(Bloomberg) — Talking drug prices with President Barack Obama was just the start. Merck & Co.’s chief executive officer says he’s on a campaign to change a perception most Americans have: that pharmaceutical companies charge too much for their drugs.
Ken Frazier has been roaming the halls of Washington, a short trip from Merck (NYSE:MRK) headquarters in New Jersey, to make the case that the drug industry relies on a few precious years of high prices to fund research before its medications lose their patents.
“What’s really important with this industry is we’re seeing unprecedented advances, which in turn is providing us with unbelievable advances in patient care,” Frazier said in an interview.
Frazier, 60, has sought to cut costs and sold the consumer division to fund more research since taking the reins in 2011. He has been at the company since 1992, starting out as vice president and general counsel and working his way up. He became chairman this year of Pharmaceutical Research and Manufacturers of America (PhRMA), the industry’s lobbying group in Washington, and, along with other executives, met with Obama earlier this month to discuss the Trans Pacific Partnership Agreement.
Drugmakers have raised concerns about the trade pact’s limits on protection of data on biologic medications. Frazier said he explained to the president that protections for intellectual property and prices are related.
An August poll by the Kaiser Family Foundation found that 72 percent of Americans think the cost of drugs is unreasonable, and a majority preferred measures to contain prices, such as letting Medicare negotiate with drugmakers and requiring companies to disclose information on how they set prices.
The issue of rising drug prices has been hanging over the industry for more than a month, since Democratic presidential candidate Hillary Clinton sent drug stocks plunging in September with a tweet about “price gouging.” She was responding to a decision by Turing Pharmaceuticals AG, which raised the price of a decades-old medicine used by HIV patients from $13.50 to $750 a pill, but her comments sent waves throughout the industry.
Big drugmakers like Merck raise prices on older drugs too, to a much lesser extent. Frazier said that on a net basis, meaning after the discounts pharmaceutical companies offer to the insurers who pay for their drugs, price growth has slowed “tremendously” over the past few years.
This year, Merck has raised the net price of 38 drugs, about a quarter of which resulted in increases of 10 percent or more, according to research by UBS.
The industry has also come under fire from doctors, insurers and patient advocates for charging five and even six figures for lifesaving treatments for diseases like hepatitis C and cancer. Merck’s Keytruda, an immune-system-based oncology drug, cost $12,500 a month, or $150,000 a year, when it was introduced last year for melanoma patients.
There needs to be a discussion about what society can afford to pay for these drugs, Dr. Leonard Saltz, a gastrointestinal oncologist at Memorial Sloan-Kettering Cancer Center, said in a speech earlier this year.
“Because we’re not having the conversation, only the people selling the drugs are weighing in on what they should cost,” he said, pointing to the cost of treatments that combine immuno-therapies and cost more than $200,000 for a year.