FRAZIER: My biggest accomplishment is staying the course, I would say, at a time when investors are increasingly skeptical of pharmaceutical research and development. We are one of the companies that didn't cut our research budget. We said we weren't going to do that, and our stock got pounded initially. (The stock price fell 17 percent in barely 9 months, then steadily rebounded, climbing from just under $30 to around $43 now.) I'm feeling a lot better about it than I was a year ago.
AP: Why hasn't Merck reduced spending on drug research like many of its rivals?
FRAZIER: I'm going to continue to fund the important work we do in our laboratories. As long as we do that, we'll be able to recruit the world-class people who want to come to industry to do important work to translate basic science into medicines that make a difference to human beings. I think that's the core of what my job is about: to create an environment where the really good science happens inside Merck.
AP: How do you choose which diseases and types of drugs you want to research?
FRAZIER: We look at two things: Where's the scientific opportunity and where's the future patient demand? You don't want to repeat in areas where there are already good drugs available.
AP: As growth slows in developed countries like the U.S., international drug companies are fighting for market share in emerging markets such as China, India, Russia and Brazil. How is Merck's business in those countries?
FRAZIER: We're the fastest-growing company in emerging markets. We have a broad portfolio of products that meet the needs of their people for both infectious and chronic diseases.
Of 7 billion people alive today, 6 billion live in emerging and developing markets. We have a huge opportunity not only to grow our business, but more importantly, going back to what Merck stands for, to actually make a difference in the lives of the people in these countries. That's what gets me up in the morning. It is the next chapter in this company's history.
AP: Like most other big drugmakers, Merck has lost millions in revenue to generic drugs as big sellers such as asthma and allergy medicine Singulair, your top drug until it got U.S. generic competition in August, lose patent protection. How do you make up for that?
FRAZIER: We focus on the underlying growth of what's left of the portfolio. You either innovate or you become defunct. I want to make sure we are spending money wisely and getting a return on investment.
AP: Now that there are good, inexpensive generic drugs available for many common diseases, most big drug companies have switched their focus to specialty drugs — complex medicines for rare diseases that can command very high prices. What is Merck doing?
FRAZIER: We have a lot of investment in specialty and oncology research, but the next few important products are for primary care and Alzheimer's, too. Merck is still committed to primary care. We stayed in vaccines when everybody got out in the '80s. That's why you have Gardasil today.
AP: The drug industry supported Obama's Affordable Care Act, which will bring health coverage to about 30 million additional people. Now that it's being implemented, how will it affect your company — and the rest of the industry?
FRAZIER: I think we'll do well. I haven't done the calculations, but probably we'll make a little bit less. What's important is people can take their medicines. What's good for patients in the long run is good for us.
AP: What are some of the changes the U.S. should be making to control medical spending?
FRAZIER: We need to fix the misalignment of incentives, to stop paying for treatment volume rather than better care. I'd like to see a lot more spending on prenatal care and less at the end of life. Eighty percent of health care costs are driven by behaviors that can be controlled or modified — excessive eating, smoking and drinking. We need a massive behavioral change.