Merck is a global pharmaceutical company that developed many important drugs and vaccines. It faces issues in pricing policies, patents, and expanding access to medicine in developing countries with poor infrastructure and low incomes. Merck addresses these issues through initiatives like ACHAP in Botswana and Accelerating Access Initiative that provide HIV medicines at discounted prices. It also has a differential pricing policy that sets prices based on a country's development level and disease burden. Merck works to improve access while maintaining incentives for drug innovation through partnerships and tailored pricing strategies.

1. GLOBAL MARKETS & STRATEGIC PERSPECTIVE
MERCK: GLOBAL HEALTH
AND ACCESS TO MEDICINE
LAYOUT
Presented By: Group 6
NAME PGDM NO
AFSAL SHA 14007
GAYATHRI K HARI 14054
GAYATHRI SATISH 14055
IRISHI R PILLAI 14064
MATHEW STEPHEN 14076
TONY SEBASTIAN 14171

3. ABOUT MERCK
• Global research driven pharmaceutical company founded in 1891
• Company discovered ,developed ,manufactured and marketed vaccines and
medicines to address unmet medical needs
• Self described as “ dedicated to putting patients first”
• Headquartered in New Jersey employed 60,000 people worldwide in 2007
• 28 manufacturing plants and 9 research sites

4. • $24.2 billion world sales and $3.275 billion net income in 2007
• 60% of company’s sales revenue came from the United States,20% from Europe and 6%
from Japan
• Some of the drug innovations developed by Merck included : Streptomycin for
tuberculosis, cortisone for rheumatoid arthritis, ARVs for HIV/AIDS
• Company also developed dozens of vaccines to prevent measles , mumps, rubella,
chickenpox, hepatitis A etc.
• Their products addresses 60% of the top 20 global burdens of disease as defined by the
WHO
(cont.…)

5. ISSUES IN THE CASE
 Issue of patents and licensing
 Challenges to pricing policies
 Expanding the business in developing nations
 Integrating Social Corporate Responsibility with business
 Lack of proper infrastructure in developing countries for providing HIV
medicines
5

6. MERCK’S STAKEHOLDERS
 Pharmaceutical Firms
• Generic
• Proprietary
 Governments of different countries
 Non-Profit organizations (Bill & Melinda Gates Foundation, Oxfam)
 People
 Health organizations like WHO, UN , FDA
6

7. 7
 ACHAP
 Accelerating Access Initiative
 Establishing a Pricing Policy
 Donated $828 million in cash contributions, products, medical programs in 2007
 Ranked among top 2 donors for philanthropic work(1999 -2007)
 Access to Medicines and vaccines in Low Income Countries
CSR INITIATIVES BY MERCK

8. PROGRAMS AND POLICIES
ACHAP- African Comprehensive HIV/AIDS Partnerships in 2000
 Implemented in Botswana, partnered with Bill & Melinda Gates
Foundation
 Government- “Masa” National ARV treatment program
 Engineer entire supply chain, train health professionals, build
infrastructure for training and treatment
Accelerating Access Initiative(AAI)
 Provide HIV medicines at a discounted rate for developing
 UN agencies to develop national treatment plans and forge
agreements for specific ARVs
8

9.  Pricing Policy
 Differential pricing policy when joined AAI in 2000
 Extended in 2001, used UNDP’s HDI & HIV prevalence as guidelines in
reductions
 Establishing Price Policy-Issue of Standardization vs. Adaptation
 Differential pricing policy when joined AAI in 2000
 Extended in 2001, used UNDP’s HDI & HIV prevalence as guidelines in
reductions
 Recognizing the importance of affordable access to medicines in
countries, Merck adapts pricing through product donations, flexible
differentiated pricing.
 If HDI of country is low, and HIV prevalence >=1%, not for profit prices
 If HDI of country is medium and HIV prevalence <1%, reduced prices are
 If HDI of country is high, competitive and market based prices
(cont.…)
9

10. UPDATED PRICING POLICY
• In 2007 Merck updated its pricing policy from HDI based to United Nations
Conference on Trade and Development’s (UNCTAD’s) list of least developed
countries:based on economic factors rather than social factors
• Under new policy, countries that received CRIXIVAN, STOCTIN and
ATRIPLA were guaranteed prices would not increase
• Prices at tier 1 countries, STOCRIN at $237, CRIXIVAN at $600 and ATRIPLA
at $613 per patient per year
• Prices at developing countries and emerging market was STOCRIN at $657,
CRIXIVAN at $1029 and ATRIPLA at $1033
• All other countries paid the market prices
10

11. LICENSING & IP ISSUES
Issue with South African Government regarding protection of
licenses and patents
• Strong intellectual property protection is necessary to perpetuate
innovation and stimulate investment in any research oriented
• Companies bearing the risks and investment costs of discovering
developing new drugs should be given appropriate time to recoup
costs
• Series of interactions lasted for over 3 years, between
companies, country governments, WHO WTO etc., NGOs, Activists, 11

12. Brazilian Storm
• In 2006, Brazilian Govt. announced the issuing of compulsory
STOCRIN, a Merck Drug and a key ingredient in triple-drug therapy
AIDS and HIV.
• This would enable the Govt. to break the patents and produce the
domestically through generic manufacturers
• Today’s patients vs. Tomorrow’s patients
• Differential Pricing Policy will not be sustainable
• Less investment by companies in these countries
12

14. GLOBAL MARKET SELECTION AND ENTRY
STRATEGY
 Partnership with governments, foundations, NGOs and international
organizations.
 Working with GAVI (Global Alliance forVaccination and Immunization)
and Bill & Melinda Gates Foundation
 Engaging globally and developing innovative approaches
 Adoption of new developing country vaccine pricing policy for
ROTATEQ and GARDASIL
14

15. 15

16. • Threat of New Entrants
• Barriers to Entry: High
• Risk associated with drug development
• Economies of scale barriers in R&D
• Bargaining power of suppliers: Medium
• Mostly commodities
• Individual scientists may have some personal leverage
• Bargaining power of buyers: Medium
• Large power of buyers – plan sponsors with an incentive to contain
costs
• Large discounts on volume buys – hospital suppliers, large
distributors, government institutions
16
(cont.…)

17. • Threat of substitutes: Low
• Threat of generic drugs
• Regionalized medical systems e.g.: Ayurveda
• Health conscious customers looking for natural medicines
instead of chemical ones
17
• Intensity of rivalry: High
• Competition is of global level
• Companies specializing in certain types of diseases
• Government intervention increases rivalry
• Very profitable industry but declining margins
(cont.…)

18. PEST ANALYSIS
• Political
• South Africa – law favouring generic versions of patented drugs
• Brazil and Thailand also issued compulsory licensing of ARVs.
• Economic
• Developing countries have per capita GDP below $1000, making price
differentiation strategy a must for survival
• Social
• Social perception about profit making being above patients
• Strong criticism from social activists
• Technological
• Lack of proper technological advancement due to improper
developing countries (e.g.: Lack preventive care, facilities for
delivery of medicines on time etc. )
18

19. LESSONS LEARNT IN DEVELOPING COUNTRIES
• Issues of Intellectual Property Rights in South Africa
• Licensing and price equalization of medicines lead to developing
countries in dire need taking the hit
• 95% of the infected resided in these countries
• These countries lack medical infrastructure
• Question of cost-effectiveness in providing drugs to these countries
19

20. IMPLICATIONS FOR THEIR BUSINESS MODEL
• Issues and effects of patents, licenses and intellectual property rights on pricing
• Problems in providing medicines and vaccines to those residing in developing
countries at no profit prices
• Need for proper infrastructure and facilities before venturing into the country
• Need to satisfy the stakeholders as well as aligning the company with
unwavering commitment to ethics and integrity.
20

21. 21