Segment Reporting

The Company’s operations are principally managed on a products basis and include four operating segments, which are the Pharmaceutical, Animal Health, Healthcare Services and Alliances segments. The Pharmaceutical segment is the only reportable segment.

The Pharmaceutical segment includes human health pharmaceutical and vaccine products. Human health pharmaceutical products consist of therapeutic and preventive agents, generally sold by prescription, for the treatment of human disorders. The Company sells these human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. Vaccine products consist of preventive pediatric, adolescent and adult vaccines, primarily administered at physician offices. The Company sells these human health vaccines primarily to physicians, wholesalers, physician distributors and government entities. A large component of pediatric and adolescent vaccine sales are made to the U.S. Centers for Disease Control and Prevention Vaccines for Children program, which is funded by the U.S. government. Additionally, the Company sells vaccines to the Federal government for placement into vaccine stockpiles. Sales of vaccines in most major European markets were marketed through the Company’s SPMSD joint venture until its termination on December 31, 2016 (see Note 9).

The Company also has an Animal Health segment that discovers, develops, manufactures and markets animal health products, including vaccines, which the Company sells to veterinarians, distributors and animal producers. The Company’s Healthcare Services segment provides services and solutions that focus on engagement, health analytics and clinical services to improve the value of care delivered to patients.

Sales of the Company’s products were as follows:



Years Ended December 31	2017						2016						2015
	U.S.		Int’l		Total		U.S.		Int’l		Total		U.S.		Int’l		Total
Primary Care and Women’s Health
Cardiovascular
Zetia	$	352	$	992	$	1,344	$	1,588	$	972	$	2,560	$	1,612	$	914	$	2,526
Vytorin	124		627		751		473		668		1,141		479		771		1,251
Atozet	—		225		225		1		146		146		2		34		36
Adempas	—		300		300		—		169		169		—		30		30
Diabetes
Januvia	2,153		1,584		3,737		2,286		1,622		3,908		2,263		1,601		3,863
Janumet	863		1,296		2,158		984		1,217		2,201		976		1,175		2,151
General Medicine and Women’s Health
NuvaRing	564		197		761		576		202		777		515		216		732
Implanon/Nexplanon	496		191		686		420		186		606		367		221		588
Follistim AQ	123		174		298		157		197		355		160		223		383
Hospital and Specialty
Hepatitis
Zepatier	771		888		1,660		488		67		555		—		—		—
HIV
Isentress/Isentress HD	565		639		1,204		721		666		1,387		797		714		1,511
Hospital Acute Care
Bridion	239		465		704		77		405		482		—		353		353
Noxafil	309		327		636		284		312		595		212		275		487
Invanz	361		241		602		329		233		561		322		247		569
Cancidas	20		402		422		25		533		558		24		548		573
Cubicin ⁽¹⁾	189		193		382		906		181		1,087		1,030		97		1,127
Primaxin	10		270		280		4		293		297		8		305		313
Immunology
Remicade	—		837		837		—		1,268		1,268		—		1,794		1,794
Simponi	—		819		819		—		766		766		—		690		690
Oncology
Keytruda	2,309		1,500		3,809		792		610		1,402		393		173		566
Emend	342		213		556		356		193		549		326		209		535
Temodar	16		256		271		15		268		283		7		306		312
Diversified Brands
Respiratory
Singulair	40		692		732		40		874		915		39		892		931
Nasonex	54		333		387		184		352		537		449		409		858
Dulera	261		26		287		412		24		436		515		21		536
Other
Cozaar/Hyzaar	18		466		484		16		494		511		30		637		667
Arcoxia	—		363		363		—		450		450		—		471		471
Fosamax	6		235		241		5		279		284		12		347		359
Vaccines ⁽²⁾
Gardasil/Gardasil 9	1,565		743		2,308		1,780		393		2,173		1,520		388		1,908
ProQuad/M-M-R II/Varivax	1,374		303		1,676		1,362		279		1,640		1,290		214		1,505
Pneumovax 23	581		240		821		447		193		641		378		164		542
RotaTeq	481		204		686		482		169		652		447		163		610
Zostavax	422		246		668		518		168		685		592		157		749
Other pharmaceutical ⁽³⁾	1,246		3,049		4,295		1,345		3,228		4,574		1,473		3,785		5,256
Total Pharmaceutical segment sales	15,854		19,536		35,390		17,073		18,077		35,151		16,238		18,544		34,782
Other segment sales ⁽⁴⁾	1,486		2,785		4,272		1,374		2,489		3,862		1,213		2,454		3,667
Total segment sales	17,340		22,321		39,662		18,447		20,566		39,013		17,451		20,998		38,449
Other ⁽⁵⁾	84		377		460		31		763		794		68		981		1,049
	$	17,424	$	22,698	$	40,122	$	18,478	$	21,329	$	39,807	$	17,519	$	21,979	$	39,498

U.S. plus international may not equal total due to rounding.


⁽¹⁾	Sales of Cubicin in 2015 represent sales subsequent to the Cubist acquisition date.

⁽²⁾

On December 31, 2016, Merck and Sanofi terminated their equally-owned joint venture, SPMSD, which marketed vaccines in most major European markets (see Note 9). Accordingly, vaccine sales in 2017 include sales in the European markets that were previously part of SPMSD. Amounts for 2016 and 2015 do not include sales of vaccines sold through SPMSD, the results of which are reflected in equity income from affiliates included in Other (income) expense, net. Amounts for 2016 and 2015 do, however, include supply sales to SPMSD.


⁽³⁾	Other pharmaceutical primarily reflects sales of other human health pharmaceutical products, including products within the franchises not listed separately.


⁽⁴⁾	Represents the non-reportable segments of Animal Health, Healthcare Services and Alliances.


⁽⁵⁾	Other is primarily comprised of miscellaneous corporate revenues, including revenue hedging activities, as well as third-party manufacturing sales. Other in 2017 and 2016 also includes $85 million and $170 million, respectively, related to the sale of the marketing rights to certain products.

Consolidated revenues by geographic area where derived are as follows:



Years Ended December 31	2017		2016		2015
United States	$	17,424	$	18,478	$	17,519
Europe, Middle East and Africa	11,478		10,953		10,677
Asia Pacific	4,337		3,918		3,825
Japan	3,122		2,846		2,673
Latin America	2,339		2,155		2,825
Other	1,422		1,457		1,979
	$	40,122	$	39,807	$	39,498

A reconciliation of total segment profits to consolidated Income before taxes is as follows:



Years Ended December 31	2017			2016			2015
Segment profits:
Pharmaceutical segment	$	22,586		$	22,180		$	21,658
Other segments	1,834			1,507			1,573
Total segment profits	24,420			23,687			23,231
Other profits	26			481			810
Unallocated:
Interest income	385			328			289
Interest expense	(754		)	(693		)	(672		)
Equity income from affiliates	49			(19		)	135
Depreciation and amortization	(1,378		)	(1,585		)	(1,573		)
Research and development	(9,355		)	(9,084		)	(5,871		)
Amortization of purchase accounting adjustments	(3,056		)	(3,692		)	(4,816		)
Restructuring costs	(776		)	(651		)	(619		)
Loss on extinguishment of debt	(191		)	—			—
Gain on sale of certain migraine clinical development programs	—			100			250
Charge related to the settlement of worldwide Keytruda patent litigation	—			(625		)	—
Gain on divestiture of certain ophthalmic products	—			—			147
Foreign currency devaluation related to Venezuela	—			—			(876		)
Net charge related to the settlement of Vioxx shareholder class action litigation	—			—			(680		)
Other unallocated, net	(2,849		)	(3,588		)	(4,354		)
	$	6,521		$	4,659		$	5,401

Segment profits are comprised of segment sales less standard costs and certain operating expenses directly incurred by the segments. For internal management reporting presented to the chief operating decision maker, Merck does not allocate materials and production costs, other than standard costs, the majority of research and development expenses or general and administrative expenses, nor the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits. In addition, costs related to restructuring activities, as well as the amortization of purchase accounting adjustments are not allocated to segments.

Other profits are primarily comprised of miscellaneous corporate profits, as well as operating profits related to third-party manufacturing sales.

Other unallocated, net includes expenses from corporate and manufacturing cost centers, goodwill and other intangible asset impairment charges, gains or losses on sales of businesses, expense or income related to changes in the estimated fair value of contingent consideration, and other miscellaneous income or expense items.

Equity income from affiliates and depreciation and amortization included in segment profits is as follows:



	Pharmaceutical			All Other			Total
Year Ended December 31, 2017
Included in segment profits:
Equity income from affiliates	$	(7	)	$	—		$	(7	)
Depreciation and amortization	(125		)	(87		)	(212		)
Year Ended December 31, 2016
Included in segment profits:
Equity income from affiliates	$	105		$	—		$	105
Depreciation and amortization	(160		)	(23		)	(183		)
Year Ended December 31, 2015
Included in segment profits:
Equity income from affiliates	$	70		$	—		$	70
Depreciation and amortization	(82		)	(18		)	(100		)

Property, plant and equipment, net by geographic area where located is as follows:



December 31	2017		2016		2015
United States	$	8,070	$	8,114	$	8,467
Europe, Middle East and Africa	3,151		2,732		2,844
Asia Pacific	782		775		842
Latin America	271		234		182
Japan	158		164		164
Other	7		7		8
	$	12,439	$	12,026	$	12,507

The Company does not disaggregate assets on a products and services basis for internal management reporting and, therefore, such information is not presented.