spent only $7.5 billion on research and development. This means that the pharmaceutical company, like many others, is still in the business of pushing drugs, regardless of their increased benefit to consumers.

• Merck also recently had to pay out over $9 billion in settlements for its drug, VIOXX. Within five years of being approved by the U.S. Food and Drug Administration (FDA) for the treatment of arthritis and menstrual pain, the painkiller was linked to thousands of heart attacks, strokes and deaths. At the same time, the drug’s manufacturer, Merck, vehemently denied any problems.

• Merck became a new entrant into a now-crowded market of drugs that treat Hepatitis C, approved by the FDA just months ago. Though it is by far the cheapest, priced at $54,600 for a 12-week course, and about 42% cheaper than market leader Gilead’s $13 billion-a-year Harvoni and a slightly smaller discount to AbbVie’s Viekira Pak, that’s still a ridiculous amount of money for anyone to pay for pharmaceutical drugs.

Related: How Big Pharma Buys Doctors

The drugs made by Merck, Ely Lilli, Johnson & Johnson, and so many other companies are insanely priced, with no true efficacy and a long list of side effects. Martin Shkreli’s recent claim to fame wasn’t so anomalous. After buying and then immediately jacking up the price of a drug that treats a potentially deadly parasite by 5000%, he was later arrested on fraud charges. What he does is loosely indicative of an entire industry.

Drug companies don’t charge nearly what a drug actually costs to make, but what they think the “market will bear.” In short, that means, what they think desperate cancer patients will fork over – which for now seems to be $150,000 for a single chemo drug.

Will the public ever start to understand Big Pharma greed?