The Cost of Innovation: Merck CEO Discusses Challenges

The pharmaceutical industry remains one of the few net exporting sectors left in the United States, providing 300,000 jobs in the country, says Merck CEO Kenneth C. Frazier, at the Wall Street Journal Executive Viewpoints event, co-sponsored by IESE Business School and BCG, in New York City.

 

But "getting to the cost side of things - that is the challenge," said Frazier, in the interview with the WSJ's Alan Murray. 

 

As more countries around the world push for equal pricing, incentives for differential pricing are being threatened. This could force people in poorer countries to pay the same as those in wealthier countries, and consequently discourage the use of certain pharmaceuticals in those poorer countries.

 

"To me, that's not a moral position to take," he said. 

 

Global price differentiation enhances innovation and ensures that doctors can make optimal choices regarding pharmaceuticals that are most appropriate for local patients, he said. "You can't have cheap prices in the most innovative industry in the world."

 

Frazier confirmed that the Obama administration's health care initiative has contributed to holding down stock prices, and many large investors are already restive about changes that are under way. 

 

Frazier, who met recently with President Obama, said the president understands the need to maintan a strong and viable pharmaceutical industry, but the country has to identify "sensible ways" to keep health care costs down, without putting a cap on innovation.