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Merck on drug prices

Executive Summary

Company Chairman Roy Vagelos states during a March 14 appearance on ABC's This Week with David Brinkley that it is Merck policy that prices for "any particular drug will stay within the [general] inflation rate plus one percent." Vagelos was responding to arguments of reporters on the show that Merck's policy since 1990 of keeping average product price increases to the Consumer Price Index allows leeway for increases on certain products that may be important to individual consumers. Merck had sent a letter to Clinton Administration health aides Jan. 15 proposing a voluntary program of holding a company's average product line inflation to the CPI and individual product prices to CPI plus one percentage point. If prices increased by a greater amount, the company would repay to the government any "excess revenues" plus make "prospective price adjustments to return prices to appropriate levels." PMA recently has proposed a plan to seek pledges from member companies to keep average prices to CPI, although its proposal does not involve returning revenues to the government ("The Pink Sheet" March 15, p. 3).
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