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Segment Reporting | 3 Months Ended
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Mar. 31, 2023
Segment Reporting [Abstract] |
Segment Reporting | Segment Reporting The Company’s operations are principally managed on a product basis and include two operating segments, Pharmaceutical and Animal Health, 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. 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, animal producers, farmers and pet owners. Sales of the Company’s products were as follows:
| Three Months Ended March 31, |  |
| 2023 |  | 2022 |  |  |  |
($ in millions) | U.S. |  | Int’l |  | Total |  | U.S. |  | Int’l |  | Total |  |  |  |  |  |  |  |  |  |  |  |
Pharmaceutical: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Oncology |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Keytruda | $ | 3,485 |  |  | $ | 2,310 |  |  | $ | 5,795 |  |  | $ | 2,779 |  |  | $ | 2,030 |  |  | $ | 4,809 |  |  |  |  |  |  |  |  |  |  |  |  |
Alliance revenue-Lynparza (1) | 142 |  |  | 133 |  |  | 275 |  |  | 141 |  |  | 125 |  |  | 266 |  |  |  |  |  |  |  |  |  |  |  |  |
Alliance revenue-Lenvima (1) | 153 |  |  | 79 |  |  | 232 |  |  | 156 |  |  | 71 |  |  | 227 |  |  |  |  |  |  |  |  |  |  |  |  |
Alliance revenue-Reblozyl (2) | 30 |  |  | 12 |  |  | 43 |  |  | 27 |  |  | 25 |  |  | 52 |  |  |  |  |  |  |  |  |  |  |  |  |
Welireg | 41 |  |  | 1 |  |  | 42 |  |  | 18 |  |  | — |  |  | 18 |  |  |  |  |  |  |  |  |  |  |  |  |
Vaccines |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gardasil/Gardasil 9 | 416 |  |  | 1,556 |  |  | 1,972 |  |  | 418 |  |  | 1,042 |  |  | 1,460 |  |  |  |  |  |  |  |  |  |  |  |  |
ProQuad/M-M-R II/Varivax | 421 |  |  | 107 |  |  | 528 |  |  | 371 |  |  | 99 |  |  | 470 |  |  |  |  |  |  |  |  |  |  |  |  |
RotaTeq | 180 |  |  | 117 |  |  | 297 |  |  | 175 |  |  | 41 |  |  | 216 |  |  |  |  |  |  |  |  |  |  |  |  |
Vaxneuvance | 94 |  |  | 13 |  |  | 106 |  |  | 5 |  |  | — |  |  | 5 |  |  |  |  |  |  |  |  |  |  |  |  |
Pneumovax 23 | 40 |  |  | 56 |  |  | 96 |  |  | 118 |  |  | 55 |  |  | 173 |  |  |  |  |  |  |  |  |  |  |  |  |
Vaqta | 30 |  |  | 10 |  |  | 40 |  |  | 29 |  |  | 7 |  |  | 36 |  |  |  |  |  |  |  |  |  |  |  |  |
Hospital Acute Care |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bridion | 276 |  |  | 210 |  |  | 487 |  |  | 195 |  |  | 199 |  |  | 395 |  |  |  |  |  |  |  |  |  |  |  |  |
Prevymis | 54 |  |  | 75 |  |  | 129 |  |  | 40 |  |  | 54 |  |  | 94 |  |  |  |  |  |  |  |  |  |  |  |  |
Primaxin | 4 |  |  | 76 |  |  | 80 |  |  | 1 |  |  | 58 |  |  | 58 |  |  |  |  |  |  |  |  |  |  |  |  |
Dificid | 62 |  |  | 3 |  |  | 65 |  |  | 49 |  |  | 3 |  |  | 52 |  |  |  |  |  |  |  |  |  |  |  |  |
Noxafil | 14 |  |  | 46 |  |  | 60 |  |  | 10 |  |  | 48 |  |  | 57 |  |  |  |  |  |  |  |  |  |  |  |  |
Zerbaxa | 27 |  |  | 23 |  |  | 50 |  |  | 18 |  |  | 12 |  |  | 30 |  |  |  |  |  |  |  |  |  |  |  |  |
Cardiovascular |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Alliance revenue-Adempas/Verquvo (3) | 83 |  |  | 16 |  |  | 99 |  |  | 71 |  |  | 1 |  |  | 72 |  |  |  |  |  |  |  |  |  |  |  |  |
Adempas | — |  |  | 59 |  |  | 59 |  |  | — |  |  | 61 |  |  | 61 |  |  |  |  |  |  |  |  |  |  |  |  |
Virology |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Lagevrio | (2) |  |  | 394 |  |  | 392 |  |  | 1,523 |  |  | 1,723 |  |  | 3,247 |  |  |  |  |  |  |  |  |  |  |  |  |
Isentress/Isentress HD | 52 |  |  | 71 |  |  | 123 |  |  | 61 |  |  | 97 |  |  | 158 |  |  |  |  |  |  |  |  |  |  |  |  |
Neuroscience |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Belsomra | 16 |  |  | 40 |  |  | 56 |  |  | 20 |  |  | 48 |  |  | 69 |  |  |  |  |  |  |  |  |  |  |  |  |
Immunology |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Simponi | — |  |  | 180 |  |  | 180 |  |  | — |  |  | 186 |  |  | 186 |  |  |  |  |  |  |  |  |  |  |  |  |
Remicade | — |  |  | 51 |  |  | 51 |  |  | — |  |  | 61 |  |  | 61 |  |  |  |  |  |  |  |  |  |  |  |  |
Diabetes |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Januvia | 271 |  |  | 280 |  |  | 551 |  |  | 325 |  |  | 454 |  |  | 779 |  |  |  |  |  |  |  |  |  |  |  |  |
Janumet | 56 |  |  | 272 |  |  | 329 |  |  | 63 |  |  | 391 |  |  | 454 |  |  |  |  |  |  |  |  |  |  |  |  |
Other pharmaceutical (4) | 172 |  |  | 414 |  |  | 584 |  |  | 160 |  |  | 443 |  |  | 602 |  |  |  |  |  |  |  |  |  |  |  |  |
Total Pharmaceutical segment sales | 6,117 |  |  | 6,604 |  |  | 12,721 |  |  | 6,773 |  |  | 7,334 |  |  | 14,107 |  |  |  |  |  |  |  |  |  |  |  |  |
Animal Health: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Livestock | 174 |  |  | 676 |  |  | 849 |  |  | 171 |  |  | 661 |  |  | 832 |  |  |  |  |  |  |  |  |  |  |  |  |
Companion Animals | 308 |  |  | 334 |  |  | 642 |  |  | 302 |  |  | 348 |  |  | 650 |  |  |  |  |  |  |  |  |  |  |  |  |
Total Animal Health segment sales | 482 |  |  | 1,010 |  |  | 1,491 |  |  | 473 |  |  | 1,009 |  |  | 1,482 |  |  |  |  |  |  |  |  |  |  |  |  |
Total segment sales | 6,599 |  |  | 7,614 |  |  | 14,212 |  |  | 7,246 |  |  | 8,343 |  |  | 15,589 |  |  |  |  |  |  |  |  |  |  |  |  |
Other (5) | 60 |  |  | 214 |  |  | 275 |  |  | 93 |  |  | 220 |  |  | 312 |  |  |  |  |  |  |  |  |  |  |  |  |
| $ | 6,659 |  |  | $ | 7,828 |  |  | $ | 14,487 |  |  | $ | 7,339 |  |  | $ | 8,563 |  |  | $ | 15,901 |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. plus international may not equal total due to rounding. (1) Alliance revenue for Lynparza and Lenvima represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs (see Note 3). (2) Alliance revenue for Reblozyl represents royalties and, for 2022, also includes the receipt of a regulatory approval milestone payment (see Note 3). (3) Alliance revenue for Adempas/Verquvo 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). (4) Other pharmaceutical primarily reflects sales of other human health pharmaceutical products, including products within the franchises not listed separately. (5) Other is primarily comprised of miscellaneous corporate revenue, including revenue hedging activities which increased sales by $99 million and $69 million for the three months ended March 31, 2023 and 2022, respectively, as well as revenue from third-party manufacturing arrangements (including sales to Organon). Other for the three months ended March 31, 2023 and 2022 also includes $51 million and $114 million, respectively, related to upfront and milestone payments received by Merck for out-licensing arrangements. 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 $3.1 billion and $2.9 billion for the three months ended March 31, 2023 and 2022, respectively. Consolidated sales by geographic area where derived are as follows:
| Three Months Ended March 31, |  |
($ in millions) | 2023 |  | 2022 |  |  |  |
United States | $ | 6,659 |  |  | $ | 7,339 |  |  |  |  |
Europe, Middle East and Africa | 3,303 |  |  | 4,359 |  |  |  |  |
China | 1,715 |  |  | 1,143 |  |  |  |  |
Asia Pacific (other than China and Japan) | 846 |  |  | 930 |  |  |  |  |
Japan | 758 |  |  | 989 |  |  |  |  |
Latin America | 661 |  |  | 607 |  |  |  |  |
Other | 545 |  |  | 534 |  |  |  |  |
| $ | 14,487 |  |  | $ | 15,901 |  |  |  |  |
A reconciliation of segment profits to Income Before Taxes is as follows:
| Three Months Ended March 31, |  |
($ in millions) | 2023 |  | 2022 |  |  |  |
Segment profits: |  |  |  |  |  |  |
Pharmaceutical segment | $ | 9,140 |  |  | $ | 9,501 |  |  |  |  |
Animal Health segment | 566 |  |  | 585 |  |  |  |  |
Total segment profits | 9,706 |  |  | 10,086 |  |  |  |  |
Other profits | 164 |  |  | 194 |  |  |  |  |
Unallocated: |  |  |  |  |  |  |
Interest income | 112 |  |  | 7 |  |  |  |  |
Interest expense | (242) |  |  | (243) |  |  |  |  |
Amortization | (543) |  |  | (699) |  |  |  |  |
Depreciation | (398) |  |  | (378) |  |  |  |  |
Research and development | (4,147) |  |  | (2,446) |  |  |  |  |
Restructuring costs | (67) |  |  | (53) |  |  |  |  |
Charge for Zetia antitrust litigation settlements | (573) |  |  | — |  |  |  |  |
Other unallocated, net | (362) |  |  | (1,607) |  |  |  |  |
| $ | 3,650 |  |  | $ | 4,861 |  |  |  |  |
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 arrangements. 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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8924-108599 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8981-108599 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8721-108599 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9031-108599 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (f) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (e) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9038-108599 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (d) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 22 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8736-108599 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9054-108599 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 15 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8657-108599 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8721-108599 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI https://asc.fasb.org/topic&trid=2134510 + Details
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