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Segment Reporting | 3 Months Ended
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Mar. 31, 2020
Segment Reporting [Abstract] |
Segment Reporting | Segment Reporting The Company’s operations are principally managed on a products basis and include three operating segments, which are the Pharmaceutical, Animal Health and Healthcare Services segments. The Pharmaceutical and Animal Health segments are the only reportable segments. 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. Human health 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. The Animal Health segment discovers, develops, manufactures and markets a wide range of veterinary pharmaceutical and vaccine products, as well as health management solutions and services, for the prevention, treatment and control of disease in all major livestock and companion animal species. The Company also offers an extensive suite of digitally connected identification, traceability and monitoring products. The Company sells its products to veterinarians, distributors and animal producers. The Healthcare Services segment provided services and solutions that focus on engagement, health analytics and clinical services to improve the value of care delivered to patients. The Company has been in the process of divesting the businesses in the Healthcare Services segment. The remaining businesses were divested during the first quarter of 2020. Sales of the Company’s products were as follows:
| Three Months Ended March 31,
| 2020 |  | 2019
($ in millions) | U.S. |  | Int’l |  | Total |  | U.S. |  | Int’l |  | Total
Pharmaceutical: |  |  |  |  |  |  |  |  |  |  |
Oncology |  |  |  |  |  |  |  |  |  |  |
Keytruda | $ | 1,906 |  |  | $ | 1,378 |  |  | $ | 3,284 |  |  | $ | 1,284 |  |  | $ | 985 |  |  | $ | 2,269 |
Alliance revenue - Lynparza (1) | 85 |  |  | 60 |  |  | 145 |  |  | 50 |  |  | 29 |  |  | 79 |
Alliance revenue - Lenvima (1) | 90 |  |  | 38 |  |  | 128 |  |  | 50 |  |  | 24 |  |  | 74 |
Emend | 5 |  |  | 38 |  |  | 43 |  |  | 63 |  |  | 53 |  |  | 117 |
Vaccines |  |  |  |  |  |  |  |  |  |  |
Gardasil/Gardasil 9 | 461 |  |  | 636 |  |  | 1,097 |  |  | 362 |  |  | 476 |  |  | 838 |
ProQuad/M-M-R II/Varivax | 333 |  |  | 102 |  |  | 435 |  |  | 343 |  |  | 153 |  |  | 496 |
Pneumovax 23 | 182 |  |  | 75 |  |  | 256 |  |  | 125 |  |  | 59 |  |  | 185 |
RotaTeq | 140 |  |  | 82 |  |  | 222 |  |  | 154 |  |  | 57 |  |  | 211 |
Vaqta | 30 |  |  | 30 |  |  | 60 |  |  | 29 |  |  | 18 |  |  | 47 |
Hospital Acute Care |  |  |  |  |  |  |  |  |  |  |
Bridion | 143 |  |  | 157 |  |  | 299 |  |  | 119 |  |  | 136 |  |  | 255 |
Noxafil | 8 |  |  | 87 |  |  | 94 |  |  | 91 |  |  | 99 |  |  | 190 |
Invanz | 6 |  |  | 59 |  |  | 64 |  |  | 14 |  |  | 58 |  |  | 72 |
Prevymis | 26 |  |  | 33 |  |  | 60 |  |  | 18 |  |  | 14 |  |  | 32 |
Cancidas | 3 |  |  | 52 |  |  | 55 |  |  | 1 |  |  | 60 |  |  | 61 |
Primaxin | — |  |  | 51 |  |  | 51 |  |  | — |  |  | 59 |  |  | 59 |
Cubicin | 15 |  |  | 31 |  |  | 46 |  |  | 42 |  |  | 46 |  |  | 88 |
Zerbaxa | 20 |  |  | 16 |  |  | 37 |  |  | 12 |  |  | 14 |  |  | 26 |
Immunology |  |  |  |  |  |  |  |  |  |  |
Simponi | — |  |  | 215 |  |  | 215 |  |  | — |  |  | 208 |  |  | 208 |
Remicade | — |  |  | 88 |  |  | 88 |  |  | — |  |  | 123 |  |  | 123 |
Neuroscience |  |  |  |  |  |  |  |  |  |  |
Belsomra | 27 |  |  | 53 |  |  | 79 |  |  | 24 |  |  | 44 |  |  | 67 |
Virology |  |  |  |  |  |  |  |  |  |  |
Isentress/Isentress HD | 75 |  |  | 170 |  |  | 245 |  |  | 108 |  |  | 147 |  |  | 255 |
Zepatier | 18 |  |  | 37 |  |  | 55 |  |  | 33 |  |  | 81 |  |  | 114 |
Cardiovascular |  |  |  |  |  |  |  |  |  |  |
Zetia | (2 | ) |  | 147 |  |  | 145 |  |  | — |  |  | 140 |  |  | 140 |
Vytorin | 3 |  |  | 50 |  |  | 53 |  |  | 3 |  |  | 94 |  |  | 97 |
Atozet | — |  |  | 122 |  |  | 122 |  |  | — |  |  | 94 |  |  | 94 |
Adempas | — |  |  | 56 |  |  | 56 |  |  | — |  |  | 48 |  |  | 48 |
Alliance revenue - Adempas (2) | 49 |  |  | 5 |  |  | 53 |  |  | 40 |  |  | 2 |  |  | 42 |
Diabetes |  |  |  |  |  |  |  |  |  |  |
Januvia | 355 |  |  | 419 |  |  | 774 |  |  | 384 |  |  | 440 |  |  | 824 |
Janumet | 113 |  |  | 390 |  |  | 503 |  |  | 167 |  |  | 364 |  |  | 530 |
Women’s Health |  |  |  |  |  |  |  |  |  |  |
Implanon/Nexplanon | 149 |  |  | 45 |  |  | 195 |  |  | 149 |  |  | 50 |  |  | 199 |
NuvaRing | 26 |  |  | 37 |  |  | 63 |  |  | 185 |  |  | 34 |  |  | 219 |
Diversified Brands |  |  |  |  |  |  |  |  |  |  |
Singulair | 5 |  |  | 151 |  |  | 155 |  |  | 5 |  |  | 186 |  |  | 191 |
Cozaar/Hyzaar | 7 |  |  | 95 |  |  | 102 |  |  | 4 |  |  | 99 |  |  | 103 |
Nasonex | 6 |  |  | 65 |  |  | 71 |  |  | (1 | ) |  | 97 |  |  | 96 |
Arcoxia | — |  |  | 70 |  |  | 70 |  |  | — |  |  | 75 |  |  | 75 |
Follistim AQ | 21 |  |  | 21 |  |  | 41 |  |  | 29 |  |  | 28 |  |  | 57 |
Other pharmaceutical (3) | 409 |  |  | 780 |  |  | 1,194 |  |  | 328 |  |  | 754 |  |  | 1,082 |
Total Pharmaceutical segment sales | 4,714 |  |  | 5,941 |  |  | 10,655 |  |  | 4,215 |  |  | 5,448 |  |  | 9,663 |
Animal Health: |  |  |  |  |  |  |  |  |  |  |
Livestock | 162 |  |  | 577 |  |  | 739 |  |  | 117 |  |  | 494 |  |  | 611 |
Companion Animals | 222 |  |  | 253 |  |  | 475 |  |  | 177 |  |  | 237 |  |  | 414 |
Total Animal Health segment sales | 384 |  |  | 830 |  |  | 1,214 |  |  | 294 |  |  | 731 |  |  | 1,025 |
Other segment sales (4) | 23 |  |  | — |  |  | 23 |  |  | 39 |  |  | — |  |  | 39 |
Total segment sales | 5,121 |  |  | 6,771 |  |  | 11,892 |  |  | 4,548 |  |  | 6,179 |  |  | 10,727 |
Other (5) | 16 |  |  | 149 |  |  | 165 |  |  | 7 |  |  | 82 |  |  | 89 |
| $ | 5,137 |  |  | $ | 6,920 |  |  | $ | 12,057 |  |  | $ | 4,555 |  |  | $ | 6,261 |  |  | $ | 10,816 |
U.S. plus international may not equal total due to rounding.
(1) | Alliance revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs (see Note 3).
(2) | Alliance revenue represents Merck’s share of profits from sales in Bayer’s marketing territories, which are product sales net of cost of sales and commercialization costs (see Note 3).
(3) | Other pharmaceutical primarily reflects sales of other human health pharmaceutical products, including products within the franchises not listed separately.
(4) | Represents sales for the Healthcare Services segment. All the businesses in the Healthcare Services segment were divested as of March 31, 2020.
(5) | Other is primarily comprised of miscellaneous corporate revenues, including revenue hedging activities, as well as third-party manufacturing sales. Other in the first quarter of 2020 and 2019 also includes approximately $75 million and $15 million, respectively, related to the sale of the marketing rights for certain products.
Product sales are recorded net of the provision for discounts, including chargebacks, which are customer discounts that occur when a contracted customer purchases through an intermediary wholesale purchaser, and rebates that are owed based upon definitive contractual agreements or legal requirements with private sector and public sector (Medicaid and Medicare Part D) benefit providers, after the final dispensing of the product by a pharmacy to a benefit plan participant. These discounts, in the aggregate, reduced U.S. sales by $3.2 billion and $2.6 billion for the three months ended March 31, 2020 and 2019, respectively. Consolidated sales by geographic area where derived are as follows:
| Three Months Ended March 31,
($ in millions) | 2020 |  | 2019
United States | $ | 5,137 |  |  | $ | 4,555 |
Europe, Middle East and Africa | 3,534 |  |  | 3,103 |
China | 864 |  |  | 746 |
Japan | 811 |  |  | 799 |
Asia Pacific (other than China and Japan) | 728 |  |  | 745 |
Latin America | 556 |  |  | 561 |
Other | 427 |  |  | 307 |
| $ | 12,057 |  |  | $ | 10,816 |
A reconciliation of segment profits to Income before taxes is as follows:
| Three Months Ended March 31,
($ in millions) | 2020 |  | 2019
Segment profits: |  |  |
Pharmaceutical segment | $ | 7,477 |  |  | $ | 6,574 |
Animal Health segment | 478 |  |  | 415 |
Other segment | 1 |  |  | 2 |
Total segment profits | 7,956 |  |  | 6,991 |
Other profits | 139 |  |  | 30 |
Unallocated: |  |  |
Interest income | 25 |  |  | 89 |
Interest expense | (212 | ) |  | (209 | )
Depreciation and amortization | (381 | ) |  | (359 | )
Research and development | (2,097 | ) |  | (1,843 | )
Amortization of purchase accounting adjustments | (295 | ) |  | (397 | )
Restructuring costs | (72 | ) |  | (153 | )
Other unallocated, net | (1,225 | ) |  | (1,082 | )
| $ | 3,838 |  |  | $ | 3,067 |
Pharmaceutical segment profits are comprised of segment sales less standard costs, as well as selling, general and administrative expenses directly incurred by the segment. Animal Health segment profits are comprised of segment sales, less all cost of sales, as well as selling, general and administrative expenses and research and development costs directly incurred by the segment. For internal management reporting presented to the chief operating decision maker, Merck does not allocate the remaining cost of sales not included in segment profits as described above, research and development expenses incurred in Merck Research Laboratories, the Company’s research and development division that focuses on human health-related activities, 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 measurement of liabilities for contingent consideration, and other miscellaneous income or expense items.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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