Reduced forecast for Merck's currency impact
In a challenging quarter for the pharmaceutical industry, Merck, a leading conglomerate specializing in both pharmaceuticals and technology, is navigating the impact of the US Most-Favored-Nation (MFN) drug pricing policy.
The MFN policy, reinstated by President Trump in 2025, aims to reduce US drug prices by aligning them with the lowest levels in comparable industrialized countries. This policy could potentially reduce US prices by 30% to 80%.
While specific details about Merck's response to the MFN policy are not readily available, the broader pharmaceutical industry, including Merck, Pfizer, and Johnson & Johnson, has expressed concerns about the policy's potential impact on revenue and the feasibility of meeting rapid price cuts.
The second quarter saw a 3% decrease in Merck's overall adjusted operating profit (Ebitda) to €1.46 billion, and a nearly 2% decline in revenue to €5.25 billion. However, organic revenue grew by 2%, and earnings by 4.6%.
The Electronics division, on the other hand, saw its operating profit nearly halve. Merck cited a provision for possible customer claims due to a supplier problem as one reason for the division's decline. Contrastingly, the business with semiconductor materials continues to grow, driven by the AI boom.
The Life Science and Healthcare divisions, however, have better prospects and are contributing to the cost discipline. In response to the tariffs, Merck's lab division is increasing prices as part of its strategy to offset the impact.
In a positive development, Merck has raised its forecast for organic earnings growth to 4 to 8%, up from the previous 2 to 7%.
The company is also exploring direct sales to patients in the US in response to President Trump's demand for cheaper drugs. This move is aimed at bypassing powerful pharmacy benefit managers in the US, a practice often accused of driving up prices by keeping a portion of negotiated discounts or adding unnecessarily expensive drugs to reimbursement lists.
For 2025, Merck now expects revenue of €20.5 to €21.7 billion (down from €21.2 billion) and adjusted operating profit (Ebitda) of €5.9 to €6.3 billion (down from €6.1 billion).
As the MFN policy continues to unfold, it poses a significant revenue challenge for the pharmaceutical industry, including Merck. The overall industry faces enforced price reductions, possible government intervention, and investor concerns stemming from this aggressive pricing strategy.
[1] White House. (2025). Executive Order on Lowering Drug Prices by Putting America First. [online] Available at: https://www.whitehouse.gov/presidential-actions/executive-order-lowering-drug-prices-putting-america-first/
[2] FiercePharma. (2025). Trump's MFN drug pricing plan: What it means for pharma and patients. [online] Available at: https://www.fiercepharma.com/pharma/trumps-most-favored-nation-drug-pricing-plan-what-it-means-pharma-and-patients
[3] STAT News. (2025). Trump's drug pricing plan could save billions, but it's unclear how. [online] Available at: https://www.statnews.com/2025/07/08/trumps-drug-pricing-plan-could-save-billions-but-its-unclear-how/
[4] Kaiser Family Foundation. (2025). Trump Administration's Proposed Most Favored Nation International Price Index Model for Medicare Part B Drugs. [online] Available at: https://www.kff.org/medicare/issue-brief/trump-administrations-proposed-most-favored-nation-international-price-index-model-for-medicare-part-b-drugs/
[5] Pharmaceutical Research and Manufacturers of America. (2025). PRMA raises concerns about Trump administration's proposed MFN model. [online] Available at: https://www.phrma.org/press-release/phrma-raises-concerns-about-trump-administrations-proposed-mfn-model
- Given the reinstated Most-Favored-Nation (MFN) drug pricing policy, Merck, a company engaged in both finance and business through its pharmaceuticals and technology divisions, faces a significant challenge in maintaining its revenue, as the policy could potentially reduce US prices by 30% to 80%.
- Recognizing the potential impact of the MFN policy on the pharmaceutical industry, the broader business world, including Merck, Pfizer, and Johnson & Johnson, has expressed fears about the policy's implications on revenue and the feasibility of meeting rapid price cuts.
