Merck chief Frazier's R&D-based drug price defense a tough sell for pharma
- According to the Kaiser Family Foundation, 72% of Americans think drug pricing is out of control—part of a broader ongoing backlash against high drug prices. Kenneth Frazier, CEO of Merck, has taken to podiums in various venues to defend pricing as the pharmaceutical sector faces a barrage of criticism.
- Recently, Frazier became chairman of the Pharmaceutical Researchers and Manufacturers of America (PhRMA).
- Frazier's main talking points are that R&D is expensive, and that although prices on new drugs are expensive, the impact of brand competition and genericization combine to balance pricing out, effectively bringing them down over the long term.
It was the tweet heard around the industry and the Internet—and a call to action which resonated with consumers, lawmakers, and patient advocates nationwide. On September 22, Clinton tweeted out her plans to implement a drug price-control proposal after Turing Pharma, headed by Martin Shkreli, raised the price of Daraprim 5,000% in one fell swoop. Since then, lawmakers and many others have piled on calling for price caps and transparency. Valeant was even subpoenaed by Congress to address its drug-pricing practices (among other things).
Enter Frazier and his efforts to counter-lobby against this trend. He has made reasonable points about the costs and risks associated with R&D, as well as the need to sustain innovation and incentive. Moreover, he points out that 85% of all drugs are generic. He even takes on the high costs of oncology drugs, such as Merck's immunotherapy drug, Keytruda, which is priced at $150,000 per year—a cost that Frazier says is "conservative" given that it is four times as effective and less toxic than Bristol-Myers Squibb's Yervoy, yet priced in the same range.
It goes to show, perspective is everything. But it will be far more difficult for the industry to defend some players' practice of hiking the costs of older drugs in order to remain competitive and boost revenue. Surveys have also shown that consumers and patients are generally not sympathetic to the R&D argument, as many perceive this as a cost of pharma failure that's being unfairly off-loaded onto the public. The big question is: What will the recent spotlight on this issue actually lead to?