Merging Into the Fast Lane of Drug Development

Today, Merck and Schering-Plough completed our global merger. By combining the two New Jersey-based companies, we have created one of the world's largest health care firms, with more than $40 billion in annual revenues.

As with other game-changing mergers, some have warned that consolidation could choke R&D and stifle innovation. It's not lost on us that this same speculation is taking place during the current wave of consolidation in the industry.

This allegation is worthy of a well-reasoned response. While I can't speak for other mergers, I'm confident that the union of Merck and Schering-Plough can accelerate the development of cures for devastating ailments. This is why our merger makes sense for our patients, customers, and shareholders across the world.

In today's economy, knowledge and innovation are no longer limited to one geographic area, one business system, one R&D pipeline, one regulatory arena, or one model of funding. Any company expecting to survive -- let alone innovate -- must attune itself to global realities. It must actively aggregate and integrate knowledge from across the world.

Look at the story of Apple's iPhone. The real miracle isn't what happened in an Apple lab. It's what's happening, right now, on computers and mobile devices worldwide. Global innovators have developed applications that make life easier. From your phone, you can now pay your bills, find a good restaurant, and even figure out what song you're enjoying on the radio. More than 75,000 iPhone applications already have been created, including Merck's own iPhone app for the new Merck Manual Home Health Handbook.

Medicines are created in much the same way. Innovation depends on information. And information flows from thousands of scientists across the world building on one another's breakthroughs. Major contemporary life-saving innovations, including some of the most widely prescribed cardiovascular medicines, would never have appeared without scientists inside pharmaceutical companies working with other scientists worldwide. And several of our most important vaccines were developed by Merck scientists building on discoveries made by scientists at academic medical centers around the world.

The global scale of the new Merck increases the chances for this sort of collaboration. We now have people in more countries, including more emerging markets, and are putting systems in place to create and incubate knowledge networks which were unattainable just a few years ago. For example, we just invested millions of dollars in an open-access resource network for our researchers -- by accelerating information sharing, we hope to accelerate the discovery and development of cancer drugs.

In addition, a broader global reach will give Merck access to new markets -- and bring new ideas to those markets. For instance, Merck's recently announced partnership with the Wellcome Trust has created a sustainable R&D organization embodied in a not-for-profit operating model to address the vaccine needs of low-income countries. Similar proposals are already on the table.

Efficiency and focus are likewise improved by the merger. The paradox here is that the new Merck, while larger, is organized to be more nimble and efficient at making decisions. And breakthrough innovations have a better chance of occurring more quickly because of the company's focus on external partnerships and collaborations. We are humble enough to know that only a fraction of the science that drives innovation will come from inside the walls of our laboratories. Likewise, our strategy for the merger was to gain additional resources that could be applied to the best science, wherever it emerges.

Finally, the merger also creates a company with greater financial strength. We will be able to cut costs and thereby expect to save approximately $3.5 billion annually beyond 2011. That means more money for research into the next generation of innovative cures.

Investments on a global scale -- and the associated risks -- are enormous. Smaller companies may hit home runs by discovering one-off breakthrough drugs. But ongoing development -- the yeoman's work of health care innovation -- requires a different model. We plan for the inevitable R&D failures and financial losses. Just one out of every 10,000 promising compounds results in an approved drug.

In addition to driving innovation to continue filling our pipeline, we must also deliver on the late-stage compounds that have a high likelihood of approval and will therefore fund tomorrow's research. In that regard, this merger also puts new legs under Merck by nearly doubling our potential medicines and vaccines in late-stage development to more than 15 -- involving everything from osteoporosis to high-cholesterol to migraines to cancer.

Asking whether or not this merger will promote innovation is an important question. But given all the available evidence -- and the manifest hopes for continued medical progress -- we're confident that the Merck merger can be a bright new way forward.

Richard Clark is chairman, president and CEO of Merck & Co., Inc. and past Chairman of the Pharmaceutical Research and Manufacturers of America.

 

Comments

[jeema2Oo]

Too big.

[BillOfRights]

Dear Mr. Clark, I'd like to ask you two simple questions about your vaccines:

1) are they tested for safety? If so, can you please provide some links to these tests

2) are they tested for efficacy? Again, the results of these tests would be most welcome.

Thanks!

[rockcreekpolicy]

Clark correctly reminds us that what pharmaceutical companies are valued for is innovation. The true measure of the success of Merck's combination with Schering-Plough as well as other recent mergers such as Pfizer's acquisition of Wyeth will be the productivity of its research labs. It's also true that success for the new Merck can also mean success for patients who are waiting for new treatments. That common interest too often gets lost in the drumbeat of negative comments about drug companies and, in general, for profit health care companies. Kudos to Merck and Clark for putting its recent financial transaction into terms that patients care about.

[Disclosure: the writer is a former Merck employee]

[RMankovitz]

" I'm confident that the union of Merck and Schering-Plough can accelerate the development of cures for devastating ailments."

Cures? I am not aware of medications curing chronic illness. Remission, or symptom suppression, perhaps, but not cure. In order to cure someone, they must already be ill, and one generally must know the causes of the illness. I do not believe the medical community knows the cause of any chronic illness, which makes coming up with a cure somewhat of a random event.

Now, primary prevention is another story. It is an anathema to the medical community business model, unless they can sell a lifetime of drugs as an answer. A lifetime of drugs presupposes that your body is somehow drug deficient, an unusual prognosis to say the least.

In my opinion, a robust and properly functioning body defense system is what can prevent and cure illnesses. The medical community is still trying to find our defense system. Until recently, they thought is just consisted of antibodies in the blood. Now, some are realizing that it mostly resides in the gut, consisting primarily of bacteria. Unfortunately, they have yet to indentify the bulk of these bacteria, much less what constitutes a healthy mix.

Since the medical community doesn't have the answers, who does? My choice is nature. After all, she evolved us and her consultations are free. A wellness program based on her can be found in "The Wellness Project."

Roy Mankovitz, Director
http://www.MontecitoWellness.com

[tompoe]

For all of that, Clark fails to announce to readers that the merger will adopt the utilization of a nonproprietary automated clinical trial data collection system for all research and development. Such a move will instantly lower the R&D costs for medicines by 70% or more. This will enable the company to enjoy greater profits over a longer time, as drugs will move into "controlled" markets years earlier. Prices will be significantly lower for patients, and with electronic oversight by a small, efficient staff of the FDA involved, prevent literally over 100,000 needless deaths each year in the U.S. alone. So, Clark, why didn't you announce that simple step, today? Are you stupid? Or, is it because you enjoy killing, raping and pillaging Americans?

[maribelles]

I don't consider big pharma in the business of "health care". They are in business to make sure
there are always diseases they can profit from, and by trampling holistic practitioners and personal health freedoms so that their fearmongering can live on. So give us a break with the propaganda.

We don't have illness because of lack of "drugs". We have illness because we have a crappy
and adulterated food system, a poisoned environment, monolithic corporations who wish to
continue to pollute to make profits, a government who lets them do so, and is indeed run by them.

Innovation will be realized when consciousness is raised towards personal empowerment, use of natural healing and cures, and an earth and its people and animals free of toxins.

I look forward to a time when these companies disappear into a big pit forever.