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Merck to Offer Drug Discounts to Medicaid Patients

April 21, 1990

RAHWAY, N.J. (AP) _ The world’s largest drug company says it will start offering discount drugs to Medicaid patients, a move long opposed by the pharmaceutical industry.

Merck & Co. announced its plan as Congress and Medicaid officials in several states sought to force drug price reductions.

But Merck will offer the seven to 12 percent savings only in states that drop restrictions barring Medicaid reimbursement to doctors who prescribe the company’s most expensive drugs, said Tony Fiskett, spokesman for Merck Sharpe & Dohne, the Rahway company’s West Point, Penn.-based pharmaceutical division.

About 24 states now restrict which drugs qualify for Medicaid, often allowing reimbursement only for lower-cost generic drugs.

Ronald Nordmann, an analyst at Paine Webber Securities, said the plan announced Thursday is ″a very clever program″ that ″would bring increases in purchases of Merck products.″

Fiskett said the lower prices will fall between the drug’s price to wholesalers and its cost to large volume buyers, including federal agencies like the U.S. Department of Veterans Affairs, which already receive significant discounts.

″The purpose of the plan is to preserve the ability of doctors to use those medicines that they choose for their patients and to ensure Medicaid patients can receive the same cost-effective medicine available to the general public,″ Fiskett said.

Currently, about 24 states, including New York, California, and Massachusetts, limit which drugs qualify for Medicaid payments.

Merck claims these restrictions unfairly prevent doctors from prescribing some of its most expensive drugs to Medicaid patients.

Fiskett said Merck has been planning to put a cost-reducing program into effect for years but many circumstances, including the rising cost of Medicaid, finally prompted the company to act this year.

″We are trying to be responsive to the needs of physicians, patients and the states,″ Fiskett said. ″There was no particular sticking point, it’s just that over time we decided that this is the responsible thing to do and the fair thing to do.″

Merck predicts the savings will be millions per year per state, Fiskett said. He said the price reductions should take effect by July 1, after all the states have had time to review the plan and make a decision.

Merck makes Vasotec for reducing blood pressure; Mevacor for lowering cholesterol; and Pepcid, which treats ulcers.

Medicaid purchases amount to about $300 million of Merck’s $3 billion in annual American pharmaceutivcal sales, said Dr. John L. Zabriskie, president of Merck Sharpe & Dohne.

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