Pharmaceutical Industry and E. Merck Ag
Historical background of the business Today Merck & Co, Inc. is one of the most recognizable companies in the pharmaceutical industry. When asked about Merck, most people think that it is and always has been a US company. However, the company’s history can be traced all the way back to the 1600’s where it was started in Darmstadt, Germany. Friedrich Jacob Merck purchased a local store in 1668 where he prepared and sold medicines. The store was called “At the sign of the Angels” and would remain in the Merck family for many generations (Merck & co. , 2000). In 1827, Heinrich Emmanuel Merck and renamed E.
MERCK AG transformed the store into a drug manufacturer. The pharmacy was so successful that by 1855 E. Merck AG was selling medications worldwide. It was at this time that Merck decided to send a company officer to the United States to set up a sales office. Once in the U. S. in 1899, Heinrich’s grandson George Merck bought one hundred and fifty acres in Rahway, New Jersey. A couple of years later, in 1903, Merck started production in its new U. S. headquarters. By this time Merck was not just producing drugs, it was also starting to produce different types of chemicals and there was also a research lab.
When the United States entered World War I in 1917, George Merck, fearing that Germany would win the war and take over his company, sold all of his stock to a US company named Alien Property Custodian (Merck & Co. , 2000). This ended all of Merck’s ties to Germany. After the war, George Merck regained a controlling share of the company in 1919 and from that day forward Merck has always been a publicly owned company. George Merck continued to grow the company until his death in 1926 at which time his son, George W. Merck took over. In 1926, George W.
Merck decided to merge the company with Powers-Weightman-Rosengarten, which was a Philadelphia, based pharmaceutical company. In 1927 the company was officially incorporated and renamed Merck & Co. Inc. This merger gave George W. Merck the capital he needed to recruit new chemists and biologists, which lead to the discovery of vitamin B12. Vitamin B12 was a huge success, but because the war had been over for several years, new foreign companies were continually underselling Merck. With no new products in sight, George W. Merck decided to merge with a Baltimore company by the name of Sharp & Dohme, Inc.
This merger was believed to have saved Merck from going under; it gave Merck new marketing facilities and a new distribution network, which it desperately needed. By the time George W. Merck died in 1957, the company had hit the one hundred million dollar mark. Not only was the dollar mark significant, George’s death marked the last time a Merck family member would ever be in control. From the 60’s on, Merck continued to raise its market share taking advantage of its research and development, which continually produced new and popular drugs every year.
Today Merck employs over fifty five thousand people and produces some of the most well known pharmaceutical products on the market. With profits totaling a little fewer than six billion dollars and annual sales of over twelve and half billion dollars, Merck is considered one of the best pharmaceutical companies in the world. Products Throughout the years, Merck has made itself a reputation for developing high quality products that consumers know will work. The drugs are developed to help with all different types of problems.
Some medicines are used for every day symptoms like a stuffed up nose and some are used for more serious illnesses like the treatment of HIV. Since Merck & Co. , Inc. was founded; it has always made a point to have an above average research and development program so that it could appeal to a wide variety of consumers no matter what symptoms they were trying to cure. Some of the first products ever distributed by Merck in the 1820’s were morphine, codeine and cocaine. These three products allowed Merck enough revenue to begin research on other types of products.
In 1933 Merck scientists discovered vitamin B12 which was, at the time, used as a therapeutic drug. The sales from B12 alone were enough to carry Merck into the next decade. Although Merck scientists discovered cortisone, which is a steroid, and streptomycin, which is used to treat tuberculosis, the 1940’s, 50’s and 60’s were fairly slow periods for Merck. Other products such as Aldomet, which is used to treat depression, Indocin and Clinoril which are anti-inflammatory drugs, were developed but none of them had the impact on revenue that Merck was used to.
It was not until the mid to late 70’s that Merck came out with some new products that really connected with consumers. It was at this time that Timoptic and Enalapril were invented. Timoptic is a hepatitis vaccine that helps with the treatment of glaucoma and Enalapril is a high blood pressure medication. Sales from these two drugs were well over a half a billion dollars by the early 1980’s. Things only got better for Merck from the 1980’s through 2000. During this time Merck produced over twenty new drugs.
Some of the more popular drugs include Cosopt, used in the treatment of glaucoma, Propecia, which is used to treat hair loss, Maxalt, which is used for migraine headaches, and Singulair, which treats cases of asthma. Although all of these medications worked out very well for Merck’s profit, there were three drugs that stood above the rest. Vasotec was a treatment for congestive heart failure and Merck’s first billion dollar a year drug. That was followed by Vioxx which is a pain medication used to treat arthritis and also a billion dollar a year seller. The most popular drug Merck ever produced was Zocor.
Zocor is a cholesterol-fighting drug that was introduced in 1992. Not only was zocor a multi-billion dollar a year drug, it was one of the most successful selling pharmaceutical drugs ever (Merck & Co. , 2000). Zocor accounted for over four billion dollars in worldwide sales in 2004 alone. With products like these and a continued dedication to research and development, Merck will be a major player in the pharmaceutical industry for many years to come. Company Locations Merck and its subsidiaries have locations all over the world. Their main headquarters is currently located in Whitehouse Station, New Jersey.
Merck takes pride in being a global healthcare leader. According to their website they currently have 83,000 employees worldwide (Merck. com). In 2009, Merck merged with competitor Shering-Plough, which extended Merck’s reach into the global economy. According to Muse (2011), Merck has over 75 locations, “Drawing from its locations in 77 countries, Merck’s worldwide sales for 2009 were $27. 4 billion (Muse p. 251). ” These locations stretch across the continental United States from New Jersey to San Francisco. The worldwide locations include factories in Europe, the Middle East, Africa, and Japan.
Merck’s revenues continue to climb with their global growth. The revenues recorded in various regions by Merck in 2012 include, “ |2012 Revenues |United States | |(By Geographic Region) |$20. 4 billion | | | | | |Europe, Middle East and Africa | | |$13. billion | | | | | |Japan | | |$5. 1 billion | | | | | |Other | | |$8. billion (Merck. com). ” | | | | Merck is seen as a leader on the stage of global expansion. It is one of the largest pharmaceutical companies in the world. Merck continues to grow and expand its influence in an effort to provide their vaccines and medicines across the globe. Their recent merger will allow them to test markets that they have not had experience in before, and help increase their profits globally.
Style of International Business Merck has been on the forefront of International Business and is one of the leaders at adapting to new employees in diverse geographic locations. The company has maintained a policy of progressiveness in their workplace. According to Muse (2011) Merck is one of the leaders in this field. They have been ranked among the Top 50 Companies for Diversity and the 100 Best Corporate Citizens List (Muse p. 251). ” Merck makes diversity one of their top priorities and it is well documented on their website. They have created a voice for the different diverse peoples within their company.
It is a new way to maintain communication with the feelings and thoughts of various groups in different regions throughout the world. Merck calls these Global Constituency Groups. According to their website, “We’ve taken an innovative, global approach to our diversity strategy through the creation of Global Constituency Groups. These groups represent the diverse constituencies in our company, our customers and society, in general. The members represent different geographies, cultures and areas of expertise. Together they reflect Merck employees and customers globally”. Merck. com) With this process, Merck is able to keep up with the problems and successes within the different constituencies throughout the company. Merck’s plan to achieve diversity within their company begins from the leadership positions. Filling these positions with people mindful of diversity has allowed the company to continue to keep its place among the most diverse companies in the world. According to Merck, “Diversity and inclusion are integrated into our leadership model, and are considered an essential leadership skill for all of our employees (Merck. com). Merck preaches this diversity not only to their employees, but their suppliers as well. “At Merck, we believe that having a diverse supplier base helps us better understand and anticipate the needs of the people we serve (Merck. com). ” This creates a positive culture throughout the company of acceptance and tolerance towards others. It is a progressive policy that allows Merck to continue to flourish and it is a model style of International Business. Strategic Alliances Merck has made many strategic alliances throughout the years to help improve their products or supply them to a wider range of people.
In the late 80’s Merck made an alliance with one of the biggest companies in the United States, Johnson & Johnson. According to the International Directory of Company Histories (2000), “In 1989 Merck joined with Johnson & Johnson in a venture to develop over-the-counter (OTC) versions of Merck’s prescription medications, initially for the U. S. market, later expanded to Europe and Canada (encyclopedia. com)”. This helped Merck products become more easily available to consumers throughout the world. At the time this alliance was hailed as a blockbuster deal that would create growth for both companies.
This deal lasted over twenty years and was very profitable for both parties. When Merck sold their stake in the deal in 2011, they received $175 million for it. The largest alliance Merck has made recently is the acquisition, or reverse merger, of their rival Schering-Plough. The $40 billion deal was made in an effort to keep up with other companies in the pharmaceutical market, especially Pfizer. According to Singer (2009), “The merger would join pharmaceutical companies that had combined sales of $46. 9 billion last year (p. 1). ” This alliance expanded Merck globally and allowed it to tap into Schering-Plough’s resources.
These resources ranged from new drugs for Merck to market, to a bigger pipeline to promote their own drugs. According to Singer (2009), “The merger gives it access to successful brand-name Schering products with much longer patents, like the prescription allergy spray Nasonex. And Merck could capitalize on Schering’s investments in promising biotechnology drugs (Singer p. 1 ). ” This alliance helped Merck continue to be a formidable competitor in the global pharmaceutical market. With this deal happening only a few short years ago, Merck continues to grow and utilize its new resources in the market today.
Exports Merck’s exports consist of various types of pharmaceuticals. Some of their most profitable exports include Singulair, Fosamax, Nasonex, and Vytorin. Singulair is used to treat seasonal allergies like other drugs such as Claritin and Allegra. It can also be used to prevent asthma attacks. It has been very profitable for Merck in the past. Yet, sales began to dramatically fall when media reports about the disturbing side effects of Singulair began to surface. The worst of these side effects included depression and suicidal thoughts.
Still, even in spite of Singulair’s profit drop, Merck continues to make large amounts of money off of the export. Nasonex and Vytorin are two products that were a result of the Merck and Schering-Plough merger. Nasonex is a nasal spray used to treat seasonal allergies in adults and children. It has proved to be a positive part of the merger, becoming one of Merck’s most profitable products. Vytorin was already part of a joint effort between Merck and Schering-Plough even before the merger. Vytorin is a combination of ezetimibe and simvastatin used to treat cholesterol levels.
They created and marketed the product together. After the merger, Merck continued to sell and market Vytorin. Fosamax is another popular export of the Merck Company. It is used to treat osteoporosis and other bone diseases. Fosamax was previously one of Merck’s best selling drugs. Yet, because of patent problems, they have lost large amount of money. According to Singer (2009) “Merck’s former blockbuster bone drug Fosamax has gone generic, and in a few years the same thing will happen to its best-selling allergy and asthma drug Singulair (pg. 1 ). ” These exports have been Merck’s main products in the past.
In the future, with their recent merger, they should be able to develop new products that can help them rebound from the losses they took from products like Fosamax and Singulair. Transportation In order to effectively and efficiently deliver their products throughout the world, Merck has contracted UPS to deliver them. As of June 2011, the joint venture known as MSD has announced that it would include and take care of Merck’s logistics and distribution around the world, which till now only managed Merck’s distribution, warehousing and transportation in North America (Berman, 2011).
According to Willie A. Deese, executive vice president and president, Merck Manufacturing Division,“ This expanded agreement with UPS allows us to focus on our core business as a global healthcare leader that looks for innovative ways to bring our medicines and vaccines to patients in emerging markets and markets around the world” (businesswire, 2011). The collaboration, which began in early 2003 with UPS just taking care of the transportation and delivery of products over time, has extended to North American distribution, warehousing and multi-modal transportation services (businesswire, 2011).
Merck now entrusted UPS with taking care of their logistics in countries like China, Brazil as well as Latin America among others. UPS also stated that it would establish proper facilities in order to store goods and vaccines so in order to ensure quicker and efficient delivery system (Berman, 2011). Merck believes that this extended partnership with UPS would result in being cost effective in the long run. Although Merck does rely on other logistic companies as well, but they rely more heavily on UPS and this current agreement will only further increase the company’s trust in the logistics firm (businesswire, 2011).
Ethical Standards The code of ethics from Merck’s website (2013) states: Being a good corporate citizen means that we comply with all applicable laws, rules and regulations. Also, we serve our society, from the local communities in which we operate to the national and international levels, by supporting a number of programs, including those that improve health and promote environmental sustainability. All of our activities are guided by our corporate responsibility principle of “Helping the World Be Well”. (p. 1) Ethical Violations Merck & Co. ave developed some great products that have helped many people. They have even done some amazing humanitarian work that follows their mission of their code of ethics, which is to help the people of this world be as healthy as they can. For example, After World War II, many people who were living in Japan could not afford the Merck developed drug streptomycin (Miller & Goldman, 2003). Streptomycin was the first drug to fight tuberculosis. Merck decided to sell streptomycin at a much lower cost in Japan so it could be distributed to those who needed it and could not afford it at market value.
Merck is also one of the nation’s largest donors to UNICEF. One of the ways that Merck has partnered with UNICEF is by donating a drug called Mectizan. Mectizan is a drug that Merck has developed to fight river blindness, and Merck has teamed up with UNICEF in order to distribute Mectizan to anyone who needs it (Unicef, 2013). But the business strategies for Merck have not always been as ethically sound as it may appear. On September 30th 2004 the drug that Merck had created to treat arthritis and severe pain, Vioxx, was pulled off the shelves for good.
The reason behind shutting down this drug was that it was found to have caused serious illnesses after long term use, including heart attacks and strokes (Kay, 2004). Vioxx was withdrawn only five years after being introduced, but in that short time had effected many, in those five years there had been over eighty million prescriptions for Vioxx (Kay, 2004). Dr David Graham, the associate director for science and medicine at the Office of Drug Safety, estimates that Vioxx caused between 88,000 and 139,000 heart attacks, of which thirty to forty percent have most likely died (Kay, 2004).
But did Merck know of this threat before they started to market the drug? Before Merck released Vioxx in 1999 their own scientist conducted tests on Vioxx while developing it. In 1997 these scientist did a study and found that patients who were being tested on were six times more likely to have heart complications when using Vioxx compared to other arthritis drugs. But this study was never released and the data was never sent to the FDA (Culp & Isobel, 2007).
Scientist also completed a VIGOR (Vioxx Gastrointestinal Outcomes Research) test on the drug and found evidence that people who take Vioxx had a five times higher chance of having a heart attack (Cahana & Mauron, 2006). In 2001 Merck scientist had another test called “meta-analysis”. The meta-analysis tested 20,000 patients, and again showed that these patients were twice as likely to have a heart attack while taking Vioxx compared to other drugs (Culp & Isobel, 2007). Not only did Merck know about these risks and kept the results to themselves, they also trained their sales people on how to dodge the subject.
In order to train the sales force who were going to be selling Vioxx to doctors, Merck developed a card game called dodgeball. The purpose of this game was to teach the sales force different ways to dodge questions asked by doctors about the effects Vioxx has on the heart (Daily, 2005). This again proves that Merck knew of these risks caused by taking Vioxx, but was trying to make sure that information was kept in house. Another instance where Merck lacked good ethical decision making is when they decided to pay Elsevier to publish a magazine for them. Elsevier is a publishing company that focuses mainly on medical and scientific literature.
Merck’s marketing team decided to pay Elsevier to publish a journal called The Australiasian Journal of Bone & Joint Medicine. This journal was made to look like any other peer-reviewed medical journal but it was far from it. Merck’s marketing department handpicked the articles that they wanted to put in this journal, with the purpose of trying to control what articles were chosen to be in the journal. They took advantage of this situation by picking articles that favored Merck products and disguising this marketing scheme as a peer review journal (Grant, 2009).
For instance in the second issue twenty one of the twenty nine articles spoke about Merck’s products in a favorable way, nine of them positively talking about Vioxx (Grant, 2009). Merck also had an ethical downfall when management decided to change the prices of their product. Not only was Merck paying doctors to prescribe Merck medicine when patients were in the hospital, Merck also started to give hospitals a ninety two percent discount on their medicine; with the idea that after the patient was discharged they would want to stay on the same medicine (Merck to pay whistleblower, 2008).
The insurance company would pay full price for the drugs after the patient was discharged and that is where Merck would bring in their profit. An employee within Merck saw what was going on and didn’t approve. A lawsuit quickly followed and Merck ended up paying $671 million, including sixty eight million dollars to the whistleblower (Merck to pay whistleblower, 2008). Even after settling Merck did not think they were in the wrong with this pricing, as Merck to pay whistleblower (2008) reported Merck making a statement saying they “stands by its pricing strategies but is keen to resolve the dispute” (p. 2). Unfortunately for Merck, Vioxx isn’t the only drug that has caused people to question Merck’s ethical decision making when it comes to their customers. As noted above, Merck released a drug called Propecia to the public that helped men with baldness. The problem with Propecia is that men are starting to see a great increase in sexual problems. Merck says that only one out of fifty men will see significant sexual side effects, and those side effects will disappear after you stop taking Propecia (Thornton, 2011). But that doesn’t seem to be the case.
A recent study by Micheal Irving showed that ninety percent of his test patients still showed signs of sexual problems forty months after being off of Propecia (Thornton, 2011). This is where ethics will hurt Merck the most. Not only have there been hundreds of millions of dollars in fines and settlements that will be paid out, but if Merck continues to keep making unethical managerial decisions, Merck will lose the trust of their customers. Even though there is no evidence yet that Merck knew that Propecia would harm people after they stopped taking the drug, it’s hard not to think of how the Merck management decided to handle Vioxx.
The financial hit is a big blow that will slow present and future projects, but money is a lot easier to gain back than trust. References Berman, J. (2011, June). UPS and Merck extend relationship with a global supply chain focus. Retrieved February 2013, from http://www. logisticsmgmt. com/article/ups_and_merck_extend_relationship_witha_ global_supply_chain_focus/ businesswire. (2011, June). UPS and Merck Expand Their Distribution and Logistics Agreement. Retrieved February 2013, from businesswire. com: http://www. businesswire. com/news/home/20110628005271/en/UPS-Merck-Expand-Distribution-Logistics-Agreement
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