I suspect that the simplest way will be to do two runs through your printer.
The only formatting a label merge knows is to put things in the top left of
each cell. So, merge to a new document and do your formatting in the new
document. If it will work, run the forms through your printer twice. (Do
this on plain paper first, to save on the cost of errors.) Otherwise...

Not as a merge, create a new document based on the label format. This will
be a table. It will be a starting place for you to look at. Make sure you
have gridlines displayed.

Now create yet another new document, this time in landscape mode. Set it up
to have the same table arrangement as the other document, except sideways.
In this document you will be able to rotate the text in the table cells by
90 degrees clockwise or counterclockwise. Put merge fields in these rotated
cells with your fields. Format them the way you want.

Good luck.