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Merck & Co Inc MRK

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Economic Moat




President Trump’s Updated Healthcare Policy Targets Drug Costs, but Implementation Looks Tough

Damien Conover, CFA Sector Director

Analyst Note

| Damien Conover, CFA |

President Donald Trump updated the administration’s healthcare policy to include new drug benefit cards for seniors and executive orders supporting insurance protection for pre-existing conditions and increased clarity around medical billing. We don’t expect any major changes to our fair value estimates or moat ratings based on the announcements, but the updates slightly increase uncertainty within the drug industry. The updates add to executive orders issued over the past two months, including international drug importation, Medicare drug price setting based on international prices, elimination of drug rebates in the supply channel, and the minor expansion of 340b drug discounts (targeting low-income patients) for certain drugs (see July 27 note for more details).

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Company Profile

Business Description

Merck makes pharmaceutical products to treat several conditions in a number of therapeutic areas, including cardiovascular disease, asthma, cancer, and infections. Within cancer, the firm's immuno-oncology platform is growing as a major contributor to overall sales. The company also has a substantial vaccine business, with treatments to prevent hepatitis B and pediatric diseases as well as HPV and shingles. Additionally, Merck sells animal health-related drugs. From a geographical perspective, close to 40% of the firm's sales are generated in the United States.

2000 Galloping Hill Road
Kenilworth, NJ, 07033
T +1 908 740-4000
Sector Healthcare
Industry Drug Manufacturers - General
Most Recent Earnings Jun 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type High Yield
Employees 71,000