Segment Reporting

9 Months Ended

Sep. 30, 2011

Segment Reporting [Abstract]

Segment Reporting

16. Segment Reporting

     The Company’s operations are principally managed on a products basis and are comprised of four operating segments — Pharmaceutical, Animal Health, Consumer Care and Alliances (which includes revenue and equity income from the Company’s relationship with AZLP). The Animal Health, Consumer Care and Alliances segments are not material for separate reporting and are included in all other in the table below. The Pharmaceutical segment includes human health pharmaceutical and vaccine products marketed either directly by the Company or through joint ventures. 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 vaccines is sold 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 Company also has animal health operations that discover, develop, manufacture and market animal health products, including vaccines, which the Company sells to veterinarians, distributors and animal producers. Additionally, the Company has consumer care operations that develop, manufacture and market over-the-counter, foot care and sun care products, which are sold through wholesale and retail drug, food chain and mass merchandiser outlets. Segment composition reflects certain managerial changes that have been implemented. Consumer Care product sales outside the United States and Canada, previously included in the Pharmaceutical segment, are now included in the Consumer Care segment. Segment disclosures for prior periods have been recast on a comparable basis with 2011.

     Revenues and profits for these segments are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
($ in millions)	2011		2010		2011		2010
Segment revenues:
Pharmaceutical segment	$	10,354	$	9,523	$	30,534	$	28,826
All other segment revenues		1,559		1,453		4,833		4,548
	$	11,913	$	10,976	$	35,367	$	33,374
Segment profits:
Pharmaceutical segment	$	6,355	$	5,851	$	19,014	$	17,578
All other segment profits		709		598		2,080		1,945
	$	7,064	$	6,449	$	21,094	$	19,523

     Segment profits are comprised of segment revenues less certain elements of materials and production costs and operating expenses, including components of equity income or loss from affiliates and depreciation and amortization expenses. For internal management reporting presented to the chief operating decision maker, Merck does not allocate production costs, other than standard costs, 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.

     Sales of the Company’s products were as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
($ in millions)	2011		2010		2011		2010
Pharmaceutical:
Cardiovascular
Zetia	$	614	$	571	$	1,788	$	1,668
Vytorin		469		485		1,407		1,452
Integrilin		53		63		172		203
Diabetes and Obesity
Januvia		846		600		2,364		1,710
Janumet		350		247		977		666
Diversified Brands
Cozaar/Hyzaar		404		423		1,236		1,690
Zocor		110		114		345		347
Propecia		112		109		330		322
Claritin Rx		55		53		240		210
Remeron		65		50		181		160
Vasotec/Vaseretic		57		69		173		191
Proscar		58		58		171		172
Infectious Disease
Isentress		343		278		972		777
PegIntron		163		168		482		539
Cancidas		150		135		476		437
Primaxin		124		135		397		452
Invanz		107		91		296		249
Avelox		59		59		227		224
Noxafil		61		52		171		150
Crixivan/Stocrin		56		49		151		148
Rebetol		38		55		138		166
Victrelis		31		—		53		—
Neurosciences and Ophthalmology
Maxalt		156		133		460		401
Cosopt/Trusopt		124		114		360		353
Oncology
Temodar		223		254		704		799
Emend		98		91		305		268
Intron A		47		50		143		155
Respiratory and Immunology
Singulair		1,336		1,215		4,018		3,638
Remicade		561		661		2,156		2,004
Nasonex		266		259		962		917
Clarinex		128		131		492		486
Arcoxia		108		94		321		284
Simponi		74		27		203		55
Asmanex		42		48		149		155
Proventil		38		43		117		155
Dulera		22		2		59		2
Vaccines (1)
Gardasil		445		316		935		768
ProQuad/M-M-R II/Varivax		391		434		927		1,093
RotaTeq		184		119		457		350
Pneumovax		133		110		276		220
Zostavax		108		23		254		136
Women’s Health and Endocrine
Fosamax		215		220		644		692
NuvaRing		159		134		455		414
Follistim AQ		129		119		404		389
Implanon		80		64		220		165
Cerazette		74		56		199		160
Other pharmaceutical (2)		888		942		2,567		2,834
Total Pharmaceutical segment sales		10,354		9,523		30,534		28,826
Other segment sales (3)		1,559		1,453		4,833		4,548
Total segment sales		11,913		10,976		35,367		33,374
Other (4)		109		149		386		519
	$	12,022	$	11,125	$	35,753	$	33,893

(1)	These amounts do not reflect sales of vaccines sold in most major European markets through the Company’s joint venture, Sanofi Pasteur MSD, the results of which are reflected in Equity income from affiliates. These amounts do, however, reflect supply sales to Sanofi Pasteur MSD.
(2)	Other pharmaceutical primarily includes sales of other human pharmaceutical products, including products within the franchises not listed separately.
(3)	Reflects other non-reportable segments, including Animal Health and Consumer Care, and revenue from the Company’s relationship with AZLP primarily relating to sales of Nexium, as well as Prilosec. Revenue from AZLP was $299 million and $345 million for the third quarter of 2011 and 2010, respectively, and $928 million and $950 million for the first nine months of 2011 and 2010, respectively.
(4)	Other revenues are primarily comprised of miscellaneous corporate revenues, third-party manufacturing sales, sales related to divested products or businesses and other supply sales not included in segment results.

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
($ in millions)	2011			2010			2011			2010
Segment profits	$	7,064		$	6,449		$	21,094		$	19,523
Other profits		31			53			67			168
Adjustments		242			73			718			323
Unallocated:
Interest income		45			23			137			57
Interest expense		(189	)		(173	)		(557	)		(539	)
Equity income from affiliates		47			98			62			98
Depreciation and amortization		(619	)		(699	)		(1,814	)		(1,985	)
Research and development		(1,954	)		(2,322	)		(6,048	)		(6,552	)
Amortization of purchase accounting adjustments		(1,306	)		(1,540	)		(4,249	)		(5,576	)
Restructuring costs		(119	)		(50	)		(773	)		(864	)
Arbitration settlement charge		—			—			(500	)		—
Legal reserve		—			(950	)		—			(950	)
Gain on AstraZeneca option exercise		—			—			—			443
Other expenses, net		(890	)		(464	)		(2,384	)		(1,792	)
	$	2,352		$	498		$	5,753		$	2,354

     Other profits are primarily comprised of miscellaneous corporate profits, as well as operating profits related to third-party manufacturing sales, divested products or businesses and other supply sales. Adjustments represent the elimination of the effect of double counting certain items of income and expense. Equity income from affiliates includes taxes paid at the joint venture level and a portion of equity income that is not reported in segment profits. Other expenses, net include expenses from corporate and manufacturing cost centers and other miscellaneous income (expense), net.