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Segment Reporting
 3 Months Ended
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,
20232022
 ($ in millions)U.S.Int’lTotalU.S.Int’lTotal
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 
Welireg41 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 
RotaTeq180 117 297 175 41 216 
Vaxneuvance94 13 106 5 — 5 
Pneumovax 23
40 56 96 118 55 173 
Vaqta30 10 40 29 7 36 
Hospital Acute Care
Bridion276 210 487 195 199 395 
Prevymis54 75 129 40 54 94 
Primaxin4 76 80 1 58 58 
Dificid62 3 65 49 3 52 
Noxafil14 46 60 10 48 57 
Zerbaxa27 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
Belsomra16 40 56 20 48 69 
Immunology
Simponi— 180 180 — 186 186 
Remicade— 51 51 — 61 61 
Diabetes
Januvia271 280 551 325 454 779 
Janumet56 272 329 63 391 454 
Other pharmaceutical (4)
172 414 584 160 443 602 
Total Pharmaceutical segment sales6,117 6,604 12,721 6,773 7,334 14,107 
Animal Health:
Livestock174 676 849 171 661 832 
Companion Animals308 334 642 302 348 650 
Total Animal Health segment sales482 1,010 1,491 473 1,009 1,482 
Total segment sales6,599 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)20232022
United States$6,659 $7,339 
Europe, Middle East and Africa3,303 4,359 
China1,715 1,143 
Asia Pacific (other than China and Japan)846 930 
Japan758 989 
Latin America661 607 
Other545 534 
 $14,487 $15,901 
A reconciliation of segment profits to Income Before Taxes is as follows:
 Three Months Ended
March 31,
($ in millions)20232022
Segment profits:
Pharmaceutical segment$9,140 $9,501 
Animal Health segment566 585 
Total segment profits9,706 10,086 
Other profits164 194 
Unallocated:
Interest income112 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.