CORRECTED-UPDATE 1-Merck health-reform costs below rivals

NEW YORK, April 23 (Reuters) - Merck & Co said on Friday its costs related to recently approved U.S. healthcare reform will be about $170 million this year and $300 million to $350 million in 2011, which is a far smaller percentage of total company sales than rival drugmakers.

Merck, whose shares jumped as much as 5.4 percent, said costs this year will be due largely to higher price rebates it will be required to give patients in the Medicaid insurance program for the poor.

The company, which has annual sales of about $46 billion following its recent merger with Schering-Plough Corp, said it will take a first-quarter charge of about $150 million related to elimination of a tax benefit for retiree drug coverage. It reports first-quarter results on May 4.

Costs escalate next year, when drugmakers are obliged to offer big discounts to patients in the federal Medicare insurance program for the elderly who have experienced a gap in coverage nicknamed the 'doughnut hole.'

Merck's projected healthcare-reform costs for next year amount to less than 1 percent of its global annual sales, and to roughly 1.5 percent of its annual U.S. sales of about $21 billion.

By contrast, rival U.S. drugmaker Eli Lilly and Co -- whose sales are more concentrated in the United States -- on Monday shook investors by disclosing it would incur $700 million in costs next year from health reform. That translates into about 3 percent of its global annual sales.

Lilly and other U.S. drugmakers, including Abbott Laboratories, cut their 2010 profit forecasts because of the costs related to the reforms.

But Merck on Friday said it continues to target high single-digit compound annual earnings growth for the newly combined company, excluding special items, from 2009 to 2013, when compared with Merck's 2009 earnings.

Merck shares were up nearly 5 percent at $35.41 on Friday afternoon on the New York Stock Exchange.

(Reporting by Ransdell Pierson, editing by Matthew Lewis) Keywords: MERCK/ ([e-mail]; + 646-223-6034; Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.