Throughout the world, healthcare costs are rising for a variety of reasons; chief among them are the greater utilization and intensity of services and cutting-edge technologies that convert once-fatal diseases into chronic conditions.

As populations continue to age in the developed world, and improved health technologies such as novel pharmaceuticals improve health and prolong life, payers are increasingly focusing attention on pharmaceutical spending within their overall healthcare budgets.

The pharmaceutical industry faces a variety of healthcare systems in developed countries and a multiplicity of government policies. Each country has its own approach to balancing patient access to the best treatments within the constraint of limited budgets. In most European countries and in Canada, the government both regulates healthcare and provides healthcare to its citizens. We understand the pressures on governments to effectively manage the limited resources allocated to healthcare, and, within healthcare, the limited resources allocated to medicines and vaccines.

Despite differences in national approaches, we price our products in all OECD (Organization for Economic Co-operation and Development) countries both to foster access and to ensure a reasonable return on our investment. Our prices around the world are determined by several factors, including: the value that our products offer to patients, payers and physicians relative to competitor products; the ability and willingness of various types of customers—including national, regional or local institutional payers, physicians, employers and patients—to pay for the product; and the cost and value of alternative treatments such as hospitalization.

The prices of our medicines and vaccines also reflect government regulation and currency fluctuation. While striving to maintain a consistent global approach, Merck also considers the national, competitive and regulatory conditions in each market individually. It is important to recognize that the price a consumer pays is also affected by duties and tariffs imposed on imported medicines and vaccines, as well as price markups by intermediaries, including wholesalers and pharmacies.

Given the multiple choices available within a class of drugs today, powerful and sometimes monopolistic buyers in the pharmaceutical marketplace—particularly governments and national health systems—have intensified pricing pressure throughout the developed world. In price-controlled environments (particularly prevalent in Europe), most governments use international price comparisons and therapeutic reference pricing as levers to set their own purchasing price. In addition, in Europe and a growing number of other developed markets, the decision to allow access to and reimbursement for medicines is increasingly being relegated to regional payers, making the challenge of ensuring access to new treatments extend beyond price alone.

In the private sector, price competition has been spurred by private health insurance plans, particularly in the United States. These payers in the developed world are able to negotiate significant rebates and discounts with pharmaceutical manufacturers, based on their ability to direct utilization. Where competition exists among health insurance plans, patients are able to obtain healthcare and their medicines at competitive prices and take advantage of numerous pharmacy service innovations that have improved the quality of pharmacy care. In the United States for example, as indicated in a Federal report published in 2010, the Trustees of the U.S. Medicare program found that Medicare prescription drug plans negotiated an average discount of 10.4 percent in 2008 (the most recent year available) and that actual prescription drug spending in the Medicare Part D program continues to come in below estimated projections.

• To learn more about our position on prescription drug pricing, click here.
• To learn more about pricing of our HIV medicines, click here.
• To learn more about pricing of our vaccines, click here.
• To learn more about pricing of our Women's Health products, click here.