Merck stock edges lower as CMS alters negotiating process

• Centers for Medicare & Medicaid Services issued new details about drug negotiations.
• Dow slides on expected further hostilities between Israel and Iran.
• Oil surges 4.5% on Middle East concerns that could affect shipping.
• Merck was the worst-performing DJIA stock at lunchtime.

Merck (MRK) is one of the worst-performing stocks in the Dow Jones Industrial Average (DJIA) on Thursday. The US government announced a new process for its next phase of pharmaceutical pricing negotiations, which might hurt Merck’s margins in the coming years.

The overall market is in pullback mode as the world expects Israel to launch further hostilities against Iran for its missile attack earlier in the week. Oil prices rose 4.5% on Thursday as tanker prices soared, and Gold remained near all-time highs. The Dow Jones is down 0.6% on Thursday afternoon, about twice the level of the NASDAQ’s sell-off. This slide follows Wednesday's cautious Dow sentiment.

Merck stock news

The Centers for Medicare & Medicaid Services (CMS) announced additional steps for the second bargaining process for up to 15 new drugs that it will seek lower prices on in 2027.

As a major purchaser of pharmaceuticals, CMS has until February 1, 2025 to select the drugs it wishes to bargain over.

"What we plan to do is have meetings with manufacturers before CMS actually sends an initial offer. But then once we have done an initial offer, we will have a first optional negotiation meeting with the manufacturer earlier than we did this past year," an anonymous CMS official said in reporting from Reuters on Thursday.

The good news for Merck is that drugmakers will be given additional time to supply the CMS with input about their respective thinking before negotiations begin.

These negotiations, which stem from legislation passed under President Joe Biden, are worrisome for US pharmaceutical investors. A 30-day supply of Merck’s Januvia drug will fall from $527 to $113 in 2026, based on the first spate of negotiations that began in 2023. Januvia, a diabetes medication, supplied about 4% of Merck’s revenue in the most recent quarter.

Merck is also dealing with competition for its cancer drug Keytruda. ImmunityBio's Anktiva and Summit Therapeutics' ivonescimab are both likely to take future market share for lung cancer treatment, according to some analysts.

Merck stock forecast

Merck stock has broken both the general support at $112 from early August as well as the August 8 range low of $110.72. At the time of writing, the Thursday low is $110.06. 

There is not much support until the $100 psychological level. That level is where MRK stock found support in October and November of last year.

With the 50-day Simple Moving Average (SMA) cast well below its 100-day and 200-day counterparts, Merck stock is firmly in downtrend territory. A break of the $100 level could see shares fall to the mid-$80s where it found support in September 2022.

MRK daily stock chart