Pricing & Commercialization
Pricing & Commercialization
We are working to find new ways to bring our medicines and vaccines to more people around the world than ever before, and to make them as accessible and affordable as possible for the patients who need them.
To that end, we strive to commercialize our products in a way that both develops our business and meets local needs in a responsible and efficient manner.
- We will price our products through differential pricing frameworks, taking into consideration the level of economic development, the distribution channel and the public health need
- Across and within countries, we will seek to identify innovative and sustainable strategies for differential pricing or other commercial approaches that allow for greater flexibility to better reach at-need segments, pursuing partnerships with private, government or nonprofit resources and distribution channels
- We will evaluate and address public health needs by working with local health care providers globally to increase knowledge of product need and use; we will invest in activities to improve patient awareness and education
In many countries, public and private health insurance plans are able to negotiate significant rebates and discounts with pharmaceutical manufacturers that enable patients to obtain health care and medicines at competitive prices.
We have differential pricing for 42 of our products, and 125 countries have implemented inter- or intra-country pricing for at least one of them.
We recognize that in developing-world markets, access to and funding for health care can be limited. Therefore, we develop and support various sustainable strategies to improve access, including directing differential pricing to patient sub-segments. Currently, we have differential pricing for 42 of our products, and 125 countries have implemented inter- or intra-country pricing for at least one of our products. As an example, initiatives expanding innovative concession program offers for our women’s health product portfolios in low- and middle-income markets demonstrate our commitment to differential pricing. We remain committed to continued growth in identifying and implementing opportunities to support access through differential pricing.
In developing-world markets, our pricing strategies include directing differential pricing to at-need patient sub-segments, either directly through national or local programs or indirectly through third-party health care funding sources that demonstrate reasonable and secure product distribution to intended patient segments and subject to applicable legal requirements.
For example, we are engaged with stakeholders within the family planning community, including the United Nations Population Fund (UNFP), Marie Stopes International (MSI), Population Services International (PSI) and the United States Agency for International Development (USAID), to support advocacy of the “Total Market Approach (TMA)” in key markets to help governments better target subsidized products, help the public sector focus on the poorest segments of the population, increase the ability of the private sector to serve middle-income tiers of the population, and decrease overall donor funding dependency. TMA leverages market efficiencies, helps expand equitable access and encourages intra-country price tiers based on economic population segments.
We believe that providing support through grants to third-party medical, scientific and patient organizations is an important way to advance mutual objectives to improve health and advance patient care. We have robust standards and policies in place to ensure that our grants support a full range of research and activities important to health care improvement. Learn more.
We will continue to champion innovative programs and partnerships to help increase the availability and accessibility of our medicines and vaccines for those who need them.
Pricing and Access
We understand that people are concerned about the costs associated with health care in general, and prescription drugs in particular.
After all, we’re patients too. That’s why we are committed to doing our part to help more patients obtain and afford the medicines and vaccines they need.
In keeping with George W. Merck’s timeless wisdom that “medicine is for the people,” we price our products to support access for patients today while also promoting the critical investments that will empower our scientists to invent the cures and treatments of tomorrow.
We approach pricing our medicines and vaccines from the perspective of value. And while value can mean different things to different people, to us it means maximizing our ability to provide something priceless—better health—to as many patients as possible. It also means doing as much as we can to prevent the problems, from lengthy hospital stays to long-term care, that are a financial burden to so many families, communities and public institutions.
Many factors go into the pricing of drugs, and every medicine is somewhat different, but in simple terms we consider the Three Ds of pricing: the Demand in society, all that goes into Development, and how well a medicine Delivers. The societal demand means we look at how critical the condition or need is in society and how many treatments, if any, currently exist. Development means we need to price medicines to pay for research, discovery and clinical trials. How well a medicine delivers means we look at the benefits of our drug, including how it can improve the lives of patients and their families, and how it can prevent other issues or the need for hospitalization.
While striving to maintain a consistent global approach to pricing, we also consider the national, competitive and regulatory conditions within each market, including the ability and willingness of various customers—such as national, regional or local institutional payers, physicians, employers and patients—to pay for our products. The prices of our medicines and vaccines also reflect government regulation and currency fluctuation effects, and prices paid by consumers can be affected by duties and tariffs imposed on imported medicines and vaccines, as well as price markups by intermediaries, including wholesalers and pharmacies.
In the private sector, particularly in developed countries like the United States, price competition has been spurred by private health insurance plans. These payers, as well as large government institutions, are able to negotiate significant rebates and discounts with pharmaceutical companies that can enable payers to lower premiums for their members.
In January 2017, we began disclosing the average annual list and net price changes across our product portfolio in the United States to increase transparency about our pricing practices, including the amount of rebates and discounts that we provide to payers. These data, which are posted in the Transparency Disclosures section of this report, show that our average annual net price changes (after rebates and discounts) across our U.S. human health portfolio have been in the low to mid-single digits since 2010. Additionally, our weighted average annual discount rate has been steadily increasing over time.
As health care systems in many developed markets are moving to a value-based care model, we are working with payers and other stakeholders to find flexible approaches to pricing. These include the use of quality- and performance-based contracts where payment is linked to quality metrics or improved health outcomes.
We recognize that in developing-world markets, access to and funding for health care, particularly pharmaceuticals, can often be limited. In many of these markets, most or all of the cost of treatment is borne by the patient. We actively work to develop and support various sustainable strategies to improve access, particularly for economically at-risk patient segments. In terms of pricing, these strategies can include directing differential pricing to patient sub-segments, either directly through national or local programs − or indirectly through third-party health care funding sources that demonstrate reasonable and secure product distribution to intended patient segments.
Our willingness to provide differential pricing strategies is evident for many of our products, including some of the best-in-class innovative brands in our HIV, hepatitis C virus (HCV), women’s health and vaccine-franchise areas. Our differentiated pricing specifically supporting eligible low- or lower-middle-income markets is applicable whether supply is through a direct purchase from our company or through one of our contracted distributors. Several recent initiatives illustrate our commitment to expanding access and availability:
- We extended our current Gavi prices for GARDASIL® [Human Papillomavirus Quadrivalent (Types 6, 11, 16, and 18) Vaccine, Recombinant] and ROTATEQ® (Rotavirus Vaccine, Live, Oral, Pentavalent) for 10 years, through 2025, to Gavi-graduated countries with Gross National Income (GNI) per capita not exceeding $3,200
- Several of our vaccines [i.e., GARDASIL, PNEUMOVAX23 (Pneumococcal Vaccine Polyvalent), MMR-II® (Measles, Mumps, and Rubella Virus Vaccine Live), VARIVAX® (Varicella Virus Vaccine Live) and VAQTA® (Hepatitis A Vaccine, Inactivated)] are provided at a reduced price through our agreement with PAHO, which targets access to low- and middle-income patients in Latin America
- Within the scope of our ongoing partnership arrangement with Gilead, we continue to provide reduced pricing for ATRIPLA® (efavirenz 600mg/emtricitabine 200mg/tenofovir disoproxil fumarate 300mg) for 94 countries
- To assist patients in China not covered by the National Free Antiretroviral Program and needing access to our anti-retroviral medicine ISENTRESS®(raltegravir), MSD in China partnered with the HIV Medical Association to initiate a series of scientific educational programs to raise disease and treatment knowledge and awareness
- We continue to engage with governments on shaping expanded HCV micro-elimination programs. For example, in 2017, we secured commitments for expanded access to ZEPATIER®(elbasvir and grazoprevir) for patients in several lower- and middle-income markets, including Indonesia and Vietnam, supported with reduced pricing
However, in some countries, our ability to bring innovative pricing and access solutions to market is constrained by the pricing regulatory framework. In these instances, we continue to work with governments, regulators and medical insurers to innovate while remaining compliant. We know there is more that needs to be done, and we want to do our part to help more patients obtain and afford the treatments they need. We are committed to continuing our efforts to develop access solutions, including flexible pricing programs, targeted as appropriate to address the cost burden for patients at need throughout the world.
|PRICING & COMMERCIALIZATION||2013||2014||2015||2016||2017|
|Number of products that are supported with differential pricing1, 2||24||35||35||40||42|
|Number of countries where inter- and/or intra-country pricing has been implemented3||70||114||121||123||125|
|Investment in patient- and provider-education programs (in millions)||$61||$52||$80||$80||$90|
|NOTE: We have realized a notable increase in both products (+46%) and geographic scope (+63%) supported with differentiated pricing intended for at-need populations. Year-over-year differential pricing performance metrics can be impacted based on the timing of local-market or third-party contract renewals and/or product life-cycle introductions or deletions. Therefore, increases or decreases in these pricing metrics should not be interpreted as anticipating the level of trend growth in future years.
1. Differential pricing intended to facilitate access for the at-need population.|
2. Products include HIV treatments, vaccines and other patented products.
3. Countries as defined by the World Bank 2017 GNI Classification, including UN-defined Least Developed Countries.