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Segment Reporting
 3 Months Ended
Mar. 31, 2021
Segment Reporting [Abstract]  
Segment Reporting Segment Reporting
The Company’s operations are principally managed on a products basis and include two operating segments, which are the Pharmaceutical and Animal Health segments, both of which are 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 Company previously had a Healthcare Services segment that provided services and solutions focused on engagement, health analytics and clinical services to improve the value of care delivered to patients. The Company divested the remaining businesses in this segment during the first quarter of 2020.
Sales of the Company’s products were as follows:
Three Months Ended March 31,
20212020
 ($ in millions)U.S.Int’lTotalU.S.Int’lTotal
Pharmaceutical:
Oncology
Keytruda$2,181 $1,718 $3,899 $1,906 $1,378 $3,284 
Alliance revenue - Lynparza (1)
118 110 228 85 60 145 
Alliance revenue - Lenvima (1)
85 44 130 90 38 128 
Vaccines
Gardasil/Gardasil 9
313 604 917 461 636 1,097 
ProQuad/M-M-R II/Varivax
333 117 449 333 102 435 
Pneumovax 23
73 99 171 182 75 256 
RotaTeq118 41 158 140 82 222 
Vaqta25 9 34 30 30 60 
Hospital Acute Care
Bridion167 173 340 143 157 299 
Prevymis35 47 82 26 33 60 
Noxafil15 52 67 8 87 94 
Primaxin— 65 65 — 51 51 
Cancidas3 55 57 3 52 55 
Invanz4 52 57 6 59 64 
Zerbaxa(2)(6)(8)20 16 37 
Immunology
Simponi— 214 214 — 215 215 
Remicade— 85 85 — 88 88 
Neuroscience
Belsomra18 61 79 27 53 79 
Virology
Isentress/Isentress HD
71 138 209 75 170 245 
Cardiovascular
Zetia2 90 92 (2)147 145 
Vytorin2 38 41 3 50 53 
Atozet— 112 112 — 122 122 
Alliance revenue - Adempas (2)
68 6 74 49 5 53 
Adempas— 55 55 — 56 56 
Diabetes
Januvia348 461 809 355 419 774 
Janumet84 401 486 113 390 503 
Women’s Health
Implanon/Nexplanon141 42 183 149 45 195 
NuvaRing21 24 45 26 37 63 
Diversified Brands
Singulair4 102 107 5 151 155 
Cozaar/Hyzaar3 87 90 7 95 102 
Arcoxia— 56 56 — 70 70 
Follistim AQ25 27 52 21 21 41 
Nasonex2 41 43 6 65 71 
Other pharmaceutical (3)
384 814 1,197 447 886 1,338 
Total Pharmaceutical segment sales
4,641 6,034 10,675 4,714 5,941 10,655 
Animal Health:
Livestock157 662 819 162 577 739 
Companion Animals280 319 599 222 253 475 
Total Animal Health segment sales
437 981 1,418 384 830 1,214 
Other segment sales (4)
— — — 23 — 23 
Total segment sales5,078 7,015 12,093 5,121 6,771 11,892 
Other (5)
58 (72)(13)16 149 165 
 $5,136 $6,943 $12,080 $5,137 $6,920 $12,057 
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 fully divested in the first quarter of 2020.
(5)    Other is primarily comprised of miscellaneous corporate revenues, including revenue hedging activities, as well as third-party manufacturing sales.
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 $3.3 billion and $3.2 billion for the three months ended March 31, 2021 and 2020, respectively.
Consolidated sales by geographic area where derived are as follows:
Three Months Ended
March 31,
($ in millions)20212020
United States$5,136 $5,137 
Europe, Middle East and Africa3,729 3,534 
China927 864 
Asia Pacific (other than China and Japan)751 728 
Japan730 811 
Latin America569 556 
Other238 427 
 $12,080 $12,057 
A reconciliation of segment profits to Income before taxes is as follows:
 Three Months Ended
March 31,
($ in millions)20212020
Segment profits:
Pharmaceutical segment$7,555 $7,582 
Animal Health segment572 479 
Other segment— 1 
Total segment profits8,127 8,062 
Other profits(34)139 
Unallocated:
Interest income11 25 
Interest expense(200)(212)
Amortization(534)(410)
Depreciation(358)(377)
Research and development(2,358)(2,097)
Restructuring costs(298)(72)
Other unallocated, net(894)(1,220)
 $3,462 $3,838 
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 intangible assets and 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.