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Merck CEO: Act now to prevent higher hepatitis C costs later

May the best drug win. That's how Merck Chief Executive Ken Frazier views the competition to treat the as many as 150 million people worldwide with hepatitis C.

The pharma giant has a combination of drugs in late-stage trials that would provide patients with hepatitis C an option that doesn't require injections of medicines, including interferon, which can cause nasty side effects.

Merck's treatment received breakthrough therapy designation from the Food and Drug Administration, which aims to speed important drugs to market. However, medicines from Gilead Sciences, Bristol-Myers Squibb, and AbbVie have the same status.

So how will Merck compete?

"I think, over time, the best drug wins," Frazier said in an interview with CNBC at Merck Research Laboratories in Boston on Tuesday. "We think our combination's going to be a very formidable competitor. It's an all-oral, once-a-day pill, it doesn't have interferon, it works across many genotypes and it can be used for patients who have comorbidities."

Frazier didn't say that the way to compete is on pricea particularly important point now as Gilead's drug, Sovaldi, has become a lightning rod for criticism over drug pricing.

Sovaldi, which was approved in December 2013, costs $84,000 for a 12-week course of treatment, a price that's drawn scrutiny from health insurers, patient advocacy groups and Congress. The drug drew $2.27 billion in first-quarter revenue.

Ken Frazier, president and CEO of Merck.
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Ken Frazier, president and CEO of Merck.

Frazier reiterated a stance Gilead has taken, noting that use of effective drugs for hepatitis C could prevent greater costs associated with the disease later in its course. Hepatitis C can lay dormant for years before showing symptoms. It also comes in multiple forms, called genotypes, and often patients have other maladies, known as comorbidities.

More than 75 percent of adults infected are baby boomers, and most don't know they're infected, according to the Centers for Disease Control and Prevention. Over time, the virus can cause liver damage, scarring and cancer, making it the leading cause of liver transplants.

Read MoreCan Gilead's Sovaldi rescue biotech?

"People don't realize that the real impact to society of hepatitis C is yet to be felt, because the wave of cirrhotic patients is about eight years from now," Frazier said. "There's a lot that we need to do as a society to prevent all the costs of liver transplants and the like."

At the moment, Gilead's Sovaldi is an early leader on the market, while drugs from Merck, AbbVie and Bristol-Myers are still in testing. Johnson & Johnson also has a new hepatitis C drug on the market, called Olysio.

The World Health Organization is among critics of the new drugs' pricing, saying that while the production cost of the medicines is low, "the initial prices set by companies are very high and likely to make access to these drugs difficult even in high-income countries."

—By CNBC's Meg Tirrell.

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