Merck decides to compete with Canadian pharmacies

Merck has a new program to provide 15-40% discounts on its drugs to anyone who lacks insurance. Unlike competitors’ programs, Merck’s is broad based. There are no age or income limits. The program is clearly aimed at matching Canadian prices.

There are some interesting implications if other big pharma companies follow Merck’s lead:

  • If consumers can get the same prices as insurers and PBMs, it may make sense for companies and individuals to drop insurance coverage for drugs and avoid the overhead of plan administration. (This has to be counterbalanced against the tax advantages of insurance and the need for catastrophic coverage.)
  • Insurers and PBMs may demand greater discounts and rebates in order to restore the differential
  • A conscious effort to match Canadian prices in the US may enforce greater discipline as pharmaceutical companies negotiate prices abroad. The pharma industry has argued that Americans subsidize other countries’ drug purchases –on the other hand the companies are free to walk away if they don’t want to charge the lower prices. I expect we’ll see greater harmonization of world prices –the Merck program is one factor contributing to that trend
  • Relief for the non-poor uninsured may increase pressure on hospitals and physicians who charge list prices to the uninsured but no one else
April 20, 2005

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