Segment Reporting

6 Months Ended

Jun. 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				Six Months Ended
	June 30,				June 30,
($ in millions)	2011		2010		2011		2010
Segment revenues:
Pharmaceutical segment	$	10,360	$	9,638	$	20,179	$	19,303
All other segment revenues		1,665		1,525		3,275		3,095
	$	12,025	$	11,163	$	23,454	$	22,398
Segment profits:
Pharmaceutical segment	$	6,443	$	5,987	$	12,659	$	11,727
All other segment profits		655		627		1,371		1,347
	$	7,098	$	6,614	$	14,030	$	13,074

     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				Six Months Ended
	June 30,				June 30,
($ in millions)	2011		2010		2011		2010
Pharmaceutical:
Cardiovascular
Zetia	$	592	$	564	$	1,174	$	1,098
Vytorin		459		490		939		967
Integrilin		56		70		120		140
Diabetes and Obesity
Januvia		779		600		1,518		1,111
Janumet		321		218		626		419
Diversified Brands
Cozaar/Hyzaar		406		485		832		1,267
Zocor		107		117		234		233
Propecia		112		113		218		213
Claritin Rx		65		58		186		157
Remeron		57		59		117		110
Vasotec/Vaseretic		59		63		116		122
Proscar		53		56		113		114
Infectious Disease
Isentress		337		267		629		499
Cancidas		168		150		326		303
PegIntron		154		185		319		371
Primaxin		136		158		272		317
Invanz		103		83		189		158
Avelox		61		59		167		165
Noxafil		56		50		110		99
Rebetol		48		55		100		111
Crixivan/Stocrin		50		48		95		100
Neurosciences and Ophthalmology
Maxalt		131		133		304		268
Cosopt/Trusopt		122		123		236		238
Oncology
Temodar		234		271		481		545
Emend		120		93		207		177
Intron A		47		51		96		105
Respiratory and Immunology
Singulair		1,354		1,258		2,682		2,423
Remicade		842		669		1,595		1,343
Nasonex		323		338		696		658
Clarinex		209		191		364		355
Arcoxia		100		95		214		190
Simponi		75		18		129		28
Asmanex		47		56		107		107
Proventil		37		55		80		112
Dulera		25		—		37		—
Vaccines (1)
ProQuad/M-M-R II/Varivax		291		340		535		659
Gardasil		277		219		490		451
RotaTeq		148		139		272		231
Zostavax		122		18		146		114
Pneumovax		64		59		143		110
Women’s Health and Endocrine
Fosamax		221		241		429		472
NuvaRing		154		145		297		280
Follistim AQ		143		137		276		270
Implanon		81		51		141		101
Cerazette		66		49		125		104
Other pharmaceutical (2)		948		941		1,697		1,888
Total Pharmaceutical segment sales		10,360		9,638		20,179		19,303
Other segment sales (3)		1,665		1,525		3,275		3,095
Total segment sales		12,025		11,163		23,454		22,398
Other (4)		126		183		278		370
	$	12,151	$	11,346	$	23,732	$	22,768

(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 $306 million and $241 million for the second quarter of 2011 and 2010, respectively, and $628 million and $605 million for the first six 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						Six Months Ended
	June 30,						June 30,
($ in millions)	2011			2010			2011			2010
Segment profits	$	7,098		$	6,614		$	14,030		$	13,074
Other profits		58			50			35			62
Adjustments		257			125			476			249
Unallocated:
Interest income		51			22			92			34
Interest expense		(182	)		(185	)		(368	)		(366	)
Equity income from affiliates		(39	)		(47	)		15			—
Depreciation and amortization		(623	)		(786	)		(1,194	)		(1,286	)
Research and development		(1,936	)		(2,179	)		(4,094	)		(4,230	)
Amortization of purchase accounting adjustments		(1,363	)		(1,662	)		(2,943	)		(4,036	)
Restructuring costs		(668	)		(526	)		(654	)		(814	)
Arbitration settlement charge		—			—			(500	)		—
Gain on AstraZeneca option exercise		—			443			—			443
Other expenses, net		(981	)		(628	)		(1,494	)		(1,274	)
	$	1,672		$	1,241		$	3,401		$	1,856

     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.