Merck sees challenges in US regulations

Merck said it sees challenges in US regulations related to Medicare and the American Bailout Act of 2021.

In 2021, the US Congress was actively considering various versions of drug pricing legislation that could significantly affect manufacturers of brand-name pharmaceuticals.

This legislation would implement a government bargaining plan for certain products covered by Medicare Parts B and D, institute financial penalties for price increases above inflation, and redesign the Medicare Part D program to include a cap on out-of-pocket costs for patients and reset responsibility for benefit costs between manufacturers, health plans and the government.

For Merck, it is unclear when or if the US Congress will pass this legislation, and it remains highly uncertain what other proposals, if any, may be included as part of future federal legislative proposals that would directly or indirectly affect pharmaceutical companies.

Merck is a global health care company that provides innovative health solutions through its prescription medicines, vaccines, biological therapies and animal health products.

The company‘s operations are managed primarily on a product basis and include two operating segments: Pharmaceutical and Animal Health.

Merck

Also in 2021, the US Congress passed the American Bailout Act of 2021, which included a provision removing the legal cap on reimbursements drugmakers pay to Medicaid starting in January 2024.

These rebates act as a discount from the list price, and removing the cap means manufacturer discounts paid to Medicaid may increase.

Before this change, manufacturers were not required to pay more than 100% of the average manufacturer’s price (AMP) in rebates to state Medicaid programs for Medicaid-covered drugs.

As a result of this provision, beginning in 2024, manufacturers may have to pay state Medicaid programs more in rebates than they received for sales of specific products.

This change could pose a risk to Merck in the future for drugs that have high Medicaid utilization and reimbursement exposure greater than 100% of the AMP.

Merck, too, faces growing price pressure from states, which are seeking to exert greater influence over the price of prescription drugs.

Several states have passed pharmaceutical price and cost transparency laws.

These laws generally require manufacturers to report certain product price or other financial information to the state.

Also, some laws require manufacturers to give advance notice of price increases.

Merck expects states to continue to focus on pharmaceutical prices and increasingly shift to more aggressive price control tools, such as Prescription Drug Affordability Boards that have the authority to conduct affordability reviews and set higher payment limits.