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UPDATED: Merck Wants No Public Option in Healthcare Reform

  • UPDATE: Due to an error in which unrelated text was accidentally transposed into this item, the original version of this item misquoted Leerink Swann's note to investors. BNET regrets the error.
Management at Merck (MRK) recently hosted a visit from analysts at Leerink Swann, where they discussed the company's position on healthcare reform. Merck supports President Obama's reform effort except for one thing -- the company doesn't want to see the public option happen, the analysts say.

In fact, Merck believes the White House and Sen. Max Baucus, D-Mont., will cut the public option from the final bill, Leerink's Seamus Fernandez and Kathryn C. Alexander report. In a note to investors describing their meeting with CEO Richard Clark and president Kenneth Frazier, they said:

On the subject of healthcare reform, management feels that big pharma still has a seat at the table and the industry still supports Senator Baucus's bill. MRK management is hopeful that the $80B pharma deal will remain in the final bill that is passed and is not in favor of a public option. Management thinks that the deal that was struck between big pharma, Baucus, and the White House will hold. PhRMA's support for the $80B deal assumed that there would not be a public plan. The public option concerns MRK management because of what it could do to severely limit drug pricing power in the United States via imposed price constraints instead of allowing for free market pricing and innovation to foster competition.
In a statement to BNET Merck said:
... issues related to a government plan were not part of those negotiations and not part of our agreement to provide substantial system savings to support health reform. It is our hope that the White House and Senator Baucus will continue to honor the agreement for the amount of the industry contribution and the mechanisms for that contribution/savings.
Merck's position -- that it opposes the public option -- is consistent with the rest of Big Pharma's. The industry is against any reform that would allow the government to negotiate drug prices.

Merck's full statement follows the jump.

Leerink put out a longer statement elaborating on its take-away from the Merck meeting. You can download that here.

Merck's statement in full: We feel the headline [in the original, "Merck: White House Promised to 'Do What Was Required' to Ax Public Option From Healthcare Reform"] overstates our position. Additionally, I would make the following points and would appreciate it if you could clarify our position. 1) With regard to analysts' report and your article Merck has consistently opposed creation of a new government insurance plan. We held our position on this issue at the time of the negotiations with the White House and Senator Baucus and we have held that position since that time. However, issues related to a government plan were not part of those negotiations and not part of our agreement to provide substantial system savings to support health reform. It is our hope that the White House and Senator Baucus will continue to honor the agreement for the amount of the industry contribution and the mechanisms for that contribution/savings. Our opposition to a public plan is a separate matter. 2) With regard to your article: Merck does not oppose increased consumer purchasing power and in fact, supported Medicare Part D and covering the uninsured in health reform because consumers will have increased power through their insurance plans which negotiate significant rebates and discounts from us. We provide discounts to insurers that the individual without coverage does not access. So, we support these coverage changes precisely to increase consumer access and empower consumers. Any statement to the opposite is not accurate. We support systemic reform that increases and improves private sector competition around price and quality -- for our products and for all health care services. We do not support arbitrary government price controls. We do not support a government plan that would be able to apply rules that are not grounded in market operation and market dynamics.
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