Merck CEO Kenneth Frazier is getting praised after leaving Trump's manufacturing council

Reuters

Merck CEO Kenneth Frazier

• Merck CEO Kenneth Frazier left the president's manufacturing council on Monday. 
• The move attracted some negative attention from President Donald Trump, but many in the healthcare industry came to Frazier's defence. 
• Frazier is the CEO of one of the biggest pharmaceutical companies in the world. 

Merck CEO Kenneth Frazier left the president's manufacturing council on Monday after President Donald Trump failed to explicitly denounce white nationalism over the weekend when violence erupted in Charlottesville, Virginia.

The president offered a stronger condemnation on Monday, but that wasn't enough to stem the tide. Two other CEOs on the council, Under Armour CEO Kevin Plank and Intel CEO Brian Krzanich, followed Frazier's lead later in the day. 

By resigning from the council, Frazier became the first biopharmaceutical CEO to take a definitive stance against the Trump administration. The move won the praise of many in the pharmaceutical industry.

Here's how Frazier, one of four black CEOs of Fortune 500 companies, came to become CEO of one of the biggest pharmaceutical companies in the world. 

From North Philadelphia to a big pharma's headquarters

Frazier, who's 62, grew up in North Philadelphia. His father, who was a janitor, motivated his kids to be successful.

"My father had a very strong view of what it took to be successful, and he in effect brainwashed all his children to think that we could do anything," Frazier told the Harvard Law Bulletin in 2011. "He had very high personal standards. Although he was a janitor by accident of birth, I believe he could have been a CEO of any company." 

Frazier attended Penn State University (he later served on the university's board of trustees), and Harvard Law School. He started his career working at a Philadelphia area law firm, becoming partner. He joined Merck in 1992 as general counsel to a joint venture with another pharmaceutical company. He went on to become a general counsel at Merck in 1999, then holding different leadership roles before taking on the role of CEO in 2011, along with chairman of the board.

Roy Vagelos, the chairman of Regeneron and former CEO of Merck who hired Frazier, said in a statement that he supported his decision to resign.

"I have known Ken for 25 years since I first recruited him to Merck. He is always smart, always ethical and repeatedly makes the right decisions. I applaud his decision to step down from the Council ... Ken is driven by a strong sense of morality in everything he does and he continues to make me proud."

Standing up for Frazier's track record

The pharmaceutical industry, which includes drugmakers like Merck, is often criticized for the rising price of prescription drugs. While Trump decided to use drug prices as a way to call out Frazier for his departure, many rallied around the CEO and his company's track record.  

In January, Merck published a report outlining the company's average list-price increases for its products. Merck was one of only a handful of big pharmaceutical companies to disclose, alongside the list price, the net prices - or the amount Merck actually receives after factoring in rebates and other discounts that drugmakers pay out. In 2016, Merck raised prices by an average of 9.6%. But after factoring in rebates, that was just 5.5% (a rate that's still higher than the rate of inflation). 

That isn't to say Merck isn't a profitable corporation. Keytruda, Merck's blockbuster cancer-immunotherapy drug that first hit the market in 2014, generated $881 million in sales in the second quarter of 2017. A treatment course of cancer immunotherapy can cost more than $100,000, depending on how long patients stay on the drug.

Still, many in the drug industry went out of their way to praise Frazier following Trump's tweet. Brad Loncar, a biotech investor who created the Loncar Cancer Immunotherapy ETF, called Frazier "one of the most decent people in the business." 

Andy Slavitt, the former head of Medicare and Medicaid under the Obama administration, recounted an experience he had working with Frazier. In 2015, the FDA approved Merck's hepatitis C medication, Zepatier. The drug is part of a new group of pricey treatments for the infection, which have list prices as high as $1,000 a pill, adding up to $84,000 per course of treatment. When Zepatier came on the market, Merck set the list price at $54,600 for a course of treatment, a move Slavitt said was bold. 

He said in their interactions that Frazier often "put the big picture ahead of the bottom line."

Slavitt was echoing what Ronald Klain, the former "Ebola czar" under the Obama administration, said in reference to Merck's Ebola vaccine development. In a large trial of almost 6,000 people, Merck showed that its vaccine was 100% effective, which could put the world in a much better position to tackle another outbreak. 

Michael Gilman, CEO of the biotech company Arrakis Therapeutics, gave Frazier "serious props" for speaking out.