J O I N U S I N B U I L D I N G A H E A L T H I E R W O R L D

Pharmaceutical Marketing at Merck

Marketing at Merck• Merck Human Health Divisions– Asia Pacific– Europe, Middle East, & Africa– The Americas (US Human Health,

Canada, Latin America)– Worldwide Human Health Marketing

• Merck Vaccine Division– U.S. Vaccine Marketing– Merck Vaccine International

Pharmaceutical Industry Characteristics

• Highly Competitive but Fragmented industry

• Complicated business model with numerous stakeholders

• Very Technical/Scientific products• Major R&D expenditures and High Risk

product development environment • Long Product-Development Timelines

Pharmaceutical Marketing Characteristics

• Long Marketing-Planning horizons• Highly regulated industry and highly regulated

marketing communications by FDA• Primary targets: Healthcare Professionals and

Consumers– Numerous “customers” with variety of information

needs requires multiple approaches to creating marketing campaigns and communications

• Evolving selling environment• Use of e-channel still in its infancy in our

industry

Role of Marketing•Recommend

development•Define product

profile needs•Define

comparators•Define Outcomes

Research needs•Develop market•Develop strategy

•Input on product labeling

•Recommend filing strategy

•Define launch plan

•Develop positioning and branding

•Finalize strategy

•Finalize pricing•Finalize

promotion and branding

•Implement launch campaign

•Finalize field sales plans

•Monitor performance

•Adjust strategy and tactics

•Sequence promotion

•Manage product life cycle

•Provide background on market and product potential

STAGES OF PRODUCT DEVELOPMENT

PostlaunchMarketing

Product Launch

Regulatory Approval

Clinical Studies

Basic Research

Merck Marketing Principles • Understand the customer’s perspective• Anticipate and outmaneuver the competition• Concentrate on selected audiences and behaviors• Define the product’s distinctive value to

selected audiences• Plan for sequenced growth throughout the product’s

life-cycle• Shape customer’s perceptions• Ensure that execution is efficient, consistent,

and well integrated• Track results and re-evaluate decisions

MarketResearch

MarketingCommunications

CustomerMarketing Pricing

Analysis

BusinessDevelopment

ProfessionalSales

Brand Management is the HUB of pharmaceutical marketing

BrandManagement

Medical Medical ServicesServices

Pharmaceutical Branding

Currently: Limited penetration and use of e-channel

• Unclear regulatory guidance• Limited e-commerce opportunity except

with major wholesellers—EDI works fine• Difficult ROI measurement with

consumers• Commitment to personal selling model

with physicians• Challenging privacy issues• Physician role as “learned intermediary”

has to be considered and respected

Consumers are increasingly being asked to take an “active role” in managing their healthcare

• Numerous treatment options and decisions to consider. Consumers are expected to “partner” with their physicians to consider risks and benefits and make choices.

• Third-party payers and employers are adopting cost-sharing models of healthcare coverage. (Spending accounts, 3-tier co-pays, etc.)

Healthcare information is a Primary destination on the web

BUT brings concerns about:Credibility/AccuracyPrivacy ProtectionRelevance

The Web Offers:SpeedConvenienceRobust ResourcesAnonymity

The changing The changing ee-Health -Health Landscape:Landscape:

In 1999 there were 750 health-information web sites

Majority based on “advertising revenue” model

Today there are ~ 50 such properties 400 filed for bankruptcy 100 were acquired and

then went out of business 200 closed or disappeared

with no explanation

Studies estimate between 73M-100M US Adults have gone online to look for health

information

73M or 62% with internet access using the Web to look at Healthcare information

68% of health seekers say the material affected their decision about treatments and care for themselves or a loved one.

61% of health seekers said the internet has improved the way they take care of themselves

Top Reasons: 93% looked for info about a particular illness or condition 65% look for nutrition, exercise, weight control advice 64% looked for info on prescription drugs 55% gathered info before visiting a doctor

Source: “The Online Health Care Revolution”, “Vital Decisions”; Pew Internet & American Life, 11/26/00, 05/22/02

The internet provides new Opportunities for Pharmaceutical Companies

• We have complex, highly technical products• The empowered consumer needs information they can

learn from and use in discussions with their physician• Educated customers have always been our best

customers and we have a significant offline commitment to education

• We are now bringing that commitment online to better meet our customers’ needs through the web channel

• This new channel requires us to evolve from a “push” to a “pull” model as consumers demand greater control and convenience in how they access online healthcare information

What has Merck Done? Create Online Websites with Merck Product Information

• Integrated part of our marketing campaigns that provide additional information online• Can be accessed directly

(www.product.com) or through links at our corporate site, 3rd party sites, or from banners throughout the web

• Originated as “Brochureware”• Evolving towards greater robustness,

interactivity, customization and permission-based marketing approach

• Primarily Consumer Focused– Developing an educational/ less advertising

oriented approach to healthcare professionals

Some Examples of Websites

MerckMedicus is a health-information portal designed to support the medical-education needs of physicians

MerckSource is a health-information resource for patients

Both sites offer objective, credible, evidenced-based resources to support the doctor-patient dialog

They deliver online on Merck’s commitment to support the medical-education needs of customers

“Merck Manuals” of the 21st Century

What else has Merck Done? Create Online Medical Education Resources for

physicians and patients

Issues for our Industry

• The web promises instant access to all information, yet our regulated environment poses limits on how we can use this channel to meet customer expectations

• Our traditional “product-centric” approach vs the “customer-centric” web environment requires adjustments in how we create and offer information to customers

• Supporting and respecting the doctor-patient, payor and employer relationships while adequately serving the consumer is a challenging balancing act

• Privacy Protection is critical. Healthcare status impacts employment and social relationships.

Corporate Info

Customer Focus

Fully Integrated Information & Services

Corporate, Product Focus

Discrete Sets of Information

Where are we headed in the future? Towards more integrated offerings

Product Info

Limited Interactivity

Customization

Personalization High TrustHigh Value

Relationship

Brochureware

Enriched Product and Medical Education sites

PULLPUSH

Bakry Al-kafMatteo Nebiolo Vietti

Index

• About Merck.• Merck’s Programs.• Today’s Merck.• The Global Pharmaceutical Industry.• Financial information.

About Merck

• global research-driven pharmaceutical company

• Originally founded in 1668 in Germany.• Established in 1891 in U.S.A.• Its commitment to help all patients obtain

access to the Merck medicines they need.

Merck Programs• Merck Patient Assistance Program.

• Free medicines.• 1.5 million prescriptions.• Medicines for chronic conditions.

• Merck Prescription Discount Program.• For the uninsured.• Saving of 15% to 20% off.• Easy to access.

• Merck's HIV research Program.• Merck Medical Outreach Program.

Merck's Contributionin Haiti Relief Efforts

• In response to this disaster.• Initial contribution.• Donating needed medicines.• Participation on the ground.

Our Products

Vaccines Prescription Products

Animal HealthConsumer Products

From Laboratoryto Pharmacy Shelf

• Drug Discovery• Preclinical Testing• Investigational New Drug (IND) Application• Clinical Trials– Phase I– Phase II– Phase III– Phase IV

• Approval Review

The Pharmaceutical IndustryValue Chain

Current Strategies

• Merger with Schering-Plough.• Job cuts follows the merger.• Biotech medications.• acquisition. ( Merck buys Avecia)• Diversification.• Innovation.

Risks

• Vioxx lawsuits issue.– Withdrawn in 2004.– 4 billion Settlement agreement charge.

• Certain of the Company’s products are going to lose patent protection.

Competitors• COMPANY COUNTRY TOTAL REV M USD %

R&D • Switzerland 53,324 -

13% • USA 48,371 – 1 6% • Bayer Germany 44,2 -

4% • GlaxoSmithKline United Kingdom - 42,813 -

15% • Johnson and Johnson USA 37,02 -

14% • Sanofi-Aventis France 35,645 -

16% • Switzerland 33,547 -

16% • AstraZeneca UK/Sweden 26,475 -

15% • Merck & Co. USA 22,636 -

21%

Competitors

Competitors

Financial Information

• Annual Sales ($m)

Financial Information• Material and Production Cost ($m)

Financial Information

• Net income as a % of sales

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