2008 Corporate Responsibility Report. on Behalf of the Board, I Am Very Pleased to Note THOMAS E

Advancing the Dialogue Toward a Healthier Future

Corporate Responsibility 2008 Report Criteria from Millennium UN Global Global Reporting the Access to Development Compact TABLE OF CONTENTS Page Initiative Indicators Medicines Index* Goals† Principles About Merck and this report Inside front cover Message from the CEO 1 Message from the Board 2 Merck’s Approach to CR Reporting 3 » Materiality assessment process 3 » Stakeholder engagement 3 Economic Contribution to Society 4 EC1, SO1 MDG 4; MDG 6; MDG 8 Target 8E » Supporting our communities 5 Summary of Our Progress and Future Plans 6 Researching New Medicines and Vaccines to Address Unmet Needs 8 MDG 4 » R&D impact and performance 9 » Current research pipeline 10 » Expanding our research capabilities and results 10 » Intensifying our research capabilities into diseases prevalent 12 C1, C3, C4 in the developing world » Clinical research and disclosure of results 12 PR3 Principle 10 » Future goals and priorities 14 » Fostering science education 14 EC8, EC9 MDG 2 Improving Access to Medicines, Vaccines and Health Care 16 EC8, EC9 H » Access strategy and management 16 A1, (A2), A3

» Key considerations for our activities 17 D1, D2, E2, F1, F2, G1, G2 » Improving access in the developing world and 19 B2, B3, E3 MDG 1; MDG 4 emerging markets » Improving access to vaccines and immunization 22 B3, E3 MDG 4; MDG 8 Target 4 in the developing world » Improving access to HIV/AIDS treatment and care 23 B3 MDG 4; MDG 6; in the developing world MDG 8 Target 4 » Improving access in developed countries 25 B3, F3, F4 » Future goals and priorities for improving and accelerating 27 access to medicines, vaccines and health care globally Ensuring Conﬁ dence in the Safety and Quality of Our Products 28 PR1, PR3 » Our commitment to product safety 28 E3 » Our commitment to product quality 30 E1, E4 » Future priorities 31 Conducting Ourselves Ethically and Transparently 32 SO2, SO3, SO4, SO8 A5 Principle 10 » Our Values and Standards 32 LA10, HR4 Principle 10 » Fostering a fair, transparent and open environment 34 Principle 10 » Ethical sales and marketing practices 34 PR3, PR6, PR7, PR9 A5 Principle 10 » Respecting and promoting human rights 36 HR3, HR5, HR6, HR7, LA4, LA10 Principles 1–5 » Future goals and priorities 37 Managing Our Environmental Footprint 38 MDG 7 Principle 8 » Improving environmental and safety compliance 38 EN23, EN28, SO8 » Addressing climate change and energy use 40 EC2, EN3, EN4, EN5, EN7, Principle 9 EN16, EN17, EN18 » Water use 42 EN8, EN10 » Emissions, efﬂ uents and waste 42 EN1, EN2, EN19, EN20, EN21, EN22 » Product stewardship 44 EN26 Principle 7, 9 » Future goals and priorities 45 Advocacy and Outreach 46 LA10 » Making a responsible contribution to public policy debates 46 SO5, SO6 B1, B2, B3, B4, B5 Principle 10 » Ensuring our policy and engagement conduct is beyond reproach 48 » Engaging with our stakeholders 49 A4 » Working in public/private partnerships to address societal challenges 49 MDG 8 Target 4 » Future goals and priorities 49 Executing the Basics 50 » Corporate governance 50 Principle 10 » Building a positive work environment 51 EC7, LA1, LA2, LA3, LA11, LA12, LA13 MDG 3 Principle 6 » Fostering safety and health in the workplace and in our communities 53 LA6, LA7, LA8, LA10, PR1 » Managing our supply chain 54 EC6, HR1, HR2, LA10 E1, E4 Principle 6, 10 Philanthropy at Merck 56 Summary of Key Performance Indicators 60 Our Medicines and Vaccines 63 Index 64 Contact Us Back cover

For more information on additional GRI disclosures and a comprehensive GRI index, go to www.merck.com/cr/gri. For more information on our ATMI reporting, go to www.merck.com/cr/atmi. * A2: Merck has a long history of working to improve access to medicines and numerous related policies, but we have not yet formalized an overall access to medicines policy. † We mention only the goals that are most closely related to our business. For more information on our contributions to the MDGs, see www.merck.com/cr/access/mdgs. At Merck our fundamental responsibility is discovering, developing and delivering innovative medicines and vaccines that can make a difference in people’s lives and create a healthier future.

We believe that fulﬁ lling this responsibility in a sustainable manner demands high ethical standards and a culture that values honesty, integrity and transparency in all that we do.

In the face of the current ﬁ nancial crisis, Merck is more committed than ever to ensuring that Corporate Responsibility (CR) is an integral part of the way we do business, and to working with our stakeholders to create shared value and to help solve the tough issues facing business and society today.

ABOUT MERCK our responsibilities in terms of global » By engaging in activities to expand Merck & Co., Inc. is a global research- health and access to medicines, ethical access to quality health care around driven pharmaceutical company that and sustainable business practices, the world contribution to scientifi c advancement, discovers, develops, manufactures and » By making a positive and sustain- good employee relations and return- markets a broad range of innovative able impact on the communities and ing value to shareholders. We seek to medicines and vaccines to address unmet societies where we live and work medical needs. Merck operates as Merck maintain high ethical standards and a Sharp & Dohme (MSD) in most coun- culture that values honesty, integrity » By meeting the needs of our tries outside the United States. Because and transparency in all that we do. employees in a fair and just manner. of what we do, we recognize that we Company decisions are driven by what have special obligations to society. is right for patients.1 ABOUT THIS REPORT This report updates Merck’s Corporate Merck’s stated mission is to provide MERCK’S CR PRINCIPLES Responsibility 2006–2007 Report society with superior products and Merck’s core business is to discover published in October 2008. Its primary services by developing innovations and develop new medicines and vac- audiences are investors committed to and solutions that improve the quality cines that make a diff erence in people’s socially responsible investing, fi nancial of life and satisfy customer needs, to lives. Our commitment to Corporate analysts, shareholders and shareholder provide employees with meaningful Responsibility extends to how we groups, non-governmental organizations work and advancement opportunities, achieve this goal: (NGOs) and academic experts concerned and investors with a superior rate of with sustainability issues, and others » By conducting our business with return. Our Company mission and val- interested in the corporate responsibil- high ethical standards ues are refl ected in our CR approach, ity activities and performance of Merck. which clearly sets out how we see In response to stakeholder feedback,

This report contains “forward-looking statements” as that term is defi ned in the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and involve risks and uncertainties, which may cause results to differ materially from those set forth in the statements. The forward-looking statements may include statements regarding product development, product potential or fi nancial performance. No forward-looking statement can be guaranteed and actual results may differ materially from those projected. Merck undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements in this report should be evaluated together with the many uncertainties that FORWARD-LOOKING affect Merck’s business, particularly those mentioned in the risk factors and cautionary statements in Item 1A of Merck’s Form 10-K for STATEMENT the year ended Dec. 31, 2008, and in any risk factors or cautionary statements contained in the Company’s periodic reports on Form 10-Q or current reports on Form 8-K, which the Company incorporates by reference. 1 Researching Needed 4 New Medicines and Vaccines Conducting Ourselves to Address Unmet Needs 2 Ethically and Transparently Improving Access to Medicines, Vaccines and Health Care 3 Ensuring Confidence in the Safety 5 and Quality of Our Products Managing Our Environmental Footprint

Advocacy and Outreach Relating to Our Corporate Responsibilities

Executing the Basics this report focuses mainly on Merck’s CR activities, progress and performance with respect to specifi c key performance Guidelines, and our self-assessment has Corporate Responsibility indicators (KPIs). In addition, the narra- been checked by the GRI. tive provides some additional information relating to our activities up through An Executive Summary of this report June 2009. As much as possible, we have is available in print and on our website. guided readers to where they can go for We plan to publish our next CR report we have provided prior year data more information, including our CR in 2010. wherever available. website and other reports such as our annual fi nancial reports on Form 10-Ks.2 In this report, we defi ne where we We welcome your feedback on do not report metrics as follows: N/A: this report. Please contact us to tell We have focused our CR reporting on not available; N/D: no data; N/R: not us what you think – our contact critical, non-fi nancial material issues reported. For most reported metrics information is on the back cover. which we have identifi ed through an assessment of factors in the global busi- GRI APPLICATION LEVEL ness environment, the pharmaceutical sector and Merck specifi cally, as well as We are pleased to have achieved a reporting level B on the Global Reporting Initiative (GRI) G3 feedback from external stakeholders. Guidelines, and our self-assessment has been checked by the GRI as shown in the grid below: We continuously strive to provide greater detail than we have in the past CC+BAA+B+ on these issues, especially in terms of our challenges, metrics and targets. Self- In addition, we have used several external declared

guidelines and measurement frame- MANDATORY works to inform the scope of our reporting. These include the Global Reporting Initiative (GRI) Guidelines,3 the Third Party Millennium Development Goals,4 Checked the Access to Medicines Index5 and the UN Global Compact,6 of which Merck OPTIONAL became a signatory GRI REPORT EXTERNALLY ASSURED REPORT EXTERNALLY ASSURED REPORT EXTERNALLY ASSURED in January 2009. We Checked are pleased to have achieved a reporting level B on the GRI More information can be found on the GRI at www.globalreporting.org. ONLINE MORE INFORMATION 1 www.merck.com/about/mission.html 4 www.un.org/millenniumgoals/ 2 www.merck.com/ﬁ nance/reportsannual.html 5 www.atmindex.org 3 www.globalreporting.org/ReportingFramework/G3Guidelines/ 6 www.unglobalcompact.org Message from the CEO

In tough economic times, it is tempting for a company to retreat back to more parochial business concerns. At Merck, however, we believe that good corporate citizenship and good governance have never been more important. Doing the right thing – even when times are tough – makes good business sense.

The past few years have been a period of signifi cant transformation for Merck. We have worked hard to transform every aspect of our business – from how we approach research and development, to how we manufacture our products, to how we engage with our customers. And the coming months will bring even more change, as we prepare to merge with our longtime partner, RICHARD T. CLARK Schering-Plough. But even as we work to align and integrate these two strong companies to Chairman, President and create a global healthcare leader, we know there are some things that will not change. Chief Executive Ofﬁ cer, Merck & Co., Inc.

First and foremost among them is our It is important that we continue to As refl ected in the theme of this report, ongoing commitment to putting patients remain true to our core values, one of Merck is committed to ongoing engage- fi rst. Discovering and developing novel which is to operate openly and ethically. ment with stakeholders, and to ensuring medicines and vaccines is at the heart In this spirit we have taken signifi cant that we are responsive to their concerns. of who we are as a company. But we steps to improve transparency, commit- Our interactions help to ensure that our also believe it is important to get our ting to public disclosure of our fi nancial approach to corporate responsibility medicines and vaccines to the people support for third-party groups and refl ects both public expectations and our who need them most. In the United for healthcare providers who speak on long-standing company values. States, we are working with the Obama behalf of Merck or our products. Administration and Congress to support We are proud of what we have achieved the enactment of common-sense plans We also want to do our part to tackle thus far – but there is always room for to reform the U.S. healthcare system. climate change. To this end, we are improvement. As a company, our corpo- We also recently increased the income improving energy effi ciency across our rate responsibility reporting and gover- parameters for Merck’s U.S. Patient business. Since 2004 we have reduced nance structure will continue to evolve. Assistance Program to help more people energy demand at our research, manu- We look forward to continuing to benefi t from our 50-year-old program. facturing and major offi ce sites by engage actively with our key stakehold- 28 percent, exceeding our goal of 25 per- ers to make sure we remain on the right 1 We also recognize that most people cent reduction. We have also made track. As you will see, this engagement is worldwide still lack adequate access to signifi cant progress toward achieving our a major theme of this year’s report. medicines, vaccines and quality health greenhouse gas (GHG) reduction goal. care. To help address this challenge, Reducing our energy use and our GHG I believe our long-standing commit- we have implemented a tiered pricing emissions not only benefi ts the environment to good corporate citizenship will policy for our HIV medicines and cer- ment, but also benefi ts Merck’s bottom line. strengthen the new Merck we are striv- tain vaccines that foster greater access to ing to build, and will provide a strong these essential therapies. We have created In January 2009, Merck signed the foundation of shared values through numerous programs and partnerships in United Nation’s Global Compact, the which Merck, our employees, and our developing countries, emerging markets, world’s largest and most widely many global stakeholders can benefi t. and industrialized countries to help embraced corporate citizenship initia- improve healthcare capacity and improve tive. Our signature signals our commit- access to our products for all who can ment to the Compact’s ten universally benefi t, wherever they live. accepted principles in the areas of Richard T. Clark human rights, labor, environment and Chairman, President and anti-corruption, and expresses our intent Chief Executive Offi cer to support and advance those principles within our company and entities con- September 2009 trolled by it. Message from the Board

Merck is a company with an inspiring track record of leadership in corporate citizenship. Initiatives such as the Merck MECTIZAN Donation Program and the African Comprehensive HIV/AIDS Partnerships, to name just two, have set the standard for public/private partnerships in improving access to medicines. Merck continues to implement innovative new programs such as the ROTATEQ Access Program in Nicaragua and the China-MSD HIV/AIDS Partnership.

The Merck Board of Directors Committee on Public Policy and Social Responsibility has reviewed Merck’s 2008 Corporate Responsibility Report. On behalf of the Board, I am very pleased to note THOMAS E. SHENK, Ph.D. that Merck has made progress on several key measures, including reducing our energy demand and Chair, Merck Board Committee our greenhouse gas emissions, enhancing employee diversity, and helping to increase the number of people with access to our medicines and vaccines. I am also glad to see the Company is instituting on Public Policy and additional measures and pursuing more aggressive targets for the future, such as greater transparency Social Responsibility regarding fi nancial support to third parties.

Signifi cantly, Merck’s corporate respon- the only U.S. company in the top seven. sibility commitment is evident through- In early 2009 Merck was ranked No. 4 out the business, as demonstrated by on CRO Magazine’s 100 Best Corporate its leadership in researching, develop- Citizens list. This public recognition ing, manufacturing and marketing confi rms what many of our global the medicines and vaccines that make stakeholders already know: Merck is such a diff erence to millions of people in step with the evolving demands worldwide. Merck’s recent engagement of global business – competitive, inno- in the United Nations Global Compact vative, and responsible. is entirely consistent with its corporate values and standards.

I am gratifi ed that Merck has been Thomas E. Shenk, Ph.D. 2 recognized for its sustainability work. Chair, In 2008 the Access to Medicines Index Merck Board Committee on ranked Merck No. 3 among global Public Policy and Social Responsibility pharmaceutical companies for promoting universal access to medicines, and September 2009 Merck’s Approach to CR Reporting

We recognize that successfully managing social, ethical and environmental issues involves everyone at Merck.

For this reason, we have established a Company-wide process for identifying the CR issues that are most important to our business success and to our stakeholders, and for more formally managing those issues in terms of performance and targets.

MATERIALITY ASSESSMENT PROCESS MATERIALITY APPROACH In 2008, Merck conducted a materiality IS THIS ISSUE MATERIAL AND SHOULD WE REPORT ON IT? assessment based, in part, on standards for sustainability reporting and discussions MERCK MERCK with both internal and external stake- CANNOT CANNOT INFLUENCE INFLUENCE holders to identify those environmental, MERCK MERCK social and governance (ESG) issues of CAN CAN greatest signifi cance to multiple stake- INFLUENCE INFLUENCE holders and to Merck’s future success.

MERCK MERCK Following a review of numerous infor- CANNOT CANNOT mation sources, Merck’s Corporate INFLUENCE INFLUENCE MERCK MERCK Responsibility Council – a senior-level CAN CAN cross-functional Merck body responsible INCREASING STAKEHOLDERS TO CONCERN INFLUENCE INFLUENCE for the Company’s CR approach – assessed ESG issues based on three parameters: 1) the impact on Merck’s ability to INCREASING IMPACT ON MERCK’S ABILITY TO EXECUTE BUSINESS STRATEGY achieve our business strategy; 2) the level Issues in this box are not Issues in these boxes are Issues in this box are material of concern to external stakeholders; and currently covered by reporting optional for reporting and the focus of reporting 3) the degree to which Merck can infl u- ence the issue. A similar process was used to determine specifi c reporting issues Board of Directors Committee on Public In 2008 and 2009, we collected feed- within each priority ESG issue area. Policy and Social Responsibility. back from certain groups, including 3 investors committed to sustainable Based on this analysis, the following Our materiality approach is illustrated by investing, analysts, shareholder groups, broad issue areas were identifi ed as pri- the chart on this page. Topics that fell in the non-governmental organizations (NGOs), ority ESG issues for the Company: top right-hand quadrant for this reporting academic experts, and Merck employees, 1) Researching and developing new year were considered to be the most mate- to inform our approach to CR and how medicines and vaccines that address rial for Merck at this time, to be included we measure our performance. This feed- unmet needs in our print report and executive summary. back helps ensure that our reporting is rel- 2) Improving access to medicines, evant and meaningful to our readers. A list vaccines and health care Merck recognizes the importance of those consulted and a summary of their 3) Ensuring confi dence in the safety of issues that may not be within the comments are available on our website at and quality of our products Company’s immediate or complete www.merck.com/cr/externalinput. We 4) Conducting ourselves ethically control such as climate change, global pov- have refl ected their comments where fea- and transparently erty and access to medicines, particularly sible and appropriate in our reporting, and 5) Managing our environmental footprint. in the developing world. In these areas, we are committed to considering for future we believe that we can, however, infl uence reports other recommendations that we In 2009, the CR Council reaffi rmed these how progress is made in addressing these could not respond to during this reporting fi ve issue areas as the Company’s ongoing issues, particularly through public policy cycle. We are also exploring mechanisms priority ESG issues, and reaffi rmed their and advocacy or through partnerships or for more formal, ongoing engagement. support for a systematic process to iden- collaborations with others. tify specifi c goals, targets and key perfor- For more information on Merck’s materi- mance indicators (KPIs) with which to STAKEHOLDER ENGAGEMENT ality assessment and stakeholder engage- measure Merck’s performance in each ment practices, go to www.merck.com/ area. These goals are reviewed annually Merck regularly interacts with a diverse cr/approach. with Merck’s Executive Committee and array of public and private stake holders. Economic Contribution to Society

Merck makes its principal economic contribution to society through the discovery, development, manufacturing and marketing of our products, which directly improve and maintain the health of individuals and communities around the world, helping them to lead more productive lives.

During 2008, we continued to grow our business with new product indications and formulations, as well as clinical trials that demonstrate their benefi ts. In 2008, we advanced 31 candidates to the next clinical development stage. As of February 15, 2009, we had 47 candidates in Phase I–III clinical development. We remain confi dent that our pipeline continues to show great potential and we continue to work hard to ensure confi dence in the safety and effectiveness of our products.

We also contribute substantial eco- activities, Merck contributes to local support government-fi nanced pensions, nomic and social value to the countries R&D capacity in the life sciences sector, health systems and local infrastructure. and communities where we operate. which is critical to building national Through our local research, manufactur- competitiveness in the 21st century. By In addition, we return value to share- ing and sales operations, by purchasing granting licenses for our products and holders in the form of dividends and an products and services from numerous our technical know-how to small and active stock repurchase program. and diverse suppliers, and by investing in medium-sized companies, we contribute community infrastructure, we gener- to their growth and to the local scientifi c For more information relating to the ate skilled employment opportunities knowledge base. Through our national Company’s business, please refer to our and market activity that directly and and local tax payments, which over the 2008 fi nancial statement set forth in indirectly drive income and eco- last fi ve years (2004–2008) totaled more our Report on Form 10-K for the year 4 nomic growth. Through our research than US$8.8 billion worldwide, we help ending December 31, 2008.

FINANCIAL INFORMATION*

GLOBAL 2008† 2007 2006 2005

Sales (US$M) 23,850.30 24,197.7 22,636.0 22,011.9 Merck’s investment in R&D programs (US$B)‡ 4.8 4.9 4.8 3.8 Number of employees 55,200 59,800 60,000 61,000 Number of stockholders (Millions) approx. 1.2 approx. 1.2 approx. 1.2 approx. 1.2 (Including those that hold Merck stock in “street name”) Annual cash dividend paid per share (US$) 1.52 1.52 1.52 1.52 Global tax expense as reported on income statement (US$M) 1,999.4 95.3 1,787.6 2,732

* For more information, see our Annual Financial Report (10-K) for the year ended December 31, 2008 at www.merck.com/ﬁ nance/reportsannual.html. † Amounts from 2008 include a gain on distribution from AstraZeneca LP, a gain related to the sale of the Company’s remaining worldwide rights to Aggrastat, the favorable impact of certain tax items, the impact of restructuring actions, additional legal defense costs and an expense for a contribution to The Merck Company Foundation. ‡ Research activities and investments include all Merck divisions. 2008 REVENUE BY SUPPORTING OUR We contribute to our communities in GEOGRAPHIC REGION (US$M) COMMUNITIES three ways: As of April 30, 2009, Merck (includ- » Direct and indirect economic contri- ing its Banyu subsidiary in Japan) butions such as employment, training, had a physical presence in approxi- support of local suppliers and local mately 80 countries worldwide with R&D, and paying taxes (as above); OTHER approximately 265 research, manufac- $2,882.5 turing, sales and administration sites. In » Managing our community impacts – JAPAN for example, by ensuring confi dence $1,823.5 all of these locations, we recognize that our success depends in large part on our in environmental and safety perfor- relationships and interactions with mance and respecting human rights; UNITED STATES EUROPE, $13,370.5 our local communities, including business » Addressing community needs MIDDLE EAST and community leaders, elected offi cials, through philanthropy and commu- AND AFRICA charities, fenceline neighbors, educators, $5,773.8 nity involvement. local media and our employees. Underlying our community approach We strive to have a positive impact on is our commitment to respecting the communities in which we oper- human rights. As a signatory to the ate, and we recognize our responsibility UN Global Compact, Merck is commit- toward those aff ected directly or indi- ted to protecting and promoting fun- rectly by our operations and activities. da mental human rights not only within our immediate workforce but within our We rely on local communities not only broader sphere of infl uence, including for our workforce but also for many of within our local communities. For more our suppliers and for our ability to do information on our commitment to business. Through ongoing engagement human rights, go to p. 37. and dialogue, we work to understand community needs and concerns, and to In addition, during the course of our respond by addressing local challenges operations, we take great care not to in ways that build stronger communi- cause harm to our communities, through ties and support the sustainability of rigorous management of the safety of our business. our processes and our environmental footprint. For more information, go to p. 38. 5

CONTRIBUTIONS TO MEDICINE AND SOCIETY

GLOBAL 2008 2007 2006 2005

Number of new products approved 12 5 2 Number of medicines and vaccines in pipeline (Phase I–III) 47 49 57 58 and products under regulatory review Philanthropic investment (US$M) 821 828 826 1,039 Summary of Progress and Future Plans

STATED GOALS IN LAST REPORT PROGRESS/ACHIEVEMENTS FUTURE PLANS

1 RESEARCHING NEEDED NEW MEDICINES AND VACCINES

» Grow our pipeline with a focus on researching and » Advanced 31 candidates to the next clinical development stage in 2008; » Continue to grow our pipeline with a focus on researching developing fi rst-in-class or best-in-class medicines as of February 15, 2009, had 47 candidates in Phase I–III development. and developing fi rst-in-class or best-in-class medicines and and vaccines. » Provided fi nancial support to the WHO/TDR Partnership Network for vaccines in targeted areas according to our R&D agenda. » Expand our interactions with public and private research in tropical diseases. » Through Merck BioVentures, further diversify Merck’s sci- entities to understand and support key research » Granted the International Partnership for Microbicides (IPM) a royalty- entifi c portfolio with a view to creating value and improving priorities and opportunities, including for developing free license to develop, manufacture and distribute a novel ARV com- access to novel biologics and biosimilars; we are committed world diseases. pound for use in developing countries. to having at least fi ve biosimilars in late-stage development » Initiate development of a formal policy on post-trial » Granted an exclusive, royalty-free licensing agreement with Medicines in 2012, and to launching at least six of these products between drug access in 2008. for Malaria for an investigational drug candidate for use in the develop- 2012 and 2017. » Finalize principles for business practices involving the ing world. » Continue to expand our engagement with public and private medical and scientifi c community. » Entered into collaborative agreement with DNDi to support discovery entities such as academic institutions and NGOs to understand and development of improved treatments for neglected tropical diseases. and support research priorities and opportunities in support » Developed a new procedure for a compassionate use program. of global public health needs. » Finalized a set of Guiding Principles for Business Practices Involving » Deliver 25 percent of early pipeline from external sources of the Medical and Scientifi c Community, and implemented guidance on science within three to fi ve years. interactions between MRL staff and external scientists.

2 IMPROVING ACCESS TO MEDICINES, VACCINES AND HEALTH CARE

» Continue to work with international groups such as the » Obtained WHO prequalifi cation for ROTATEQ, MMRII and GARDASIL. » Continue to work with international groups to facilitate intro- GAVI Alliance to facilitate introduction of vaccines in By the end of 2008, ROTATEQ was approved in 87 countries, 15 of duction of our rotavirus and human papillomavirus vaccines in the world’s poorest countries. which are GAVI-eligible; GARDASIL was approved in 109 countries, the world’s poorest countries. » Continue to investigate opportunities to reduce the 23 of which are GAVI-eligible. » Begin reporting in 2010 the number of doses shipped through cost of our ARVs for people living in the world’s poor- » To help expand access to GARDASIL in developing world, worked out GARDASIL Access Program. est countries and those hardest hit by the pandemic, agreement with CSL Limited to waive royalties for sales in those countries. » Achieve 82–84 percent vaccination rate for rotavirus with including through working with external manufactur- » As of December 31, 2008, 653,867 patients in 131 countries and territories, ROTATEQ in Nicaragua by the end of 2009. ers and suppliers to achieve incremental effi ciencies. including an estimated 111,471 children, were being treated with regimens » Continue to pursue partnerships with others to improve access » Expand our presence in emerging markets and explore containing at least one of Merck’s ARVs. to medicines and care in resource-constrained settings. business models for all our products to reach new » Through China-MSD HIV/AIDS Partnership, expanded access to preven- » Continue to support actively health system reform worldwide to populations. Report on developments in future reports. tion, testing, monitoring and treatment in Sichuan Province. help improve and accelerate access to medicines and vaccines. » In connection with the MECTIZAN Donation Program, 31 percent of the » We are on track to achieve our goal of $2 billion in sales from formerly at-risk population in the Americas is no longer at risk of contract- emerging markets by 2010, and we plan to be among the top ing river blindness. fi ve pharmaceutical companies in the markets we are focusing on.

3 ENSURING CONFIDENCE IN THE SAFETY AND QUALITY OF OUR PRODUCTS

» Continue to register at trial initiation all clinical trials » Posted the results of our trials on www.ClinicalTrials.gov since » Continue to implement our vaccine supply manufacturing in patients that the Company sponsors worldwide, October 2008; through December 2008, posted the results of over strategy as part of our commitment to restore Merck’s reputa- at www.ClinicalTrials.gov. 290 trials on www.ClinicalStudyResults.org. tion as a reliable global supplier of quality vaccines. » Continue to disclose results from all registered » Of 42 inspections for Good Clinical Practices or pharmacovigilance » Continue to maintain strict product quality standards and mul- trials of marketed products regardless of outcome conducted by regulatory agencies worldwide in 2008, none resulted in tiple supply chain safeguards to ensure the safety and supply of at www.ClinicalTrials.gov in a timely manner. critical observations and none resulted in the rejection of any clinical study our products no matter where our medicines and vaccines are » Continue to work to enhance and integrate our sys- or regulatory ﬁ ling. manufactured internally or externally. tems to identify, measure, control and sustain quality » Established an Anti-Counterfeiting Steering Committee to oversee our » Continue to implement our corporate, proactive worldwide excellence in our products. global strategy, and worked with other companies to strengthen efforts anti-counterfeiting strategy, focused on securing the supply against counterfeits worldwide. chain, detecting and responding to counterfeit events, and raising awareness of the risks of counterfeit pharmaceutical products.

4 CONDUCTING OURSELVES ETHICALLY AND TRANSPARENTLY

» Achieve 95 percent completion rate of new ethics » In October 2008, began reporting grants over $500 made by Merck’s » Achieve our planned 2009 goals regarding ethics training; training courses by required employee populations, Global Human Health division to U.S. organizations in support of inde- achieve a 100 percent response rate to the disclosure state- including Know the Code, by end of 2009. pendent accredited educational programs for healthcare professionals. ment on confl icts of interest by 2010. » Disclose over time our fi nancial support to medical, » Endorsed U.S. Physicians Payment Sunshine Act of 2008, which would » Report on results of new program on escalation, investigation, scientifi c and patient organizations globally. In 2009, have mandated disclosure of fi nancial relationships between physicians remediation and recognition of non-compliance events in expand reporting on grants and payments to U.S. and the pharmaceutical industry. 2009 CR Report. organizations and begin reporting on grants made in » Began disclosing support to patient organizations in Europe, Middle » Begin disclosing in 4Q2009 all payments to U.S.-based healthcare Europe and Canada; continue to expand disclosure into East and Africa made by Merck offi ces in those regions since 2008. professionals who speak on behalf of Merck or our products; in other regions as we work to build infrastructure and » Implemented new Guiding Principles for Ethical Business Practices second half of 2009, begin reporting certain other U.S. third-party systems necessary to allow global reporting. with the medical and scientifi c community. grants and payments made to patient organizations in Canada » Disclose in 2009 all payments to physicians in the » Adopted a policy requiring a minimum six-month time period following and grants to other third-party institutions in Europe, Middle East, United States who speak on behalf of Merck or the approval of a new product before launching DTC broadcast advertis- Africa and Canada. our products. ing in the U.S., formalizing our historical practice. » Develop a global training program based on Merck’s Guiding » Update our policies and practices in the U.S. » Updated our policies and practices in the U.S. to ensure compliance with Principles for Business Practices Involving the Medical and by January 2009 to ensure compliance with the revised PhRMA Code. Scientifi c Community. revised PhRMA Code on Interactions with Health » Finalize development of global labor relations guidelines and Care Professionals. monitoring tools. » Implement human rights risk assessment tool. STATED GOALS IN LAST REPORT PROGRESS/ACHIEVEMENTS FUTURE PLANS

5 MANAGING OUR ENVIRONMENTAL FOOTPRINT

» Reduce energy intensity by 25 percent per unit area » Achieved and exceeded our goal to reduce energy demand by 25 percent » Zero signifi cant safety or environmental events. (MMBTU/ft2) and reduce water use by 15 percent by the from a 2004 baseline; achieved and exceeded our water-use goal of » Continue to reduce the Company’s total global greenhouse end of 2008 from a 2004 baseline. 15 percent reduction between 2004 and 2008. gas emissions to reach 12 percent by the end of 2012 from a » Reduce the Company’s total global greenhouse gas » Inaugurated a 1.6 megawatt ground-mounted photovoltaic energy array 2004 baseline, including offsetting emissions from new facili- emissions by 12 percent by the end of 2012 from a at our corporate headquarters. ties currently under construction. 2004 baseline. » Adopted a corporate commitment to build all new laboratories and » Establish appropriate reduction goals in line with the global » Zero signifi cant safety or environmental events. offi ces to achieve LEED® Silver Certifi cation or its equivalent globally. desire among nations and regions to commit to signifi cant » Continue to work with stakeholders on the issue » Through our membership in the PhRMA PIE Task Force, contributed to reductions through 2020 and 2050. of Pharmaceuticals in the Environment to identify the research that supports the SMARxT Disposal Program, designed » Continue to identify opportunities for water use improvements. additional data needs and to conduct our own envi- to provide the general public with information on proper disposal » Continue to monitor Toxic Release Inventory (TRI) and Volatile ronmental risk assessments based upon the best of medication. Organic Compounds (VOC) emissions to ensure that we main- available science. tain reductions gains from past initiatives. » Continue to work with stakeholders and the scientifi c community on the evolving issue of pharmaceuticals in the environment (PIE).

6 ADVOCACY AND OUTREACH

» Include in 2009 on our website all dollars spent glob- » Beginning in 2009, expanded disclosure of corporate political contribu- » In 2010, draft a new model code of conduct that includes provi- ally on corporate political campaign contributions. tions to Australia and Canada, the only other countries where Merck sions of the Center for Political Accountability Model Code and » Report externally in 2009 on adherence to ethical busi- provides such contributions. additional provisions based on policies and practices. ness practices related to corporate political spending. » In 2008, Merck began disclosing on our website the portion of dues that » In 2010, disclose all of our memberships in U.S. state business- » Ensure all major public/private partnerships (PPPs) major U.S.-based trade associations report to us as being used for related associations, regardless of the size of the dues. in which we participate have clear annual perfor- advocacy and/or political activity purposes where dues are >$50,000. » Provide on our website a list of policy positions being advocated mance requirements, where possible linked to the » In 2009, we are requiring an annual progress and evaluation report for within U.S. state legislatures. Millennium Development Goals. By 2010, work toward all PPPs to which we provide ﬁ nancial support. » In 2010, report on the number of PPPs for which Merck has reporting on percentage of PPPs that report annually provided support that report annually against program objec- against such requirements. tives and performance requirements, including a measure of their progress against the U.N. Millennium Development Goals where applicable.

7 EXECUTING THE BASICS

Employee practices » Increase female representation at senior manager » Increased female representation in executive roles to 28 percent, and » Continue to increase female and under-represented ethnic group level to 36 percent, and under-represented ethnic under-represented ethnic group representation on senior management representation at senior manager level in line with 2012 goals. group representation at this level to 18 percent, by 2012. team to 15 percent. » Begin to formally track global use of our fl exible work arrange- » Raise awareness of fl exible work arrangements policy, » Launched the Global Constituency Groups (GCGs) initiative, to support ments in 2009; by 2010, achieve 80 percent employee satisfaction increase employee satisfaction with fl exible work our global diversity strategy. with opportunities in this regard. opportunities and begin tracking global use in 2009. » In 2008, Merck implemented a global fl exible work arrangement policy » Reduce Company-wide and lost-time injury rates by 15 percent » Reduce Company-wide and lost-time injury rates by and launched tools to increase access to such arrangements worldwide. in 2009 versus 2008 performance; reduce the motor vehicle acci- 15 percent each from 2007 baseline by end 2008. » Decreased lost-time injury rate by 12.5 percent while taking steps that dent rate by ten percent in 2009 versus 2008 performance. dramatically increased reporting of injuries.

Supply chain management » Achieve 100 percent completion of Screening Survey by » Provided all existing external manufacturers with our guidelines » Increase supplier diversity to 17 percent of total applicable existing external suppliers of pharmaceutical interme- and expectations, as well as Pharmaceutical Industry Principles for spend in the U.S. and Puerto Rico by 2010. diates and compounds by end of 2008. Responsible Supply Chain Management screening survey. Achieved an » Achieve 100 percent completion of Detailed Ethical Supplier » Achieve 100 percent completion of Merck’s pre-selection 81 percent response rate. Assessment by potential suppliers by 2010. Detailed Suppliers Ethical Assessment by potential » Performed EHS-specifi c evaluations of approximately 30 potential » Implement annual supplier supplemental ethics standards suppliers of new business globally by 2010. external manufacturers. training for each procurement employee by 2010, and develop » Develop formal mitigation plans for those items » Worked toward increasing completion of Merck’s pre-selection Detailed a Supplier Code of Conduct by 2010. sourced externally that are critical to ensuring our Suppliers Ethical Assessment by potential suppliers of new business. » By end 2009, achieve 100 percent completion of the Screening ability to supply fi nished product without interruption. » Achieved 2008 supplier diversity goal of 14 percent of total Survey by existing external manufacturers of pharmaceutical Have plans for 20 percent, 60 percent and 100 percent applicable spend. intermediates and compounds. of our suppliers that fi t within this category for 2008, » Develop formal risk mitigation plans where required for 2009 and 2010, respectively. external manufacturers who require improvements to meet » Expand our supplier diversity reporting in the Pharmaceutical Industry Principles for Responsible Supply United Kingdom and Canada by 2010. Chain Management. KEY ISSUE Researching Needed New Medicines 1 and Vaccines to Address Unmet Needs

Over the next ten years, the new developments In the context of these developments, and in in medical technology will most likely be the interests of helping to avoid a widening of the “therapeutic systems” consisting of individual gap in access to health care, global pharmaceutical (e.g. geno-) typing, comprehensive informa- companies will have to demonstrate their global tion, a quality scheme, plus the medicine. Those responsibility in facilitating the availability of “therapeutic systems” will extend beyond the high-quality medicines by participating in the use of medicines alone and may include life development of new medicines and vaccines for style and dietary guidance. All this will allow patients in poorer countries. They will have to a more patient-specifi c application of medi- engage more in new ways of fi nancing innova- cines bringing increased therapeutic effi ciency tion and a new system of intellectual property and safety. It will not yet be “personalized rights application. Their experience and capacity medicine”, but it will come very close. Current will be needed to bring aff ordable high-quality approaches to marketing will have to be replaced medicines to all people. Taking a leadership OTMAR KLOIBER to some extent by the provision of services to role in this regard will be better than being patients and physicians. forced into action. Secretary-General, World Medical Association

…global pharmaceutical companies will have to demonstrate responsibility… [with] development of new medicines and vaccines for patients in poorer countries. »

Merck is committed to addressing medical needs through scientiﬁ c excellence and innovation. This is our primary 8 responsibility and contribution to society. It is also the key growth driver of our business. We invested almost $5 billion annually on R&D in 2006, 2007 and 2008. Our research and development agenda Merck’s R&D model is designed to All Merck employees must abide by our evolves as science advances and disease increase productivity and improve the Code of Conduct (see p. 32), which also burdens change globally. At present, probability of success by prioritiz- applies to the way we work with exter- our work is driven through six major ing the resources of Merck Research nal researchers, doctors and academics. research franchises: Laboratories. Our research objectives In addition, Merck has fi nalized new and strategy are reviewed and approved Guiding Principles for Business Practices » Atherosclerosis and annually by our Research Management Involving the Medical and Scientifi c cardiovascular disease Committee, chaired by the President, Community (see p. 35). All activities » Bone, respiratory, immunology Merck Research Laboratories (MRL); involving the medical and scientifi c and endocrine disorders we also seek input from external sci- community that are sponsored by Merck » Diabetes and obesity entifi c experts to inform our decisions. should have a well-articulated purpose. » Infectious diseases and In addition, the research strategy and Further, in November 2008 MRL novel vaccines goals of our franchises and functional implemented a Global Research and departments are reviewed on a regular Development procedure that describes » Neuroscience including basis by the Research Strategy Review the types of engagement opportunities Alzheimer’s disease and pain Committee, which includes input from during which MRL staff may seek input » Oncology external scientifi c experts, to ensure that from external scientists to inform the our eff orts stay properly focused. One of Merck’s great challenges – and the focus our developing expertise and ongoing focus on of Merck Research Laboratories (MRL) – is genomics and RNA interference. to develop and maintain a productive pipeline that eff ectively uses our expertise and experi- Merck is working hard to increase productivity ence to address many of the world’s greatest by refi ning research priorities, focusing on safety, burdens of disease. MRL is targeting key areas and diversifying R&D activities. This diversifi - such as Alzheimer’s, cancer, cardiovascular disease, cation is a result of internal as well as external diabetes and infectious disease. MRL’s business eff orts and we are pursuing external collabora- model refl ects our dedication to making scien- tions, strategic alliances and partnerships as an tifi c advances that can translate into improved integral component of our R&D strategy. health opportunities for a broad spectrum of citizens globally. MRL continues to build on our long history of PETER S. KIM, Ph.D. bringing novel medicines to patients, and MRL Evolving scientifi c and medical knowledge off ers scientists are passionate about their goal of discov- Merck Executive Vice President, great opportunities, and we are investing in novel ering and developing innovative medicines that and President of areas and innovative technologies that could lead address major unmet medical needs. Merck Research Laboratories to future breakthroughs. This is demonstrated by

MRL’s business model is dedicated to making scientiﬁ c advances that can translate into improved « health opportunities…

development of MRL scientifi c strategy R&D IMPACT to the approximately 11,000 people or operations from discovery through AND PERFORMANCE behind the life-enhancing discoveries late-stage development. This procedure Medicines discovered and developed of Merck Research Laboratories, we provides a consistent approach that ensures by Merck scientists save and improve are among the world’s most innovative compliance with applicable laws, regula- countless lives around the globe. Thanks institutions in the medical sciences for 9 tory requirements and Merck policies. producing fi rst-in-class medicines.

GENERAL R&D » PERFORMANCE DATA SUMMARY 2005–2008

GLOBAL 2008 2007 2006 2005

Merck’s investment in R&D programs (US$B)* 4.8 4.9 4.8 3.8 Number of people employed in the Company’s research activities 11,000 11,700 11,400 12,400 Number of medicines and vaccines in pipeline (Phase I–III) 47 49 57 58 and products under regulatory review Initiated licenses for new technologies† 46 55 53 N/R Filed U.S. patent applications 216 200 227 N/R

Number of products approved 12 5 2

Percentage of top 20 global burdens of illness addressed by our 53‡ 60 N/A N/R products and pipeline (as deﬁ ned by WHO and excluding accidents, premature birth and self-inﬂ icted injuries)

* Research activities and investments include all Merck divisions. † Includes acquisitions, research collaborations, and preclinical and clinical compounds. ‡ The decrease in 2008 is due mainly to the changing nature of the Global Burden of Disease as deﬁ ned by WHO. CURRENT MERCK RESEARCH PIPELINE » (AS OF JULY 15, 2009*)

PHASE I PHASE II PHASE III

Alzheimer’s Disease Alzheimer’s Disease Atherosclerosis V950 MK-0249 MK-0524A, MK-0524B, MK-0859 (anacetrapib) Cancer Anemia Cancer MK-0752, MK-1496, MK-1775, MK-2578 MK-8669 (ridaforolimus) MK-0226, MK-4827, MK-5108, MK-8033, V934/V935 Cardiovascular Atherosclerosis Diabetes MK-3614 MK-1903 MK-0431C Diabetes Cancer HPV MK-4074 MK-0646 V503 Endrocrine Cardiovascular Migraine MK-6913 MK-0736, MK-6621† (vernakalant [oral]) MK-0974 (telcagepant) Infectious Disease Diabetes Ophthalmology MK-3281 MK-0893, MK-0941, MK-8245 MK-2452 (taﬂ uprost) Neutropenia Infectious Disease Osteoporosis MK-4214, MK-6302 MK-3415a, MK-7009, V419, V710 MK-0822 (odanacatib) Pain Insomnia MK-4409 MK-4305 Psychiatric Disease Osteoporosis MK-8368 MK-5422 Psychiatric Disease MK-0594, MK-5757, MK-8998 Respiratory Disease MK-0476C, MK-0633 Sarcopenia MK-2866 (ostarine)

* Merck’s most recent pipeline data can be found at www.merck.com. † An afﬁ liate of the Company has exclusive rights outside of the United States, Canada and Mexico to vernakalant (IV) for rapid conversion of acute atrial ﬁ brillation to normal heart rhythm. On July 26, 2009, the Company submitted a Marketing Authorization Application to the European Medicines Agency seeking marketing approval for vernakalant (IV) in the EU.

In 2008, we advanced 31 candidates to » CANCIDAS, a novel drug for the is the number of patents we fi le in the 10 the next clinical development stage. As treatment of fungal infections, United States. In 2008, Merck fi led of February 15, 2009, we had 47 candi- received approval for expanded use in 216 original U.S. patent applications. The dates in Phase I–III development, nine pediatric patients aged three months number of U.S. patents granted to Merck of which were in Phase III. to 17 years with indicated fungal during that same period was 146. Many infections, in July 2008. of these patents were related to com- In 2008, Merck gained U.S. approval for pounds in various stages of development. » GARDASIL, for the prevention of vul- one new medicine and expanded the var and vaginal cancers caused by HPV use of one medicine and one vaccine: Merck’s research pipeline continues to types 16 and 18, in September 2008. grow as we accelerate our discovery » EMEND for Injection, for the pre- eff orts. The chart above illustrates the vention of chemotherapy-induced TREDAPTIVE (CORDAPTIVE in status of our pipeline as of July 15, 2009.1 nausea and vomiting was approved by Latin America), a lipid-modifying therapy the FDA in January 2008. EMEND for patients with mixed dyslipidemia and EXPANDING OUR RESEARCH for Injection provides a new option for primary hypercholesterolemia, has been day one, as a substitute for EMEND approved in 42 countries, including the CAPABILITIES AND RESULTS taken orally, as part of the recom- European Union, as of August 2009. It is We believe that drug development is not mended three-day regimen. Prior currently being launched in international an eff ort that can be successfully driven to the FDA decision, on January 11, markets and remains investigational in the by an individual or just one company. 2008, the European Union (EU) United States. Most cases of true innovation come granted marketing approval for from robust collaboration amongst indi- EMEND for Injection, known as Our dedication to basic research is a viduals with diverse backgrounds and IVEMEND in the EU, an action critical component of our research mis- capabilities joined together by the idea that applies to all 27 EU countries sion and overall philosophy. One measure of changing the course of human health. as well as Norway and Iceland. of the eff ectiveness of our basic research MRL recognizes advancements in scien- programs and of our innovation capacity tifi c knowledge external to Merck and we are vigilant in leveraging, licensing RESEARCH POLICY ISSUES »

» Genetic Research: Genetic research examines how variations in research into the biology of animal and human stem cells for more the system of human biomolecules – such as DNA, RNA and than a decade, because we believe that this could help identify proteins – affect disease and an individual patient’s response to important new medicines and therapies for treating or curing drugs. The advent of DNA sequencing methodology and other diseases such as Parkinson’s disease and cancer. Merck is opposed advances in biomedical technology have made it practical to to the reproductive cloning of human beings. initiate studies that attempt to understand which genetic deter- minants cause a disease or drug response. Merck scientists have » Animal Research: To discover, develop, manufacture and market a strong commitment to understanding how genes work and how innovative medicines and vaccines that treat and prevent illness, they are linked to diseases and drug treatments. laboratory animal research is indispensable for scientiﬁ c and regulatory reasons. Merck is dedicated to the ethical and respon- » Regenerative Medicines Research: Some of the most advanced sible treatment of all animals used in the development of medi- scientiﬁ c technologies in regenerative medicine involve animal or cines and vaccines. human embryonic stem cells or stem cells developed through somatic cell nuclear transfer. Merck has been conducting For more information go to www.merck.com/cr/newtechnologies.

and acquiring new technologies and discovery pipeline. The EBR portfolio in December 2008 Merck announced compounds that are consistent with our includes partnerships worldwide, and a new division – Merck BioVentures R&D strategy. drug discovery programs in all six of (MBV). This division is aimed at Merck’s franchise areas, with a goal developing biosimilar products that The majority of our research invest- of delivering 25 percent of the early will capitalize on the upcoming patent ment is in our in-house research but pipeline from external sources of sci- expirations of many currently-marketed we are also committed to working ence within three to fi ve years. More at: biologic therapeutics. It is anticipated with strategic partners who can help www.merck.com/cr/research. that biosimilars will off er great value us achieve our research and fi nancial and improved access to these classes objectives, particularly in view of an Our external alliances range from tar- of medicines. increasingly challenging regulatory and geted acquisitions to research collabora- commercial environment. These external tions, licensing preclinical compounds SCIENTIFIC PARTNERSHIPS collaborations are a fundamental and and clinical compounds and technology The sharing of ideas across scientifi c ongoing component of our research transactions. In 2008, Merck signed disciplines enables Merck to continue to and development strategy. 46 external agreements to leverage build on our culture of innovation. We innovative science that is conducted encourage our scientists to collaborate To this end, in 2007 Merck established outside of Merck. with peers at the top private and public our External Basic Research (EBR) research institutions and to share the division, MRL’s newest, and virtual, As we continue to expand and diversify results of their research outside of Merck laboratory. Focused explicitly on exter- Merck’s scientifi c portfolio, we anticipate through publications and participation nal sources of science and innovation, that our treatments will include not only in professional meetings. EBR is developing and implement- medicines and vaccines derived from ing a strategy to expand the scope and chemistry, but also biological medicines, In addition, Merck collaborates with size of Merck’s early pipeline through which are large molecules produced external researchers and other members collaborations with external partners. using living organisms. In order to of the pharmaceutical industry by par- 11 Like MRL’s other research sites, EBR leverage our unique capabilities for ticipating in selected scientifi c consortia. contributes to all stages of Merck’s biosimilar products and novel biologics, Consortia are an important mechanism IN ACTION IN MERCK BIOVENTURES » OUR VALUES Merck BioVentures expects to have a well-diversifi ed product port- regulatory as well as commercial advantages compared to working folio across many clinical indications; we are committed to having at with mammalian cells, since it will make it easier for us to control least fi ve biosimilar products in late-stage development in 2012 and and assure quality. The ability to precisely characterize our proteins to launching at least six biosimilar products between 2012 and 2017. will be important to payors, physicians and patients – providing The Company has announced its plans to invest over $1.5 billion in added choices from the available products for a given indication. Merck BioVentures by 2015. The experience we are gaining with bio- THE FUTURE REGULATORY ENVIRONMENT similars and the proprietary technology that we continue to establish will further enhance our launch into novel biologics as well. The regulatory landscape for biosimilars is still evolving. Because of the complexity of biologics, there exist regulatory concerns GLYCOFI PROVIDES INNOVATION about a simple generic-type biosimilar approval process. We under- A critical component of Merck’s entry into biosimilars was enabled stand these concerns and, therefore, our strategy is to conduct by the acquisition of a New Hampshire-based company named a thorough development program, including a complete preclinical GlycoFi in 2006. Through the GlycoFi acquisition, Merck obtained a toxicology package and Phase III clinical studies for each of our strong intellectual property position for the production of protein biosimilars, and submit Biologic License Applications to obtain therapeutics, including monoclonal antibodies and vaccines, that approval. We will, of course, adapt our approach as new legal are of a particular glycoform and constitute new compositions. We requirements are implemented. believe that the yeast-based platform may provide major scientifi c, MSD FRANCE, FOUNDING MEMBER OF THE NATIONAL ALZHEIMER’S FOUNDATION » Almost 30 million people worldwide are affected by Alzheimer’s disease, and this is estimated to quadruple to 120 million by 2050.2 OUR VALUES Because people with Alzheimer’s disease become unable to care for themselves and require extensive assistance for numerous years,

IN ACTION the economic impact on health and social systems is signifi cant and growing. There is currently no cure for Alzheimer’s and other forms of dementia. The few existing treatments can only improve symp- toms or slow their progression in some people. More research is essential to fi ght this disease. In France, the Government has identifi ed Alzheimer’s as a national priority, launching a National Alzheimer’s Plan (2008–2012), and establishing the Foundation for Scientifi c Cooperation on Alzheimer’s Disease and Related Conditions to set up a national network of excellence in Alzheimer’s research and treatment. MSD France is a founding member of this Foundation and has committed $5 million over fi ve years to its fi nancing. The Company will disease progression, and will help identify other ways to make also share research and provide advisory scientifi c support to the improvements in patients’ quality of life. Merck will also benefi t National Alzheimer’s Plan. from broader perspectives that can help inform our own research We believe that this public/private initiative will foster research into agenda and plans. novel diagnostic methods and treatments that could prevent or halt

PREDICTIVE SAFETY TESTING CONSORTIUM » Merck is a charter member of the Critical Path Institute’s Predictive Administration to support the qualifi cation of seven biomarkers Safety Testing Consortium (PSTC), and a leader in subsequently for monitoring certain specifi c acute drug-induced kidney injuries OUR VALUES setting and delivering the group’s objectives. This consortium with markedly improved performance characteristics over previ- established fi ve working groups to identify and evaluate safety ous measures (blood urea nitrogen (BUN) and serum creatinine).

IN ACTION biomarkers that can be used to help bridge animal toxicology stud- This submission also served to establish a standardized process ies and early human trials. The ﬁ rst example of the consortium’s with regulatory authorities that paves the way for subsequent safety success has been the data recently provided by the PSTC to the biomarker qualiﬁ cations. European Medicines Evaluation Agency and U.S. Food and Drug

by which researchers can work together Organization (WHO). More at: treatment of onchocerciasis (river blind- on nonproprietary scientifi c challenges www.merck.com/cr/researchpriorities. ness), see p. 20. In 2009, Merck and that are common to all parties. For more Working with numerous partners over DNDi (Drugs for Neglected Diseases information, see box above. many years, Merck has research pro- initiative) entered into a collaborative 12 grams relating to signifi cant burdens of agreement to facilitate the discovery INTENSIFYING OUR illness in the developing world, includ- and development of safe, eff ective, and RESEARCH INTO DISEASES ing malaria, tuberculosis, diarrheal aff ordable therapies for neglected PREVALENT IN THE disease, cervical cancer, and HIV and tropical diseases (NTDs). For more DEVELOPING WORLD AIDS (including for pediatric use). infor mation, see p. 20. More at: www.merck.com/cr/access Overall, Merck’s R&D is closely aligned developingworld. CLINICAL RESEARCH AND with global needs, and addresses more than half of the global burdens of DISCLOSURE OF RESULTS Merck’s research has also resulted in Patient safety is our highest prior- illness as defi ned by the World Health ® MECTIZAN (ivermectin) for the ity. Merck conducts clinical trials

CLINICAL RESEARCH » PERFORMANCE DATA SUMMARY 2006–2008

GLOBAL 2008 2007 2006

Number of clinical trials per year registered at www.ClinicalTrials.gov* 139 160 98 Phase II–V clinical trials initiated*†‡ 36 45 43 (in number of countries) (62) (54) (49) Manuscripts of clinical trial results and related papers submitted 235 172 172 to peer-reviewed journals

* Prior year data have been adjusted since reporting last year due to a change in methodology. † Phase V trials are conducted to determine new uses for existing products and/or broader health and economic outcomes. ‡ We have modifi ed this KPI from last year to report clinical trials initiated vs. clinical trials conducted. CLINICAL RESEARCH POLICY ISSUES » » Pediatric Formulations and Indications: Where appropriate, we are laws and regulations and Merck’s own Code of Conduct and conducting clinical trials and seeking approval for pediatric indi- related policies. For more information go to Contributions at: cations and age-specifi c formulations. For a listing of all of our www.merck.com/cr/clinicalresearch. pediatric clinical trials in Phases I–IV, go to www.ClinicalTrials.gov. » Contract Research Organizations: Before agreeing to work with an » Informed Consent: Merck requires assurance that subjects and/ outside Contract Research Organization (CRO), Merck performs or their legal representatives understand the procedures, use rigorous assessments and due diligence audits to ensure that the and disclosure of personal health information, use of biological CRO complies with Good Clinical Practice (GCP) standards and is samples, and risks/benefi ts involved in a clinical study, and that aligned with Merck’s own Code of Conduct. Merck performs peri- their participation is voluntary. Informed consent is obtained odic audits of all existing CROs with which we do business. If we prior to initiation of any clinical study procedures. In the case identify violations of the contract or GCP, Merck works with the that a prospective clinical study participant cannot read the CRO on a corrective action plan. If improvements are not made form, the consent form may be read by a patient advocate, with within a defi ned time period or if repeat violations occur, Merck consent documented and witnessed. More information at: will terminate work with the CRO. www.merck.com/cr/clinicalresearch. » Compassionate Use Programs: Merck has a new procedure for a » Working with External Collaborators: Merck supports academic compassionate use program that recognizes the importance of and community-based physicians and researchers in expanding providing access to new treatments under development to cer- clinical and scientifi c knowledge and in improving the under- tain patients. Merck may conduct a compassionate use program standing of the appropriate use of Merck products. After evaluat- under the following circumstances: the disease is life-threatening ing requests, Merck provides the external scientifi c community or severely debilitating; no alternative treatments are available with drug, funding and/or human resources, in accordance with for patients; a patient is not eligible for a clinical trial; and a marketing authorization application is planned in the future.

worldwide; we rigorously study our Good Clinical Practices (ICH–GCP) In response to physicians’ and patients’ products, working with regulators and standards. More information on clinical requests for improved information, Merck healthcare professionals over many years trial conduct and governance at: registers clinical trials at www.Clinical to characterize the effi cacy and safety www.merck.com/cr/clinicalresearch. Trials.gov and has been posting results of profi les of our medicines and vaccines clinical trials at the site since October 2008. (for more information on safety issues, Merck is committed to the timely Prior to December 2008, Merck see p. 28). registration of clinical trial information posted results of clinical trials to and disclosure of trial results – regard- www.ClinicalStudyResults.org. This Merck’s clinical trials, fundamental to less of their outcome. We believe that provides patients and physicians with the development of innovative medi- clinical trial registries serve an important information about ongoing clinical trials cines and vaccines, adhere to laws and function for patients and their healthcare that are open and recruiting patients regulations for the protection of human providers to learn about and gain access and ensures that researchers who analyze, subjects, including the International to relevant clinical trials of experimental report or publish the results of clinical Conference on Harmonization – treatments or preventative agents. trials have timely information about

* 13 PHASE II–V CLINICAL STUDIES

PERCENTAGE OF PATIENTS

0 10 20 30 40

United States

Europe

Asia Paciﬁc

Latin America

Central and 2006 Eastern Europe 2007

South Africa 2008

* Phase V trials are conducted to determine new uses for existing products and/or broader health and economic outcomes. MISE IN THAILAND » In 2006, MISE launched an international program in the tsunami- ravaged areas of Thailand, in conjunction with MSD Thailand, the OUR VALUES Kenan Institute Asia, and the Thai Ministry of Education. Known as the Inquiry-based Science and Technology Education Program

IN ACTION (IN-STEP) and launched in Phang-nga with a $500,000 commitment from Merck, the three-year initiative seeks to improve student performance in science through inquiry-based learning, and to develop a proven model for the Ministry of Education to replicate nationwide. Since the program began, a team of MISE staff and educators from U.S. partner school districts and organizations has worked with local experts in Thailand to translate and adapt instructional materials from the United States that are consistent with Thailand’s educational reform program. To date, the initiative has trained more than 125 Thai educators on these instructional materials. Thirty-six of the Thai teachers who received the training have used their new knowledge to teach workshops co-designed with IN-STEP staff. In addition to the formal workshops, MSD Thailand has organized employee volunteers to assist teachers in the classroom; to date, more than 40 employees have participated.

our medicines and vaccines. Over ZETIA, with atorvastatin, the active HPV vaccine, for the new indication 290 Merck clinical trial results were ingredient in Lipitor, as another for use in males to prevent external posted on www.ClinicalStudyResults.org treatment option for patients with genital lesions. through December 2008. high cholesterol. FUTURE GOALS In addition, we are committed to pub- On June 5, 2009, Merck reported that AND PRIORITIES lishing the results from confi rmatory the preliminary results for the pivotal » Merck will continue to grow its clinical trials in peer-reviewed journals. Phase III study of rolofylline (MK-7418) pipeline, with a focus on research- In 2008, Merck submitted 235 manu- showed that rolofylline did not meet the ing and developing fi rst-in-class or scripts of clinical trial results and related primary or secondary effi cacy endpoints, best-in-class medicines and vaccines papers to such journals. and that while Merck will continue to in targeted areas according to our analyze the data with outside experts, R&D agenda. Merck supported the revisions to the Company will not fi le applications » For the longer term, we are commit- the Pharmaceutical Research and for regulatory approval this year. ted to having at least fi ve biosimilar Manufacturers of America (PhRMA) products in late-stage development Principles on Conduct of Clinical Trials On April 21, 2009, Merck announced in 2012, and to launching at least and Communication of Clinical a delay in the U.S. fi ling of telcagepant six biosimilar products between 2012 Trial Results that were adopted in (MK-0974), an investigational treatment and 2017. 14 April 2009. We continually assess for acute migraine. A new drug applica- the changing global requirements tion is no longer expected to be fi led » We will continue to expand our and update our clinical processes and with the FDA in 2009. A new timeline engagement with public and private practices to ensure the Company is will be developed as additional informa- entities such as academic institutions compliant. For more information, tion is available. and NGOs, to understand and sup- go to: www.phrma.org/clinical_trials. port research priorities and oppor- In July 2009, the FDA approved an tunities, including for developing PROGRESS IN 2009 expanded indication for ISENTRESS, world diseases. In 2009, we stated our intention to fi le our integrase inhibitor for the treat- three new drug applications with the ment of HIV-1 infection, that includes FOSTERING U.S. Food and Drug Administration: treatment-naïve patients. Prior to this, SCIENCE EDUCATION in October 2007, the FDA had granted Fostering the next generation of sci- » MK-7418, rolofylline, a potential fi rst- ISENTRESS accelerated approval for entifi c leaders is a key part of Merck’s in-class selective adenosine A1 antago- use in combination with other anti- overall commitment to science and nist being evaluated for the treatment retroviral medicines for the treatment innovation. It is essential for the sustain- of acute heart failure of HIV-1 infection in adult patients ability of our business to have access to » MK-0974, telcagepant, our new, fi rst- who have evidence of viral replication the best-trained scientifi c minds globally, in-class oral calcitonin gene-related and HIV-1 strains resistant to mul- and it is essential for the economic peptide receptor antagonist, which tiple antiretroviral agents (treatment- development and well-being of the represents a new mechanism for the experienced patients). communities in which we operate. treatment of migraine We also anticipate regulatory action in Merck has a long history of promoting » MK-0653C, a combination of 2009 on a supplemental fi ling submit- science education at the pre-college, ezetimibe, the active ingredient in ted to the FDA for GARDASIL, our undergraduate, graduate and post-doctoral MERCK INSTITUTE FOR SCIENCE EDUCATION (MISE) » PERFORMANCE AND IMPACT DATA SUMMARY 2005–2008

2008 2007 2006 2005

Merck investment in MISE (US$M) 3.9 3.4 3.4 3.3 Student enrollment in grades pre-K–8 35,210 37,015 36,244 36,696 (NJ and PA MISE-supported school districts)

Number of participants in the Academy for Leadership 136 N/R N/R N/R in Science Instruction

levels. We have provided long-term, sus- objectives and make a lasting diff erence understanding of the fundamentals of tained support for programs that expand in education reform by committing to leadership and strong classroom science capacity for training in biomedical and long-term partnerships focused on the instruction. With more than 140 educa- health sciences. Our support continues specifi c goals of: tors participating, the Academy is now today through activities that are driven the primary vehicle for professional » Developing and delivering research- through public/private partnerships with development of partnership teachers, based professional development local, regional and national partners; rely administrators and district staff , and this opportunities to enhance teacher on evidence-based approaches to learn- change will be refl ected in increased knowledge and skills; ing; and undergo rigorous evaluation. Academy registration as the program » Providing access to high-quality cur- continues to expand. At the pre-college level, our key pro- riculum materials and resources; gram is The Merck Institute for Science One of our major programs in higher » Building communities within and Education (MISE), established in 1993 education is our partnership with the across school districts that are com- as a non-profi t organization dedicated United Negro College Fund (UNCF), mitted to strengthening science to improving science education from which established the UNCF/Merck teaching and learning within and kindergarten through 12th grade, and Science Initiative in 1995. This ground- across schools and school districts; infl uencing education policy. MISE has breaking program seeks to expand the made a signifi cant impact on the char- » Promoting local, state and national pool of world-class African-American acter of teaching and learning science policies that support eff ective biomedical scientists and, in so doing, in its partner school districts, according science education. to enhance economic competitiveness to research performed over a 15-year in the United States. The initiative also period fi rst by the Consortium for In August 2008, MISE launched the provides Merck with an opportunity Policy Research in Education (CPRE) Academy for Leadership in Science to recruit from a more diverse pool of and subsequently by Horizon Research, Instruction, a three-year professional post-doctoral fellows in support of the Incorporated (HRI). It has become a development program for teachers, Company’s diversity workforce goals. model for how corporations can support principals and district administrators the nation’s STEM (science, technology, enabling them to work as school- and engineering, mathematics) education district-based teams, and deepening their 15 IN ACTION IN UNCF/MERCK SCIENCE INITIATIVE » OUR VALUES Dr. Robert L. Satcher, Jr., M.D., Ph.D., a chemical engineer who is a UNCF/Merck post-doctoral fellow in 1997. “Historically, we’ve not investigating a range of compounds that could be used for thera- had much of a commitment in this country to encourage African- peutics, is a prime example of how the UNCF/Merck Science American talent in the sciences. This fellowship is an important part Initiative works to support African-American biomedical students. of the solution.” Dr. Satcher is an orthopedic oncologist who formerly treated The program’s dedication to mentoring fellows is critical. “Even patients at Northwestern Medical Center in Chicago, Illinois, and though I went to a ‘good’ school and had support at home, there now conducts research on how bone cells respond to physical was still the potential that I wouldn’t get it right,” Dr. Satcher says. forces – a subject that led him to become a NASA astronaut so he “Helping other young scientists realize their potential is key.” could study it further. Dr. Satcher is scheduled to be a crew member on the November 2009 “[The UNCF/Merck Science Initiative] provided me support for Space Shuttle launch to the International Space Station. research at a critical time in my training,” says Dr. Satcher, who was ENDNOTES 1 Candidates shown in Phase III include specifi c This chart refl ects the Company’s current 2 Wimo A. Economic Impact of Dementia. SECTION products. Candidates shown in Phase I, II and research pipeline as of July 15, 2009. This 24th Conference of Alzheimer’s Disease III include the most advanced compound with chart has been excerpted from the Company’s International, March 26, 2009. a specifi c mechanism in a given therapeutic quarterly report on Form 10-Q fi led with the area. Back up candidates are not shown. SEC on August 3, 2009 and should be viewed along with disclosures in that fi ling. KEY ISSUE Improving Access to 2 Medicines, Vaccines and Health Care

The health and physical well-being of people well as type C strains that are found in indus- around the world depends on their access to trial countries. Or a fi nal product that has the drugs and vaccines that can eff ectively prevent, shelf-life, stability or limited number of required control and cure diseases. Unfortunately, there is doses to make it a robust, and usable product in limited research and development investment in low-income country settings where there are few many tropical diseases such as malaria or dengue, trained medical staff and little health infrastruc- and therefore little prospect of new drugs being ture in rural areas. Research-based pharmaceutical available anytime soon to treat these signifi cant companies have a critical role to play in foster- causes of illness and death. ing the research, development and production of drugs and other medical products that have a very There is also limited investment in ensuring that signifi cant health value to the global community, important medical breakthroughs translate into and not just U.S. or European markets. These products that can treat diff erent strains of disease fi rms have the power to literally save millions of JOY PHUMAPHI or perform eff ectively in medical conditions in lives, and spur the economic and social develop- Vice President for Africa. This requires drug-makers, for example, ment of families and communities worldwide. to produce meningococcal vaccines that address Human Development, type A strains commonly found in Africa, as World Bank

Research-based pharmaceutical companies have the power to save millions of lives, and spur the economic and social development of communities worldwide. »

As a global research-based pharmaceutical company, one of our top corporate responsibility priorities is to accelerate access 16 to medicines, vaccines and quality health care worldwide. We are doing this through a three-pronged strategy: 1. Discovering and developing break- 3. Promoting and participating in part- Merck maintains cross-company through medicines and vaccines nerships with governments, multilat- accountability for our access strategy, that address major burdens of illness eral organizations, community-based which is approved by our Executive globally (see p. 8). organizations, other corporations Committee. Merck Research Laboratories and NGOs to help build healthcare determines therapeutic areas in which 2. Developing long-term business capacity, expand delivery systems and to focus, taking into account three main strategies and models tailored to the address specifi c health and develop- criteria: unmet medical needs and global individual needs and circumstances ment challenges, particularly in the burdens of illness, feasibility in terms of diff erent countries such that our developing world (see p. 18). of available knowledge and exper- products reach the patients who can tise, and commercial value. Merck’s benefi t from them wherever they may In addition, we seek to advance access Manufacturing Division is investing in live, while also supporting the growth to medicines, vaccines and health care a robust, high-quality supply chain, as of our business. We also engage in through public policy and outreach well as product formulations and packag- philanthropic activities to support activities that address barriers and chal- ing to meet the diverse needs of all access to medicines and vaccines as lenges to healthcare delivery. populations, including the elderly, well (see pp. 20–21). children and developing world populations. Global Human Health, including We take very seriously the responsibility that we have, third party for research into possible antiretroviral as a research-based pharmaceutical company, to both (ARV) prevention strategies. discover and make available the medicines and vaccines that can do so much for people around the world. We We have adopted a tiered pricing approach – also know that access is determined by many inter- one of the fi rst in the industry – for our ARVs in order related elements, and have taken this into account in to foster greater access to these essential therapies. our own work and in how we work with others. Through this approach and the eff orts of our partners, approximately 650,000 patients in 131 countries and We engage in a wide range of public/private territories are being treated with regimens containing partnerships and other collaborations to spur at least one of Merck’s ARVs. We have now adopted progress for new approaches for diseases that aff ect a similar pricing approach for our vaccines for rota- developing and emerging market countries. This virus and for prevention of cervical cancer, and are KENNETH C. FRAZIER includes our royalty-free licensing agreement with the only major pharmaceutical company to have Medicines for Malaria Venture, and our recently- committed to this pricing approach for a vaccine. Executive Vice President announced collaboration with the Drugs for and President, Neglected Diseases initiative to facilitate discovery Sustainable solutions have only come from draw- Merck Global Human Health and development of safe, eff ective and aff ordable ing on the expertise of all stakeholders, and we therapies. We also have provided a royalty-free remain committed to fulfi lling our responsibili- license for a promising microbicide to another ties, from the bench to the benefi ciaries.

We engage in public/private partnerships and other collaborations to spur progress for new approaches « for diseases that affect developing and emerging market countries.

Merck Vaccines and Infectious Diseases, universal access to medicines, and the Merck received WHO prequalifi cation sets and achieves product access indica- only U.S. pharmaceutical company in for ROTATEQ in October 2008 and for tors and targets. Merck’s Global Public the top seven. MMR-II (Measles, Mumps, Rubella Policy and Corporate Responsibility Virus Vaccine Live) in December 2008. group advocates for reforms and legisla- KEY CONSIDERATIONS In May 2009, GARDASIL was the 17 tion with both national and international FOR OUR ACTIVITIES fi rst cervical cancer vaccine awarded 1 authorities that will help expand access In developing business strategies and WHO prequalifi cation. STOCRIN, 2 to medicines and health care. The Offi ce models to improve access, Merck CRIXIVAN and ATRIPLA, our treat- of Corporate Responsibility collaborates considers a wide range of policy issues ments for HIV/AIDS, have also received with senior divisional and regional and how best to address them, and what WHO prequalifi cation. Merck is com- management on alliance development, actions we can take, either directly or mitted to working with WHO for the health policy and other issues related in partnership with others, to be most prequalifi cation of ISENTRESS. As it to global health partnerships and eff ective in achieving our goals. These is required by the prequalifi cation pro- access. More on our access strategy at policy issues include: cess, Merck is awaiting the inclusion of www.merck.com/cr/access. ISENTRESS in WHO’s Expression REGISTRATION AND of Interest and will be ready to submit Through this approach, Merck has been WHO PREQUALIFICATION the necessary documents. able to improve access to our medicines Merck is committed to registering and vaccines throughout the develop- our medicines and vaccines in develop- To increase the transparency of the ing world and emerging markets. In ing countries and emerging markets in Company’s product registration status, we June 2008 we were recognized for our parallel with developed countries to the are disclosing registration for ROTATEQ, eff orts when the newly launched Access extent permitted by local regulations; in GARDASIL and our four antiretrovirals to Medicines Index (ATMI) ranked this connection WHO prequalifi cation (ARVs) and updating this information Merck No. 3 among the world’s largest is an important step in fostering access. every six months. More details at www. pharma ceutical companies in promoting merck.com.cr/accessvaccines. PANDEMIC PREPAREDNESS – A-H1N1 INFLUENZA OUTBREAK » In response to the A-H1N1 infl uenza outbreaks, Merck has been To help with the outbreak response in Mexico, Merck’s Mexican in ongoing contact with public health offi cials and international subsidiary announced a donation of 80,000 doses of PNEUMOVAX23 OUR VALUES organizations to determine how best to contribute to the effort to (Pulmovax in Mexico) to Birmex, the state-owned vaccine facil- combat this potential global health threat. Since many deaths in fl u ity of Mexico, for the immunization of healthcare workers in

IN ACTION patients are due to a secondary bacterial infection such as pneumo- affected areas. nia, Merck also assessed its ability to meet a potential increase in demand for PNEUMOVAX23, Merck’s pneumococcal vaccine.

RESPONSIBLE PRICING intellectual property protection in devel- EXTERNAL MANUFACTURING Through our worldwide tiered pricing oping as well as developed countries. Merck is committed to seeking ways to strategy, Merck is committed to making We recognize the public health fl ex- reduce the cost of our medicines and our HIV medicines and vaccines more ibilities contained in the WTO TRIPS vaccines, and thus increase aff ord ability aff ordable to more people by applying a agreement. If these exceptions become and access. We work with external diff erential pricing policy corresponding the rule, however, then incentives for manufacturers and suppliers to achieve to countries’ level of development and innovation would be reduced in ways incremental effi ciencies and to reduce or burden of disease. In the least developed that could aff ect all countries and lead waive the royalty on vaccine doses sold countries of the world, Merck sells our to a decline in biomedical innovation. in the developing world. In 2008, Merck ARVs as well as two of our vaccines, reached an agreement with licensing GARDASIL and ROTATEQ, at prices Merck supports the role of quality partner CSL Limited whereby CSL at which we do not profi t. In middle- generic medicines in healthcare systems agreed to waive Merck’s royalties for income countries, Merck provides our around the world. While we defend our sales of GARDASIL in the developing ARVs and vaccines at signifi cantly intellectual property rights vigorously, world to help expand access. CSL’s deci- reduced prices, taking into account fac- we strive to do so in a manner that does sion to waive the royalties will result in tors such as relative level of economic not undermine access to medicines in lower prices and is an example of how development, relative burden of disease, countries where such medicines have industry partners can work together government commitment to treating its been manufactured and may be sold free to develop sustainable solutions for population, and the value that Merck of intellectual property rights. vaccine access. ARVs and vaccines have in the local marketplace. In high-income countries, In December 2008, a shipment of PRODUCT DONATIONS we price our products at competitive generic Losartan, the active pharmaceu- In our view, donating medicines and prices, taking into account the value tical ingredient found in COZAAR, a vaccines is not a sustainable long-term they provide. We believe that our pricing Merck antihypertension drug, was going solution to the global challenge of access approach has contributed to improving through the Netherlands on its way to to medicines. However, we recognize access to our medicines and vaccines, Brazil, and was seized on charges of pat- that millions of patients have an imme- while also taking into account Merck’s ent infringement. The Dutch Authorities diate need for these products and cannot need to continue to invest in research, informed Merck, and Merck sent noti- wait for solutions. For that reason, development and production and to fi cations of the Dutch patent violation Merck remains committed to donating provide an attractive return to our share- to the carrier, the manufacturer and the our products through the Merck Medical 18 holders. More on Merck’s worldwide importer from Brazil. In this case, Merck Outreach Program, the MECTIZAN pricing strategy at www.merck.com/cr/ acted within its legal rights to enforce Donation Program and through our accessdevelopingworld. a valid patent in the Netherlands. As a U.S.-based Patient Assistance Programs. policy matter, however, we should have We also believe that, in well-defi ned PATENTS taken greater consideration of the fact circumstances involving informed The overwhelming majority of medi- that the shipment was bound for a partnership agreements and attention cines and vaccines considered essential country in which Merck does not have to sustainability of access, programs by the WHO are not patented in the patent rights. We have ensured that our involving donated vaccines can help developing world; yet very few people policies and internal procedures have accelerate access to novel vaccines and in those countries have access to the been clarifi ed on this point. drugs (see p. 23 for an example related medicines they need. A complex array to vaccine access in Nicaragua). Merck of factors create practical barriers to LICENSING is committed to conforming fully to the access to care.3 Merck considers issuing licenses for WHO Guidelines for Drug Donations our medicines and vaccines to further and to disclosing the U.S. wholesale Intellectual property protection provides increase their availability. To grant such value of drug donations per year. See a critical incentive for research-based licenses, however, we must fi rst be cer- p. 21 for more on these programs. pharmaceutical companies to invest in tain of both the quality of the licensee’s the research and development of new product and the ability of the licensee to PUBLIC/PRIVATE PARTNERSHIPS medicines and vaccines. Further, policies provide uninterrupted supply. To date, A critical part of Merck’s access strat- that support innovation, including R&D Merck has granted royalty-free licenses egy is promoting and participating in in the life sciences sector, are key drivers for our ARV efavirenz to fi ve South public/private partnerships (PPPs) with for national economic competitiveness African generic manufacturers. local communities, governments, NGOs, and social prosperity. For these reasons multilateral organizations and other we support and advocate for eff ective corporations to address specifi c health IN ACTION IN THE MERCK MECTIZAN DONATION PROGRAM » OUR VALUES The Merck MECTIZAN Donation Program (MDP) is one of the most signifi cant initiatives undertaken by Merck to help improve access to medicines in developing countries. Established more than 20 years ago, the MDP is the longest-running disease-specifi c drug donation program and public/private partnership of its kind in history, and is widely regarded as one of the world’s most successful public/private health collaborations. Onchocerciasis, or “river blindness,” is one of the leading causes of preventable blindness worldwide, affecting mainly rural areas in sub-Saharan Africa and Latin America. In 1987, Merck announced that it would donate MECTIZAN, our breakthrough medicine for the treatment of onchocerciasis, to all who needed it, for as long as needed, to eliminate the disease as a public health problem. To facilitate the donation and delivery of MECTIZAN, Merck established a unique, multisectoral partnership, involving the World Health Organization (WHO), the World Bank and UNICEF, the Task Force for Global Health, as well as ministries of health, non- governmental of MECTIZAN for river blindness will reach 100 million treatments development organizations and local communities. annually by 2010. In 1998, Merck expanded the Merck MECTIZAN Donation Program In November 2007, public health offi cials announced that transmis- to include the prevention of lymphatic fi lariasis (LF), commonly sion of river blindness had been halted in Colombia, marking the referred to as elephantiasis, in African countries where the disease fi rst time that the disease has been eliminated as a public health co-exists with river blindness. problem on a country-wide basis anywhere in the world. In 2008, it was announced that 31 percent of the formerly at-risk population Since the program began, Merck has donated more than 2.5 billion in the Americas is no longer at risk of contracting the disease. The tablets of MECTIZAN for river blindness, with nearly 700 million success of the program in Latin America means that 74,476 people treatments approved since 1987. The program currently reaches in 190 communities are now free of the threat of river blindness, more than 80 million people through river blindness programs and signals the potential for a future free of river blindness in all in Africa, Latin America and the Middle East (Yemen) annually. of the Americas. In a promising development toward elimination of Additionally, 300 million treatments for lymphatic fi lariasis (LF) river blindness in Africa, WHO’s department of Tropical Disease have been approved, with nearly 90 million treatments approved in Research is conducting studies to determine endpoints to stopping 2008 alone. treatment with MECTIZAN in certain areas of West Africa. To date, Merck has invested more than $35 million dollars in direct More on the MDP, its performance and impacts at fi nancial support for the MECTIZAN Donation Program, in addition www.merck.com/cr/mectizan. to $3.9 billion worth of tablets. We estimate that Merck’s donation

and development challenges beyond around the world, including the African IMPROVING ACCESS IN THE those which Merck can directly control. Comprehensive HIV/AIDS Partnerships, DEVELOPING WORLD AND We have fi ve decades of experience in that are helping to prevent and treat EMERGING MARKETS developing PPPs to build healthcare HIV/AIDS, other chronic condi- Merck has an ethical responsibility – capacity and expand delivery systems. tions and vaccine-preventable illnesses. and the ability – to help accelerate 19 The best known of these programs is the Information on specifi c partnership access to our medicines and vaccines in Merck MECTIZAN Donation Program programs can be found throughout this least developed countries where access (see box above), the fi rst large-scale, report and on www.merck.com/cr. is most lacking. In middle-income comprehensive global health initiative of countries and emerging markets, its kind. Merck has applied our experi- we are undertaking opportunities to ence with the MECTIZAN Donation expand our business, while at the same Program to programs and partnerships time providing our medicines and

ACCESS TO MEDICINES AND VACCINES » PERFORMANCE DATA SUMMARY 2005–2008

GLOBAL 2008 2007 2006 2005

Number of Merck products for which not-for-proﬁ t prices are 66 2 2 offered to least developed countries Millions of treatments approved for river blindness through the 174.2 128 118 114 MECTIZAN Donation Program (at three tablets per treatment) Product donations (US$M)*† 766 766 768 979 (% in the developing world) (77) (79) (58) (45)

* We value our product donations based on the U.S. wholesale price. Decrease in product donations is due in large part to decline in patient enrollment in our corporate U.S. Patient Assistance Program attributed in part to an increasing number of patients with prescription drug coverage (including through the Medicare Prescription Drug Program, which began in January 1, 2006). † Includes Merck Medical Outreach Program (including ACHAP), MECTIZAN Donation Program and Merck U.S. Patient Assistance Program. EMERGING MARKETS »

Emerging markets will continue to provide signiﬁ cant growth Korea, Russia, Turkey, Poland and Brazil. Merck is committed opportunities for Merck. We are on track to achieve our goal of to creating and leveraging business opportunities in an innova- OUR VALUES $2 billion in sales from emerging markets by 2010, and we are tive, responsible and sustainable manner that will drive revenue determined to be among the top ﬁ ve pharmaceutical companies growth in emerging markets.

IN ACTION in the markets we are focusing on, which include China, India,

vaccines to new patients in a fair and In 2008, Merck began supporting partnerships in infectious disease areas responsible manner. Mothers2Mothers (m2m), an orga- that enable innovation in diseases of nization that addresses prevention of the developing world. HEALTHCARE CAPACITY-BUILDING mother-to-child transmission (PMTCT) Merck recognizes that human resource by employing mothers living with HIV In January 2008, Merck and other phar- capability-building is a major factor (‘Mentor Mothers’) as peer educa- maceutical companies agreed to provide in addressing global health challenges. tors and professional members of the fi nancial support for the WHO/TDR For this reason, we are engaged in a healthcare team, in public health facili- Partnership Network (Special Program number of initiatives to address health- ties in Kenya, Lesotho, Malawi, Rwanda, for Research and Training in Tropical care capacity-building in the developing South Africa, Swaziland and Zambia. By Diseases (TDR)), an independent global world, focusing specifi cally on health- the end of 2008, m2m had expanded to program of scientifi c collaboration. care training. For example: a total of almost 500 sites across Africa, Potential collaboration involves industry employing 1,400 women living with grants to scale up TDR’s network In 2009, with support from The Merck HIV/AIDS as mentors and reaching infrastructure for (1) maintaining capaci- Company Foundation, the Earth more than one million people. ties for drug testing in cell and animal Institute at Columbia University models; (2) maintaining its database launched a community health worker In addition, since 2003 Merck has of drug targets and information on training program to strengthen com- helped increase the capacity of national known “drug-ability” of the targets; and munity health services for over immunization programs through the (3) evaluation and feedback to collabo- 400,000 people in ten African coun- Merck Vaccine Network – Africa rating institutions. tries as part of the Millennium Villages (see p. 23). For more on Merck’s health- project (www.millenniumvillages.org). care capacity-building activities in the In 2009, Merck and the Drugs for The initiative aims to advance the developing world, go to www.merck. Neglected Diseases initiative (DNDi) development of a professional cadre of com/cr/healthcarecapacity. entered into a collaborative agreement approximately 800 community health to support the discovery and develop- workers to fi ll a critical gap in primary DEVELOPING WORLD ment of improved treatments for a wide health care provision for rural communi- RESEARCH INITIATIVES range of neglected tropical diseases ties throughout Africa. Merck has a long history of both in- (NTDs). Merck will contribute small house research and external research molecule assets and related intellectual

MERCK’S CONTRIBUTION TO ACHIEVING THE MILLENNIUM DEVELOPMENT GOALS »

One of the ways in which Merck measures its access performance » Combat HIV/AIDS, Malaria and Other Diseases (Goal 6) is in relation to progress on the UN Millennium Development

OUR VALUES » For more than 20 years, Merck has been at the forefront of the Goals (MDGs). We believe that the private sector, including the effort to respond to the HIV and AIDS pandemic, discovering research-based pharmaceutical industry, has an important and developing innovative treatments for the disease.

IN ACTION role to play in contributing to the achievement of the MDGs, particularly those focused on health. Listed below are just some » Since March 2001, Merck has had in place a differential pric- of Merck’s contributions with regard to the healthcare-related ing policy whereby infected people in those countries hard- MDGs. More at: www.merck.com/cr/access/mdgs. est hit by the HIV and AIDS pandemic and least able to afford treatment can obtain Merck ARVs at prices at which Merck » Reducing Childhood Mortality by 2015 (Goal 4) makes no proﬁ t. » Merck has developed and manufactured pediatric vaccines » Through programs like the African Comprehensive HIV/AIDS to help protect children from many of the most common and Partnerships and our work in China and elsewhere, Merck has serious childhood diseases including chickenpox, measles, helped to establish trailblazing programs to address HIV and mumps, rubella, Haemophilus inﬂ uenzae type b (Hib), hepatitis AIDS in countries around the world. A and B, rotavirus and human Papillomavirus (HPV). » Developing Public/Private Development Partnerships to Improve » We participate in numerous public/private partnerships Access to Medicines in Developing Countries (Goal 8, Target 4) focused on improving childhood mortality and building capacity in immunization services to prevent childhood diseases, » Merck has long been a pioneer in developing public/private such as the GAVI Alliance, the Merck Vaccine Network – Africa, partnerships to foster access to medicines and vaccines in and the ROTATEQ Access Partnership. developing countries around the world. A prime example is the Merck MECTIZAN Donation Program, which is widely regarded as one of the world’s most successful public/ private partnerships. property via a non-exclusive, royalty- countries to help protect women from and health care in the developing world, free license to DNDi to conduct early HIV. The compound is the fourth we Merck is engaged in a number of high- development programs for drug candi- have granted to IPM since 2005. level fora, including The Medicines dates for the treatment of NTDs, with Transparency Alliance (MeTA). Estab- the primary goal of manufacture and For more on Merck’s research eff orts lished by the U.K. Department for distribution of drug therapies at low cost in relation to developing world International Development in 2008, the to the public sector in resource-poor needs, go to www.merck.com/ aim of MeTA is to build transparency countries. Merck and DNDi will share cr/researchpriorities. and accountability around the selection, joint intellectual property on drug can- procurement, sale and distribution of didates generated through early develop- RESPONDING TO IMMEDIATE NEEDS essential medicines. Merck also served as ment, and Merck will retain the option To meet humanitarian assistance needs a member of the Global Fund Technical to undertake late clinical development in the developing world and to support Working Group (TWG) on In-Kind and registration of drug candidates. disaster relief and emergency situa- Donations, which was commissioned by tions worldwide, the Merck Medical the Global Fund on HIV/AIDS, TB and In March 2009, Merck and Medicines Outreach Program (MMOP) is a critical Malaria to examine the potential advan- for Malaria Venture (MMV), a not-for- vehicle through which Merck helps tages and concerns associated with the profi t virtual research and development expand access to medicines and vac- Global Fund’s acceptance of donations organization dedicated to reducing the cines. The scope of the MMOP varies of in-kind goods. burden of malaria, announced a licens- from year to year and is infl uenced by ing agreement for an investigational changing medical needs in develop- To contribute to the debate on research drug candidate for the treatment of ing countries, the quantity of Merck in neglected tropical diseases and other malaria in the developing world. Merck, medicines available for donation, and the diseases prevalent in the developing whose researchers discovered the can- random nature of natural and man-made world, Merck has participated in numerous didate, has granted MMV an exclusive, disasters. In conducting the MMOP, discussions, including the 2008 Infectious royalty-free license to pursue develop- Merck adheres to the World Health Diseases Summit in Washington, D.C., ment of the investigational candidate Organization’s (WHO) Guidelines for which focused on leveraging private- for the treatment of malaria in malaria- Drug Donations. sector skills for health system development endemic countries. Merck retains the and capacity-building; the 2008 Partnering option to become MMV’s development In 2008, Merck donated $43.4 mil- for Global Health forum, organized by partner upon completion of the fi rst lion in market value of medicines Bio Ventures for Global Health and the Phase II clinical trial of the candidate; and vaccines through well-established Biotechnology Industry Organization (BIO) at the same time Merck has committed partnerships to help patients throughout and sponsored by the Bill & Melinda not to profi t from its sale in malaria- the developing world. These dona- Gates Foundation; and the Global endemic countries. tions supported sustained chronic-care Ministerial Forum on Research for health programs in Central Asia; enabled Health – Mali in November 2008. In addition to Merck’s own research immunization programs in Central eff orts in HIV/AIDS, we have entered and Southeast Asia, the Caribbean and Merck has been a founding partner and into partnerships with other researchers Africa; provided disaster assistance in active participant in several industry and scientifi c organizations to help Myanmar, India, Honduras and the and multi-stakeholder eff orts to promote accelerate the search for treatments U.S.; and reached many thousands policies to improve access to medicines and possible cures. Most recently, in more worldwide through the ongoing and vaccines in the developing world. March 2008, refl ecting the Company’s medical programs of our partner private For more information, go to www.merck. ongoing commitment to fi nding ways voluntary organizations. More on com/cr/accessdevelopingworld. to prevent and treat HIV/AIDS, Merck MMOP at www.merck.com/mmop. 21 granted the International Partnership FUTURE GOALS AND PRIORITIES for Microbicides (IPM) a non-royalty- INFORMING PUBLIC DEBATES FOR DEVELOPING AND EMERGING bearing, non-exclusive license to ON ACCESS TO MEDICINES MARKET COUNTRIES develop, manufacture and distribute a IN THE DEVELOPING WORLD » We are on track to achieve our goal of novel ARV compound (L’644) for use To inform the public policy discourse $2 billion in sales from emerging mar- as a vaginal microbicide in developing related to access to medicines, vaccines kets by 2010, and we plan to be among

MERCK MEDICAL OUTREACH PROGRAM » PERFORMANCE DATA SUMMARY 2005–2008

GLOBAL 2008 2007 2006 2005

Number of countries and territories reached by the 115 104 103 98 Merck Medical Outreach Program Total value of product donations (US$M)* 43.4† 125‡ 46 54 Number of disaster relief efforts assisted 56 2 4 Total value of disaster relief contributions (product) (US$M)* 0.872 3.3 2.6 12.2§

* We value our product donations based on the U.S. wholesale price. † Figure includes the value of donations to the African Comprehensive HIV/AIDS Partnership (ACHAP). ‡ 2007 was characterized by a large increase in requests from our PVO partners, as well as increased availability of pharmaceuticals and vaccines for their ongoing humanitarian programs and disaster relief efforts. § 2005 was unprecedented in terms of disaster relief and included efforts in the wake of the tsunami that struck Southeast Asia, hurricanes Katrina and Rita, a major earthquake in Pakistan and ﬂ oods in Guatemala. the top fi ve pharmaceutical companies immunization programs are particularly epidemiology from studies conducted in the markets we are focusing on. critical to the health and economies in 22 countries and in more than of developing countries – but they are 80,000 infants and children with health » In 2009, we plan to expand our health diffi cult to deliver. Merck continues to authorities, governments, NGOs and capacity-building portfolio to include make progress in our mission of prevent- physicians around the world. new projects and partnerships focused ing disease and saving lives by bringing on healthcare worker training in the forward innovative vaccines, working Also in 2006, Merck introduced developing world. with partners to make them accessible to GARDASIL, a vaccine to prevent cervi- » We will continue our interaction with those who need them around the world, cal, vulvar and vaginal cancers; precan- external stakeholders to understand and helping to build healthcare capacity cerous or dysplastic lesions; and genital key research priorities and opportuni- in developing countries. warts caused by the human papilloma- ties, and to support those with relevant virus (HPV). Cervical cancer is the expertise and resources where possible. In 2006, Merck introduced ROTATEQ, second most common cause of can- a vaccine against rotavirus, a disease cer death in women worldwide, IMPROVING ACCESS whose eff ects kill nearly 600,000 chil- and greater than 80 percent of these TO VACCINES dren each year, mainly in the develop- deaths are in the developing world. AND IMMUNIZATION ing world. By the end of 2008, By the end of 2008, GARDASIL IN THE DEVELOPING WORLD ROTATEQ was approved in 87 coun- was approved in 109 countries, many tries, 15 of which are GAVI-eligible under fast-track or expedited review, Because of gaps in the healthcare infra- countries. Merck is sharing clinical data of which 23 are GAVI-eligible. structure and workforce of the develop- on ROTATEQ and rotavirus disease ing world, preventive measures such as

MERCK VACCINES » PERFORMANCE DATA SUMMARY 2005–2008

GLOBAL 2008 2007 2006 2005

Number of countries where Merck has committed to no-proﬁ t 72 72 N/A N/A prices for ROTATEQ and GARDASIL Number of low- and middle-income countries using Merck’s 16 11 N/R N/R vaccines in their public sectors Number of vaccines approved, registered in number of countries 11 vaccines in 11 vaccines in N/R N/R 114 countries >100 countries » Number of doses sold worldwide of ROTATEQ, GARDASIL and MMRII 55.9M 46M N/R N/R

» In high human development index (HDI) countries 52.6M 44M N/R N/R

» In medium HDI countries 3.3M 1.6M N/R N/R

» In low HDI countries 43,000 0 N/R N/R

» In GAVI countries* 603,000 504,000 N/R N/R

» Number of new country registrations of GARDASIL and 18 72 105 1 22 ROTATEQ gobally† (and cumulatively to date) (196) (178) (106) (1) » In high HDI countries 6 31 81 1 (119) (113) (82) (1)

» In medium HDI countries 11 28 12 0 (51) (40) (12) (0)

» In low HDI countries 1 11 5 0 (17) (16) (5) (0)

» In GAVI countries* 8 21 9 0 (38) (30) (9) (0)

» Partnership data:

» Merck investment in MVN–A (US$) 800,000 1M 400,000 400,000

» Number of healthcare professionals trained through MVN–A 142 97 103 89

» ROTATEQ Access Program (Nicaragua):‡ » Total doses of vaccines delivered as 1st, 2nd or 3rd dose 329,560 291,797 20,325 N/A » Total doses of ROTATEQ delivered as 3rd dose (fully-vaccinated child) 106,700 87,611 0 N/A » Vaccine coverage (% receiving 3rd dose of ROTATEQ) among 81 80 0 N/A Nicaraguan infants

* GAVI list includes 72 countries that are eligible for funding; this includes countries that are classifi ed as low HDI as well as some countries that are classifi ed as medium HDI. Fifteen UN member countries are not included in the Human Development Index due to lack of data. † Prior year data have been adjusted due to a change in methodology. ‡ As of 12/31/08. IN ACTION IN ROTATEQ ACCESS PARTNERSHIP » OUR VALUES Each year rotavirus kills more than 600,000 children under fi ve, rotavirus vaccination that are among the highest in the world. The mostly in the developing world. In 2006, Merck and the Ministry of Ministry of Health reports that approximately 81 percent of eligible Health in Nicaragua announced a new public/private partnership at infants in Nicaragua were vaccinated with ROTATEQ in 2008 and the Clinton Global Initiative through which all eligible infants born that winter hospitalizations for diarrhea and dehydration have been in Nicaragua in a three-year period would receive free doses of considerably lower than in the past. By the end of 2009, the govern- ROTATEQ, Merck’s vaccine to help prevent rotavirus. Merck is also ment hopes to achieve an 82–84 percent vaccination rate. providing technical assistance for the duration of the program, and In addition to helping Nicaragua protect infants and young children is working with the Nicaraguan Ministry of Health to strengthen from rotavirus, this program is adding to the evidence base support- Nicaragua’s national rotavirus disease surveillance network and ing introduction of routine rotavirus vaccination in resource-poor assess the public health benefi t resulting from the early adoption countries, and has helped to inform access decisions in other coun- and use of a rotavirus vaccine. tries. More at: www.merck.com/cr/accessrotateq. As of April 2009, Merck has provided nearly one million free doses of ROTATEQ to Nicaragua, and the country has achieved rates of

PARTNERSHIPS TO INCREASE immunization models in resource-poor FUTURE GOALS AND ACCESS TO VACCINES and other countries. In 2008, more PRIORITIES FOR VACCINES GAVI ALLIANCE: Merck is a founding than 195,000 doses of GARDASIL were AND IMMUNIZATION partner in the GAVI Alliance, a public/ approved for donation; the fi rst ship- » As we move towards 2010, Merck private partnership committed to ments of donated GARDASIL were is looking forward to working with saving children’s lives and protecting sent to Bolivia, Cambodia and Lesotho international groups such as the GAVI people’s health by increasing access during the fi rst half of 2009. For more Alliance, WHO, PATH, UNICEF, the to immunization in poor countries. information, go to www.merck.com/ Pan-American Health Organization More at: www.gavialliance.com. cr/accessgardasil. (PAHO) and others to facilitate introduction of our rotavirus and human ROTATEQ ACCESS PARTNERSHIP: Through MERCK VACCINE NETWORK–AFRICA papillomavirus vaccines in the world’s this program launched in 2006, Merck (MVN–A): As part of our commitment poorest countries. introduced ROTATEQ in Nicaragua to the GAVI Alliance, in 2003 Merck » Merck will begin reporting in 2010 the and enabled the country to establish initiated the Merck Vaccine Network– number of doses shipped through rapidly a national rotavirus vaccination Africa (MVN–A), a multi-year phil- the GARDASIL Access Program. program to help protect infants from anthropic initiative to help increase this potentially serious disease. More at: the capacity of national immunization » The ROTATEQ Access Partnership www.merck.com/accessrotateq. programs in Africa by supporting aca- aims to achieve an 82–84 percent demic partnerships in the development vaccination rate in Nicaragua by the GARDASIL ACCESS PROGRAM: of sustainable immunization training end of 2009. In 2007, Merck made a commit- programs. Since 2003, more than ment to donate at least three million 510 immunization managers in Kenya, IMPROVING ACCESS TO doses of GARDASIL, Merck’s cervical Mali, Uganda and Zambia have com- HIV/AIDS TREATMENT cancer vaccine, to organizations and pleted MVN–A training and returned AND CARE IN THE institutions in developing countries. to their medical facilities to share their DEVELOPING WORLD 23 The GARDASIL Access Program expertise and knowledge with col- For more than 20 years, Merck has sought enables applicants from eligible lowest- leagues. For more information, go to to make a diff erence in the fi ght against income countries to gain operational www.merck.com/cr/mvna. HIV/AIDS, discovering and develop- experience in the design and implemen- ing innovative treatments for the disease. tation of HPV vaccination projects, Today we market four ARVs: CRIXIVAN, with the goal of supporting the develop- STOCRIN, ATRIPLA and ISENTRESS. ment of successful child and adolescent Since our HIV products fi rst reached the

HIV/AIDS ACCESS » PERFORMANCE DATA SUMMARY 2006–2008

GLOBAL 2008 2007 2006

Number of patients on Merck ARV therapy – all formulations, all products 653,867* 763,118 701,391 (Percentage in developing world) (76) (91) (93) Percentage of total patients on Merck ARVs estimated to be children taking 17 15 19 pediatric formulations Percentage of total patients using Merck ARVs at prices which Merck does not proﬁ t 76 82 74 Percentage of total patients using Merck ARVs at signiﬁ cantly discounted prices 98 18

Number of countries and territories in which patients are on at least one formulation of 131 135 125 Merck’s ARVs

* Although the 2008 fi gure represents a decrease to the number of patients on Merck ARVs, it is important to recognize that the number of patients in developing countries treated with generic ARVs – including those through cooperative efforts with AAI companies – has increased signifi cantly. CHINA-MSD HIV/AIDS PARTNERSHIP (C-MAP) » In 2005, Merck and the Government of China established the fi rst large-scale, national comprehensive public/private partnership, OUR VALUES known as the China-MSD HIV/AIDS Partnership (C-MAP), to address HIV/AIDS prevention, patient care, treatment and support. In sup-

IN ACTION port of China’s Action Plan for Reducing & Preventing the spread of HIV/AIDS (2006–2010), the partners introduced the project in Liangshan Prefecture, Sichuan Province, with the aim of developing a comprehensive model that could be replicated in other provinces. The Merck Company Foundation has committed $30 million to support the partnership over fi ve years; the Government of China, through the leadership of the Ministry of Health, is providing staff, facilities and equipment. The project is focused on six strategies: » Raising awareness and reducing discrimination among target populations through training and education » Deploying comprehensive, integrated risk-reduction approaches to reduce HIV transmission among high-risk populations populations, more than 45,000 at-risk individuals, including injection drug users, commercial sex workers and STD clinic patients » Establishing a service network to provide consecutive treatment, have undergone targeted HIV prevention interventions to encourage care and support to people living with HIV/AIDS treatment, prevention, HIV testing and counseling through peer » Providing support to orphans and families affected by HIV to education initiatives. To increase the diagnosis of people living with alleviate negative social and economic impacts HIV/AIDS and to provide timely counseling and referral services, » Building capacity of healthcare workers and organizations and C-MAP supported the efforts of Liangshan’s Disease Control Center developing new anti-HIV strategies and techniques to establish 82 provider-initiated HIV testing and counseling (PITC) sites in 12 counties along with 22 testing and counseling sites for » Strengthening HIV surveillance, monitoring and evaluation pregnant women in four counties for the prevention of mother-to- systems and data management and analysis to track program child transmission (PMTCT); nearly 96,000 people, including more implementation, assess program outcomes, and identify and than 17,000 pregnant women, have received HIV testing/counseling apply best practices in a timely manner. services through PMTCT sites. In 2008, C-MAP expanded to cover 62 counties/districts targeting In the fi rst half of 2009, C-MAP continues to implement its 2008 Work 21 million out of 87.5 million total population in Sichuan Province. Plan, which was signifi cantly delayed by the Sichuan earthquake From 2007 through 2008, C-MAP launched 82 initiatives in sup- that occurred in 2008. In 2009 and 2010, the program will continue to port of its six core strategies. Through a variety of HIV educational ensure resources are focused in areas of greatest need, and provide programs, nearly two million people received up-to-date HIV infor- support to solve capacity and manpower issues at local levels. mation and training. To reduce the infection rate among high-risk

market in 1996, we have worked to expand versus developed counties). As of formulations for its ARVs. Of those access to them both directly and in partner- December 31, 2008, 653,867 patients being treated with Merck ARVs, as of ship with others, particularly for patients in in 131 countries and territories were end of year 2008, there were an esti- 24 countries that are the poorest and hardest being treated with regimens contain- mated 111,471 children using pediatric hit by the pandemic. ing at least one of Merck’s ARVs. Three formulations, representing 17 percent out of four (76 percent) – or an esti- of all patients on Merck ARVs. We are Merck has had an intensive broad-based mated 498,845 patients – obtained these currently engaged in a collaboration HIV/AIDS clinical research program ARVs in the more than 80 countries in with the National Institute of Allergy since 1985 that has sought to address which we sell them at a price at which and Infectious Diseases and others on both treatment and prevention. In Merck does not profi t. An additional a study of ISENTRESS in children addition to Merck’s active research and nine percent received Merck ARVs and adolescents. We are also working development programs focusing on in countries where they are off ered at in partnership with the U.S. President’s novel ARV drugs, Merck has made a signifi cantly discounted prices. Nine out Emergency Plan for AIDS Relief signifi cant investment in HIV vaccine of ten patients using Merck ARVs (PEPFAR) Partnership for Pediatric development. Beyond our own research live in developing countries in Africa, AIDS Treatment to identify scientifi c eff orts, we have entered into partner- Asia, Latin America and the Caribbean and technical solutions to improve access ships with other researchers and scien- where the pandemic is having its most to ARV treatment for children living tifi c organizations to help accelerate the devastating impact. with HIV/AIDS in resource-limited set- search for new treatments and innova- tings. For more information on pediatric tive prevention strategies. For details on Access to aff ordable HIV diagnostics formulations for our ARVs, see Merck’s long history of groundbreaking and treatment for children is an urgent www.merck.com/cr/accesshivaids. research in this area, go to www.merck. global health priority. According to com/cr/accesshivaids. UNAIDS, there are approximately PARTNERSHIPS TO IMPROVE 2.1 million children under the age of ACCESS TO ARVS Merck believes a relevant measure of 15 living with HIV worldwide. As part The most important factors for improv- the success of our ARV access strategy of the Company’s ongoing commit- ing access to ARVs in the long term are is the number of patients treated, and ment to the fi ght against HIV/AIDS, strengthening healthcare infrastructure, where they are treated (developing Merck has developed certain pediatric ensuring adequate fi nancing for health, IN ACTION IN FOSTERING HEALTH LITERACY IN SWITZERLAND » OUR VALUES Health literacy means having the skills to make decisions that are supported by health insurers, MSD Switzerland initiated the “Health good for one’s health.4 For pharmaceutical companies such as Literacy Alliance” in 2006, which advocates for health literacy in Merck, improved health literacy contributes to better public under- health policy and among the general public. standing of disease prevention and management, and to building These activities have raised awareness of the importance of health stronger, more sustainable health systems able to support contin- literacy among the public and other stakeholders, and helped ued healthcare innovation. ensure the issue was included in draft preventative health legisla- MSD Switzerland has been working with universities and others tion in 2008.5 Health literacy has also been designated an objective to support programs to raise health literacy levels in the country. of the Swiss e-health strategy.6 These two important developments In 2006, MSD sponsored a Swiss Health Literacy Survey which pro- are beginning to provide a legal and institutional framework for vided the ﬁ rst comprehensive picture of health literacy challenges improving health literacy in the future. in the country. With Health Promotion Switzerland, a foundation

and helping to build local healthcare CRIXIVAN to Botswana’s national helping to expand the Global Fund’s capacity through training and support. ARV treatment program for the part- engagement with the private sector Public/private partnerships have a criti- nership’s duration. In November 2008, through co-investment, involvement cal role to play in this process, drawing Merck expanded its donation to include in country coordinating mechanisms, on the complementary expertise of ATRIPLA and ISENTRESS. ACHAP policy development, resource mobi- all stakeholders – governments, inter- has made a signifi cant contribution to lization and advocacy. We also engage national agencies, community organiza- key aspects of Botswana’s response to the with stakeholders at scientifi c and tions, donors, the private sector, NGOs, HIV/AIDS epidemic and has served as policy events, such as the second Global patients and others – to identify the a catalyst for the provision of urgently Experts Summit held in Vancouver in most promising and effi cient ways to needed infrastructure, equipment, human February 2009, which aimed to develop address the impact of HIV/AIDS in resources, training and program support expert consensus on the research needed a variety of resource-scarce settings. for the Botswana ARV program. The ini- to optimize the individual and societal Merck is engaged in a number of part- tiative has dramatically reduced mother- benefi ts of the public health approach to nerships worldwide, including: to-child transmission and reduced new delivering ARV therapy. infections among children by 80 percent, ACCELERATING ACCESS INITIATIVE (AAI): and has signifi cantly improved blood FUTURE GOALS AND PRIORITIES Merck is a founding member of the supply safety. As of April 30, 2009, more RELATING TO HIV/AIDS AAI, a partnership between UNAIDS, than 126,000 patients were receiving » Merck remains committed to contin- the WHO, UNICEF, UNFPA, the ARV treatment; this is approximately ued R&D investment in new treat- World Bank and nine research-based 84 percent of the treatment-eligible ments for HIV. pharmaceutical companies to broaden population, signifi cantly up from less » We will continue to engage in creative access while ensuring rational, safe and than fi ve percent when the program partnerships that address the full range eff ective use of medicines for HIV/ began and the highest coverage rate of factors aff ecting access to medi- AIDS. As of September 30, 2008, some in Africa. cines and the impact of HIV/AIDS in 773,803 patients in developing countries resource-constrained settings. were estimated to be taking one or more CHINA-MSD HIV/AIDS PARTNERSHIP medicines supplied at preferential prices (C-MAP): In 2005, Merck and the IMPROVING ACCESS IN 25 by an AAI company. Although this fi g- Government of China established a ure is lower than in 2007, it is important large-scale, comprehensive public/ DEVELOPED COUNTRIES to recognize that the number of patients private partnership to address HIV/AIDS Even in industrialized countries, access in developing countries treated with prevention, patient care, treatment to medicines can be hindered by lack generic ARVs – including those through and support (see p. 24). of insurance coverage, bureaucratic cooperative eff orts with AAI com- reimbursement and pricing approval panies – has increased signifi cantly. A comprehensive summary of Merck’s processes, and government policies that HIV/AIDS partnerships and programs seek to cut costs but can often limit AFRICAN COMPREHENSIVE HIV/AIDS can be found at www.merck.com/cr/ patient and physician choice. We believe PARTNERSHIPS (ACHAP): In 2000, the hivaidspartnerships. increased access can be achieved through Government of Botswana, The Merck a strategy that combines pricing our Company Foundation/Merck & Co., STAKEHOLDER ENGAGEMENT AND products responsibly, and, where neces- Inc., and the Bill & Melinda Gates PUBLIC POLICY ACTIVITIES sary, donating our products to those Foundation established ACHAP to sup- Merck maintains an active dialogue who lack healthcare coverage; advocat- port and enhance Botswana’s response with various stakeholders involved in ing for healthcare reforms that will allow to the HIV/AIDS epidemic through HIV/AIDS public policy and outreach, citizens greater access to treatment and a comprehensive approach to HIV/ including NGOs, patient groups, and care; and promoting and participating AIDS prevention, treatment, care, sup- scientifi c leaders, through specialized in public/private partnerships to address port and impact mitigation. Since 2001, advisory boards, targeted feedback chronic and infectious disease and other The Merck Company Foundation and meetings, and through participation in complex health challenges. the Gates Foundation have committed various public policy fora and initia- US$106.5 million to the partnership. tives. As a member of the Private Sector PUBLIC POLICY AND ADVOCACY In addition, Merck agreed to donate Delegation of the Global Fund since Merck is an active and responsible its ARV medicines STOCRIN and 2002, Merck has been instrumental in participant in the public dialogue U.S. PATIENT ASSISTANCE PROGRAMS* » PERFORMANCE DATA SUMMARY 2005–2008

2008 2007 2006 2005

Number of patients utilizing Merck’s Patient Assistance Program (PAP) 250,285 350,000 540,240 730,000 Number of prescriptions ﬁ lled under Merck’s PAP (Millions) 1.5 >1.6 >3.4 6.9 Total value of Merck medicines dispensed under Merck’s PAP† (US$M) 174 116.5 326 542 Number of patients enrolled in Merck Prescription Discount Program 6,952 12,334 28,946 82,742

Number of enquiries to Merck’s call center about PAP/discount program 347,557 328,724 526,640 1,025,659

* Decrease in numbers due in part to an increasing number of patients with prescription drug coverage, including Medicare Prescription Drug Program. † Totals include the Merck Vaccine Patient Assistance Program and are based on the U.S. wholesale price.

on healthcare reform, advocating for promote effi ciency and enhance the adult vaccines free of charge to unin- improving access to medicines, vac- quality of care. To learn more about sured adults age 19 or older who cannot cines and quality health care, includ- Merck’s advocacy eff orts on U.S. health- aff ord their vaccines. ing reforms that support our ability to care reform, go to www.merck.com/ continue to research and develop new healthcarereform. Merck experienced a 19 percent decline innovative products, and to promote in patient enrollment in our corporate access to medicines and quality care. PHILANTHROPIC INITIATIVES U.S. Patient Assistance Program (PAP) IN THE U.S. from 2007 to 2008; this compares to In countries with social healthcare sys- While donating medicines and vaccines a 35 percent decrease from the previ- tems, including most European coun- is not a sustainable solution to the access ous year. Total prescriptions declined tries and Canada, we understand the challenge in the United States, Merck by 12 percent in 2008, while total value pressures on governments to improve has several programs which make our of products provided through Merck’s public health while eff ectively manag- products available to those who cur- Patient Assistance Programs decreased by ing limited healthcare resources. In these rently cannot aff ord them. fi ve percent. The decline is attributed in countries, we advocate for healthcare part to an increasing number of patients policies that address the interdependent Through our U.S. Patient Assistance with prescription drug coverage (includ- goals of ensuring rapid access to new Programs, which began more than ing through the Medicare Prescription medicines and vaccines for patients who 50 years ago, Merck has provided more Drug Program, which began January 1, need them, using limited healthcare than 27 million free prescriptions and 2006). Another contributing factor to resources most effi ciently, and support- vaccines, representing a total value usage decline was the removal of one ing continued innovation and devel- (Wholesale Acquisition Cost) of more Merck product – FOSAMAX – from the opment of important new treatments. than $1.9 billion over the past seven years. product list in mid-2008 (six months after More on healthcare reform on p. 47. Eff ective March 1, 2009, Merck increased patent expiry) once patients had broad the income limit to the Merck Patient access to lower-cost generic equivalents. In the U.S., Merck advocates for health Assistance Program to enable more system reform that relies on market- people in need to receive Merck medi- The Merck Prescription Discount based competition to improve quality, cines for free. Patients now may qualify Program, launched in 2005, is avail- 26 control costs and continue to encour- for the program if their household able to the uninsured regardless of age age the innovation that has made the income is $43,320 or less for individuals, or income, and off ers easy access to U.S. system deliver some of the best and $58,280 or less for couples or $88,200 or discounts of at least 15 percent on many most eff ective health advances and care less for a family of four (previous income Merck medicines. in the world. We feel reforms should limits were $21,660, $29,140, $44,100, address not only the issue of cover- respectively). The Merck Vaccine Patient Merck also participates in the Partnership age but also the need to improve value, Assistance Program provides Merck’s for Prescription Assistance (PPA), the

THE MERCK MANUALS » For more than 100 years, Merck has provided unbiased and inde- is unlimited. The Merck Manual on the web is updated to ensure that pendently reviewed health information resources to the public the information is as current as possible. OUR VALUES and to healthcare professionals, both directly and through non- From 2001 through 2008, Merck partnered with the International proﬁ t operations established as independent enterprises. In 1899, Council of Nurses (ICN) and Elsevier Science, the leading publisher

IN ACTION Merck published the fi rst edition of The Merck Manual, a 192-page of scientifi c reference textbooks, to help nurses working in remote resource book designed to aid physicians and pharmacists. Now in areas of developing countries gain access to critical quality health- its 18th edition, The Merck Manual has been translated into 17 lan- care information. The ICN/Merck Mobile Library Program provided guages. In 1997, Merck created The Merck Manual – Home Edition to traveling libraries of health education and reference materials, provide the benefi ts of The Merck Manual for the general public. In its including donated copies of The Merck Manual – Home Edition, in second edition, more than three million copies have been sold and African countries. In addition to the ICN/Merck Mobile Library proj- translated into 14 languages. As part of our commitment to ensur- ect, Merck has donated 60,000 copies of The Merck Manual to NGOs ing that all who need and want medical information can obtain it, for distribution to physicians, nurses and community health workers Merck provides the content of these and other specialized Merck throughout Africa. Manuals on the web for free. Registration is not required, and use MCAN » PERFORMANCE DATA SUMMARY 2006–2008

2008 2007 2006

Merck Company Foundation investment in MCAN (US$M) 4.9 4.7 4.6 Subset of children enrolled in cross-site evaluation for clinical outcome across sites 849 63 N/A Number of children/families who received asthma education through MCAN 1,670 1,144 1,036 Number of healthcare providers who received asthma education through MCAN 308 146 127

Number of community-based events 135 306 112

pharmaceutical industry initiative that asthma healthcare services for children; system reform worldwide to help brings together America’s pharmaceuti- enhance knowledge about asthma among improve and accelerate access to cal companies, as well as doctors, patient aff ected individuals and the general medicines and vaccines. advocacy organizations and civic groups public; foster asthma-friendly schools and » IMMUNIZATION: To inform and enable to help low-income, uninsured patients communities; promote asthma-safe home customer decisions, we will continue get free or nearly free brand-name environments; and reduce disparities in to work with partners to demonstrate medicines. To date, the PPA has helped childhood asthma outcomes. MCAN the benefi ts using our newest vaccines more than fi ve million patients. More at: supports childhood asthma programs and to assess immunization program www.MerckHelps.com. in New York, Los Angeles, Chicago, eff ectiveness. Merck believes that out- Philadelphia and San Juan, Puerto Rico. comes data from ongoing demonstra- PUBLIC/PRIVATE PARTNERSHIPS The number of children and families tion projects will continue to show the IN THE U.S. receiving direct support through MCAN public health and economic impact of To complement our donation eff orts, is growing steadily. At the same time, the our vaccines, as well as our medicines. Merck works in partnership with number of healthcare providers who have governments, multilateral organizations, received asthma education through the » INTELLECTUAL PROPERTY: Merck will community-based organizations, other program has almost tripled in the last continue to advocate at the national corporations and NGOs to address three years. For more on MCAN’s activi- and international level for strong intel- specifi c health challenges beyond those ties, go to www.mcanonline.org. lectual property protection in develop- over which Merck has immediate and ing and developed country markets, direct control. THE MERCK ALLIANCE TO REDUCE coupled with growth in our eff orts DISPARITIES IN DIABETES: To address to expand our supply chain through THE MERCK CHILDHOOD ASTHMA the growing problem of healthcare qualifi ed local business partners as a NETWORK (MCAN): Established in 2005, disparities in the context of type 2 way to ensure aff ordable and high- the Merck Childhood Asthma Network, diabetes in the United States among quality supplies to all of our customers. Inc., (MCAN), is a non-profi t, 501(c)(3) minority, low-income and underserved » HEALTHCARE CAPACITY: Lack of skilled organization established to address adult populations, The Merck Company healthcare professionals will continue the complex and growing problem of Foundation launched The Alliance to to limit countries’ ability to diag- pediatric asthma in the United States. Reduce Disparities in Diabetes with nose and treat disease and provide Funded by The Merck Company a commitment of $15 million through ongoing care to citizens. Merck will Foundation, the mission of MCAN is 2013. More on p. 58. continue to work through partner- 27 to support and advance evidence-based ships to help strengthen healthcare programs that improve the quality of FUTURE GOALS AND capacity worldwide. life for children with asthma and their PRIORITIES RELATING TO families and to reduce, through dis- IMPROVING ACCESS TO » PARTNERSHIPS: We will continue to semination of eff ective interventions, MEDICINES, VACCINES AND pursue public/private partnerships the burden of the disease on them and (PPPs) and other collaborations to society. MCAN supports competi- HEALTH CARE GLOBALLY improve access to medicines and care tive, peer-reviewed childhood asthma Merck is focused on addressing the fol- in resource-constrained settings; in this translational research specifi cally focused lowing priorities: connection, we will ensure all of our on the adoption of evidence-based » HEALTHCARE REFORM: We will access PPPs have stated targets and eff ec- treatment and prevention models that continue to support actively health tiveness measures by the end of 2010. will improve access to and quality of ENDNOTES 1 STOCRIN (efavirenz) is marketed by Bristol- 2 ATRIPLA is marketed by Bristol-Myers Squibb Vol 3. San Diego: Academic Press; 2008. SECTION Meyers Squibb under the tradename SUSTIVA and Gilead in the United States, Canada and pp. 204–211. in the United States, Canada and six European Europe. Merck and Gilead are working to 5 Federal Offi ce of Public Health, Draft law countries (France, Republic of Ireland, register and distribute ATRIPLA in 106 develop- on Prevention and Health Promotion, at Germany, Italy, Spain and the United Kingdom). ing countries around the world. www.bag.admin.ch/themen/gesundheit It is commercialized by Merck through its 3 Attaran A. How Do Patents and Economic spolitik/00388/01811/01843/index. affi liate MSD in all other countries within the Policies Affect Access to Essential Medicines html?lang=de. European Union and many countries outside in Developing Countries? Health Affairs 2004; the United States. 6 Federal Offi ce of Public Health, eHealth 23(3):155–166. Strategy, at www.bag.admin.ch/themen/ 4 Kickbusch I and Maag D. Health Literacy. In: krankenversicherung/04108/index.html? Kris Heggenhougen and Stella Quah, editors lang=de. International Encyclopedia of Public Health, KEY ISSUE Ensuring Confi dence in the 3 Safety and Quality of Our Products

A current global challenge to the quality and Trust in medicines and medicines information is critical safety of medicines is the proliferation of coun- to ensuring patients can benefi t from prescribed treat- terfeits. Appropriate regulations and enforcement ments. Research by the National Health Council has mechanisms are needed to prevent counterfeit revealed that, while many patients are willing to accept medicines reaching patients. However, given that a certain amount of risk, the main reason why people this cannot currently be guaranteed, the risks of do not adhere to prescribed treatments is the fear of counterfeits should be communicated to patients adverse side eff ects. Additionally, the International and the public. Patients should be encouraged to Alliance of Patients’ Organizations (IAPO) has buy medicines from trusted sources and to report found that patients worldwide believe strongly in any suspect medicines. Pharmaceutical companies their basic right to participate in decisions about their can play a valuable role in raising awareness of the health care, and to have full information about diag- issue and working with patient groups, regulators noses and treatments to make the best decisions. and others to communicate risks and develop MYRL WEINBERG strategies to address the problem, including set- A collaborative eff ort of patient advocacy orga- President, National Health Council, and ting appropriate regulations. nizations and private industry on these issues can improve trust and increase adherence, making for Board Chairman, International Alliance a healthier population. of Patients’ Organizations (IAPO)

Trust in medicines and medicines information is critical to ensuring patients can beneﬁ t from prescribed treatments. »

Nothing is more important to Merck than the quality and safety of our medicines and vaccines. 28 OUR COMMITMENT before they are marketed. Our clinical Through December 2008, we have TO PRODUCT SAFETY trials conduct adheres to International posted the results of over 290 trials on Although medicines and vaccines have Conference of Harmonization – Good www.clinicalstudyresults.org. We register many benefi ts, they are also associated Clinical Practice (ICH–GCP) and our clinical trials on ClinicalTrials.gov with the risk of certain side eff ects. our clinical trials are regularly inspected and have been posting the results of our All medicines are associated with side and audited. Merck conducts indepen- trials on this site since October 2008. eff ects, but not everyone will experi- dent, periodic audits of the processes, More on p. 13. ence them. This is why pharmaceutical computerized systems, technology and manufacturers make relevant risk infor- collaborative partners supporting Merck POST-MARKETING STUDIES mation about their products available, clinical development. In 2008, there Merck continues to research the enabling physicians to evaluate the risks were 42 audits to assess compliance with eff ectiveness and safety profi les of our as well as the benefi ts of any treatment Good Clinical Practices (GCP) and products on an ongoing basis. When in the context of their clinical judgment pharmacovigilance (PV) regulations appropriate, or as required by regulatory and discuss them with their patients. and guidelines, conducted by regulatory authorities, we conduct several types of Through this process, physicians and agencies, of Merck or clinical trial studies after approval, including epide- patients can determine whether a given investigators. None resulted in critical miology studies to understand the types medicine is right for them. observations and none resulted in of patients utilizing our products as well the rejection of any clinical study or as examine the eff ectiveness and safety CLINICAL TRIALS regulatory fi ling. profi les of many of our marketed prod- In accordance with comprehensive ucts as they are used in clinical practice regulations and our own research poli- in several population-based healthcare cies, we test our products extensively systems. In 2008, we had eight ongoing Merck is committed to providing the global commu- to counterfeit activity, raise public and stakeholder nity with quality products and a reliable supply of safe awareness of the risks posed by counterfeits and and eff ective medicines and vaccines. We maintain strict deliver eff ective advocacy to increase enforcement product quality standards in our manufacturing opera- and shape key regulatory requirements. tions consistent with current Good Manufacturing Practices, and we maintain redundant supply chain To further combat the growing counterfeiting issue, safeguards to ensure the safety of our products no we work with governments, regulatory agencies, matter where they are manufactured in the world. enforcement agencies, other pharmaceutical manufacturers, wholesalers, distributors, consumer groups We agree that counterfeit pharmaceutical products and related organizations. We fully support increased constitute a serious and growing threat to public enforcement of existing anti-counterfeiting laws health. Industry, governments, regulators and enforce- and the adoption of new laws and regulations to WILLIE A. DEESE ment agencies need to partner together to combat further combat counterfeiting and to strengthen this problem. No one group can eff ectively com- current enforcement and available penalties, to Executive Vice President bat this problem alone. As a result, Merck has in place minimize opportunities for counterfeit products and President, a company-wide strategy to ensure the security of to enter the supply chain, and stakeholder eff orts to Merck Manufacturing Division our supply chains, deter, rapidly detect and respond achieve greater public awareness.

Merck is committed to providing the global community with quality products and a reliable supply of safe and « effective medicines and vaccines.

postmarketing epidemiology studies to SAFETY INITIATIVES Complementary to this is our work evaluate safety. In late 2007, Merck’s senior leadership with the Observational Medical launched the SafetyMatters initiative Outcomes Pilot (OMOP), a partner- ADVERSE EVENT REPORTING (AER) to investigate potential enhance- ship between The Foundation for the After a product has been approved and ments to our already robust approach National Institutes of Health, the FDA 29 is being prescribed to patients, manufac- for identifying and evaluating health and PhRMA to explore the applica- turers are required to report to regula- outcomes of interest (HOIs) in con- tion of large claims and electronic health tory authorities adverse experiences they nection with our marketed products. record databases to assist in the evaluation learn about from any source. We ensure The goal of SafetyMatters is to explore of the benefi t/risk profi les of marketed adverse event information is entered and implement appropriate use of medicines, and so improve drug safety into our global AER database and is emerging technologies and methods for monitoring. More at: omop.fnih.org. submitted to regulatory authorities in a HOI identifi cation and evaluation, and timely manner and in accordance with thereby further enhance post-licensure PRODUCT LABELING AND country-specifi c regulations. Merck has monitoring and evaluation of our PRODUCT INFORMATION an extensive program in place to process marketed products. Ongoing oversight and monitoring of and assess adverse experience reports. our product labels and information are a More at: www.merck.com/cr/safety. major focus of our safety eff orts. To inform treatment choices and address safety

PRODUCT SAFETY MANAGEMENT » PERFORMANCE DATA SUMMARY 2006–2008

GLOBAL 2008 2007 2006

Number of GCP/PV audits by regulatory agencies of Merck or clinical trial investigators 42 35 36 Number of post-marketing epidemiology studies to examine safety (ongoing) 8 8 N/A ASK ABOUT MEDICINES » Confusion about medicines can lead to their inappropriate use, possible alternatives and where to go for further information. which is potentially dangerous to patients and costly for health Supporters of the initiative included the UK Department of Health, OUR VALUES systems.1 Studies have shown that encouraging patients to ask a wide range of patient, National Health Service, academic and questions about their medicines and improving patient/doctor com- professional organizations and the pharmaceutical industry. 2 IN ACTION munication helps patients to use their medicines more effectively. After six years of operation, the organizers and MSD believe that In 2003, MSD UK helped to establish Ask About Medicines, a unique sustainable changes have been made to patient involvement policy public/private partnership between stakeholders with an interest and practice. Having achieved its objectives, the initiative was dis- in the effective use of medicines aimed to encourage UK patients to solved in March 2009. However, the Ask About Medicines website ask speciﬁ c questions about the medicines they are taking, about and related resources are still available at www.aam.org.

questions, we believe in the importance Since the introduction of SINGULAIR Over the past few years, Merck has of providing physicians and patients with in 1998, the Company has updated the experienced a number of challenges in communications about our products, post-marketing section of the prescrib- manufacturing that have prevented us their benefi ts and risks. By providing ing information to communicate a from being able to meet global demand appropriate information about our prod- range of adverse events reported with for a number of our vaccines. We are ucts, and working with patient organiza- post-marketing use of the drug, includ- working to correct these issues and to tions and other stakeholders, we want to ing neuropsychiatric events. Merck regain our position as a reliable vac- encourage better adherence to treatment will continue to work with the FDA cine manufacturer and supplier. In the and foster improved public health. to revise the prescribing information past three years, Merck has invested for SINGULAIR in the United States. over $1 billion in new manufacturing U.S.-Based Resources on the Safety Merck is confi dent in the effi cacy and resources to ensure that we have the and Eff ectiveness of Medicines and safety of SINGULAIR, which has been long-term supply capabilities to meet Treatments include: prescribed to tens of millions of patients public health needs around the world. with asthma and allergic rhinitis since More at: www.merck.com/cr/quality. » U.S. Federal Drug Administration its approval.4 (FDA) Drug Index: www.fda.gov/ In early 2008, the FDA inspected cder/drug/DrugSafety/DrugIndex.htm OUR COMMITMENT TO Merck’s West Point vaccines and bio- » The Physicians’ Desk Reference web PRODUCT QUALITY logics manufacturing facility. At the site: www.pdrhealth.com Merck is committed to providing the conclusion of the inspection, the FDA issued a report containing 49 observa- » Merck’s products website: global community with quality products tions from their visit. Subsequently www.merck.com/product and a reliable supply of safe and eff ective medicines and vaccines. We maintain Merck received a Warning Letter from the FDA dated April 2008. If you live outside the U.S., please see strict product quality standards and mul- local regulatory agency web sites for tiple supply chain safeguards to ensure Merck took the observations and the safety information about medicines the safety and supply of our products Warning Letter very seriously and prescribed in your country. no matter where our medicines and vaccines are manufactured in the world. committed to addressing all concerns to the Agency’s satisfaction. Importantly, QUESTIONS ABOUT MERCK More at: www.merck.com/cr/quality. the issuance of the Warning Letter PRODUCTS IN 2008 did not aff ect any available product or During 2008, post-marketing reports of All manufacturing facilities that Merck Merck’s ability to continue to supply 30 adverse events drew interest from the owns, operates and contracts with our vaccines. media on the safety of GARDASIL, our and any company from which we vaccine to help prevent cervical cancer. purchase formulated pharmaceuticals, In July 2008, Merck received a letter Merck continues to evaluate all safety active ingredients and sterile prod- from the FDA closing out its inspection data in the context of its own post- ucts, must comply with current Good of the West Point facility. Following sub- marketing adverse experience database Manufacturing Practices. Furthermore, sequent inspections by the Agency, we as well as its ongoing clinical trial data- all formulated products, and the active continue to work with the Agency in base and provides post-marketing reports pharmaceutical ingredients they contain, a cooperative manner to ensure that to regulatory authorities worldwide. In that are marketed by Merck in the U.S. we have robust processes and procedures December 2008, after an updated review are produced in FDA-approved facilities, in place to produce vaccines and sterile of all available safety data, the CDC including facilities owned and operated products to the highest standards. reinforced their continued recommenda- by our suppliers. More on p. 54. tion for vaccination with GARDASIL.3 In 2008, Merck had no product recalls in the United States.

PRODUCT QUALITY » PERFORMANCE DATA SUMMARY 2005–2008

2008 2007 2006 2005

Number of product recalls in the United States 02 0 1 IN ACTION IN MERCK’S ADVANCED FORENSIC LABORATORY » OUR VALUES As part of our corporate anti-counterfeiting efforts, Merck main- packaging, and, if possible, determine the common origin of coun- tains an advanced forensic laboratory that provides detailed terfeit materials. Reports detailing these ﬁ ndings are shared with analyses of suspected counterfeit products. Using a wide array of regulatory and/or law enforcement agencies, and may be used to analytical tools, the forensic scientists use physical and chemi- support enforcement actions, legal proceedings, and other internal cal characterization methods to identify counterfeit products and and external actions.

STEPPING UP THE FIGHT Committee to oversee our global laws and enforcement programs, includ- AGAINST COUNTERFEITS anti-counterfeiting strategy and ensure ing increased criminal and civil penal- Counterfeit pharmaceutical products that our anti-counterfeiting goals ties for counterfeiters. In addition, we are a growing global problem and a seri- are reached. support the eff orts of organizations such ous threat to public health. For Merck, as the Partnership for Safe Medicines maintaining patient safety and protect- Merck has in place strict policies and to educate the public about the risks ing our reputation are paramount, and procedures designed to keep our drug of counterfeit medicines. For details on are the principal goals underlying our distribution system safe and secure, these eff orts, go to www.merck.com/cr/ corporate anti-counterfeiting strategy. and to minimize any opportunity for anticounterfeiting. counterfeit products to enter the supply To achieve these goals, we work with chain. In the United States, we require FUTURE PRIORITIES government agencies, pharmaceutical customers to purchase our products » We continue to implement our vac- manufacturers, wholesalers, distributors, directly from Merck or a Merck autho- cine supply manufacturing strategy consumer groups and related organiza- rized distributor. In addition, we publish as part of our commitment to restore tions in the global fi ght against pharma- the names of authorized distributors Merck’s reputation as a reliable global ceutical product counterfeits. on Merck’s website, and we audit our supplier of quality vaccines. distributors to ensure compliance with » Merck maintains a comprehensive Merck’s policies and procedures. In the We continue to maintain strict worldwide anti-counterfeiting program European Union, Merck works with product quality standards and multiple that has three goals: (1) secure the sup- law enforcement agencies to detect and supply chain safeguards to ensure the ply chains, (2) rapidly deter, detect respond to counterfeit products, includ- safety and supply of our products no and respond to counterfeit activity, and ing importation or trans-shipment of matter whether our medicines and (3) raise public and stakeholder aware- counterfeit pharmaceuticals through the vaccines are manufactured internally ness of the risks posed by counter- European Union. In a number of or externally. feits, and deliver eff ective advocacy to developing countries, Merck has pro- » We will continue to implement our increase enforcement and shape key vided training to Customs offi cials, in corporate, proactive worldwide anti- regulatory requirements. In further- conjunction with the Pharmaceutical counterfeit strategy, focused on secur- ance of the work that Merck has Security Institute. ing the supply chain, detecting and done in combating counterfeits and responding to counterfeit events, recognizing the growing nature of Merck also supports and advocates for and raising awareness of the risks of the counterfeit problem, in 2008, increased enforcement of existing anti- counterfeit pharmaceutical products. Merck’s Executive Committee estab- counterfeiting laws and the adoption lished an Anti-Counterfeiting Steering of public policies to strengthen existing 31

ANTI-COUNTERFEITING » PERFORMANCE DATA SUMMARY 2005–2008

GLOBAL 2008 2007 2006 2005

Number of investigations of suspected counterfeit Merck product 45 102 73 51 Number of substantiated cases of counterfeit Merck product 29 72 54 46 ENDNOTES SECTION 1 Department of Health. Better information, better choices, better health: putting information at the centre of health. DOH, London, 2004. 2 Nielsen-Bohlman N, Panzer AM, Kingdig, DA Eds. Health Literacy: A Prescription to End Confusion. Institute of Medicine of the National Academies. National Academies Press, Washington, 2004. 3 www/merck.com/newsroom/press_releases/products/2008_0708.htm. and www.fda.gov/BiologicsBloodVaccines/Vaccines/Approved Products/ucm111280.htm 4 www.merck.com/newsroom/press_releases/product/2009_0612.html KEY ISSUE Conducting Ourselves 4 Ethically and Transparently

Pharmaceutical companies that have built robust Finally, as the United States government re-opens business ethics and compliance programs, like the issue of healthcare reform, companies must Merck, must now do more to evaluate the beef up transparency of specifi c corporate and eff ectiveness of their systems. In other words, once trade associations’ lobbying positions. Such sun- policies are written and employees are trained, shine may defuse allegations of hidden backroom how do companies determine if anonymous dealings, or undue corporate infl uence, which has employee hotlines, or stronger rules for marketing tarnished what was once a “good guy” industry. drugs to doctors, are achieving their desired ends?

Companies must also look further up and down their supply chains to combat entrenched business problems like bribery and corruption, drug counterfeiting and quality problems in drug inputs. ELIZABETH E. McGEVERAN Senior Vice President, Governance & Sustainable Investment, F&C Management Ltd.

Pharmaceutical companies must do more to evaluate the effectiveness of their business ethics and compliance programs… »

We believe that behaving ethically is not only the right thing to do; it has many advantages for us and helps promote a good 32 global business climate. A reputation for ethical working practices not only helps to attract, motivate and retain talented individuals, but it also means that policymakers and other stakeholders are more likely to listen to what we have to say.

For Merck, as a highly regulated pharmaceutical company, ethical working practices without cutting corners help to ensure our regulatory compliance with laws and regulations and help result in signiﬁ cant contributions to medicine, patients and society. OUR VALUES applies one standard of conduct to all been designed to deter wrongdoing and AND STANDARDS employees worldwide and is available in to foster: 27 languages. Ethical business practices Ethics and integrity are underscored » Honest and ethical conduct, includ- are a key measure in annual perfor- in the Company’s code of business ing the ethical handling of actual or mance evaluations of all of our employ- conduct, Our Values and Standards, fi rst potential confl icts of interest between ees globally. developed and distributed to Merck personal and professional relationships; employees in 1999, and updated in 2002 and 2004. Our Code of Conduct Merck’s Code of Conduct (available at » The protection of our confi dential www.merck.com/about/conduct) has and proprietary information and that of our customers and vendors; Conducting ourselves ethically is a core value ensure that events are escalated to the appropriate across the whole of Merck. We work hard not place within the Company, are properly investi- only to inform our employees about what consti- gated, and that the appropriate disciplinary action tutes ethical behavior, but also to hold ourselves is taken, up to and including dismissal, when nec- accountable for ensuring those ethical business essary. These guidelines also contemplate various practices are implemented. types of positive recognition for those employees who bring issues and concerns to the Company’s We are committed to scrutinizing, reporting and attention so that they can be addressed. where necessary improving our ethics performance on issues of particular concern to our stakeholders. These eff orts are not only in the interests of the patients and health professionals who rely on our We have recently established comprehensive, global products, but also underpin the sustainability of JACQUELINE BREVARD guidelines for escalation, investigation, remediation our business. For this reason, we work to ensure and recognition of non-compliance events, and that our evolving ethics programs cut across Vice President, Chief Ethics and have implemented them across our diff erent divi- cultures and mores, to drive standards higher and Compliance Ofﬁ cer, sions and regions. Through these eff orts, we can ultimately to uphold the most fundamental rights Merck & Co., Inc. evaluate the eff ectiveness of our systems and help of people everywhere.

We are committed to scrutinizing, reporting and where necessary improving our ethics performance « on issues of particular concern to stakeholders.

» Compliance with Company policies, To date, 90 percent of Merck employees interest is high and we anticipate that we applicable governmental laws, rules have completed Know the Code training, will reach 100 percent in 2009. and regulatory requirements; and we anticipate this will increase to 95 percent by the end of 2009. In 2008, ADDRESSING MISCONDUCT » Prompt internal reporting of viola- we rolled out new and updated courses Like integrity of product, integrity of tions of the Code; on anti-corruption and bribery, and performance is a Merck standard 33 » Accountability for adherence to the fi nancial stewardship. In 2009, we are wherever we do business, and ignorance values and standards set forth in implementing new and updated courses of that standard is never an accept- the Code. on the importance of raising concerns able excuse for improper behavior. We within the Company, confl ict of inter- make it clear that no act of impropriety Merck’s Offi ce of Ethics develops and est, global trade compliance and safe advances the interest of the Company oversees global initiatives designed to harbor privacy. and no act of impropriety will deter illegal, unethical and improper be tolerated. behavior related to the Company’s An important component of Merck’s business, and has implemented several corporate compliance program is our In 2008 we established comprehensive, mechanisms to help ensure the highest annual compliance review, which global guidelines for escalation, inves- standards of ethics and integrity across includes an annual confl ict of inter- tigation, remediation and recognition our business. In 2007, it launched a est certifi cation and disclosure process, of non-compliance events, and imple- global compliance online training series and compliance with key corporate mented them across our diff erent divi- to provide employees with tools and policies. All directors, offi cers, managers sions and regions. These guidelines will resources for making responsible busi- and other selected Company employees help ensure the appropriate disciplinary ness decisions. All employees worldwide must certify in writing the absence or action is taken, up to and including are required to complete Know the Code, existence of actual or potential confl icts dismissal, when necessary. the fi rst course of this series; new of interest under this Confl ict of Interest employees undergo this training within Policy. Our annual response rate to the 30 days of joining Merck. disclosure statement on confl icts of HELPING OUR EMPLOYEES that policymakers and other stakeholders standards and transparent business prac- DO THE RIGHT THING are more likely to listen to what we have tices. By working across industries and Our employees worldwide understand to say. For Merck as a highly regulated continents to promote ethical behav- that they should bring to the attention pharmaceutical company, ethical work- ior, we believe this initiative can help of management workplace issues of any ing practices without cutting corners limit corruption, encourage fair and type including potential violations of result in real contributions to science, open competition, and lead to a better law, Company policy or the Company’s and they enhance our regulatory com- business environment. Code of Conduct. Merck strives to pro- pliance. All of this together helps to provide a work environment that encour- mote a good climate for global business. ETHICAL SALES AND ages employees to communicate openly MARKETING PRACTICES with management, without fear of Merck’s commitment to ethics extends In providing the best possible care to retaliation or retribution. beyond the Company’s boundaries. their patients, doctors use information We actively promote the develop- from pharmaceutical companies and Over and above this, the Offi ce of Ethics ment of codes and standards for ethical other sources to help inform prescribing provides several channels for Merck and transparent business practices that decisions. Accordingly, Merck believes employees worldwide to raise ethi- can help limit corruption, ensure fair it is important to maintain informa- cal questions or concerns. This includes and open competition and encour- tive, ethical and professional relation- the Merck AdviceLine, a telephone line age a better business environment, all ships between healthcare providers and available to employees around the world of which are essential to economic pharmaceutical companies. We recognize 24 hours a day, seven days a week, staff ed growth and improved standards of living. that both our reputation for integrity by an independent organization, which Merck also seeks to make a diff erence and the trust our stakeholders place in allows employees to remain anonymous in in the global business environment by us depend on our ethical practices. Our accordance with applicable legal standards supporting Transparency International interactions with healthcare providers, for employee-based hotlines, and to com- and other organizations that work to other customers and consumers are gov- municate in their local language to ensure eliminate corruption, promote transpar- erned by laws and regulations, as well as accuracy of reported information. Calls ency and foster the principles outlined our long-standing global code of ethical to the Merck AdviceLine have almost in the Organization for Economic conduct and guidance that is enforced doubled since 2006, due in part to greater Cooperation and Development (OECD) through our global business practices awareness of the AdviceLine as a result of Conventions against Corruption and compliance program. increased employee communications. and Bribery. INTERACTIONS WITH In addition, the Merck Ombudsman In an eff ort to combat global corrup- HEALTHCARE PROFESSIONALS Program off ers a “safe haven” for tion, the World Economic Forum The changing healthcare environment U.S.-based employees to express work- Partnering Against Corruption Initiative demands that Merck changes the way related issues without fear of retaliation. (PACI) was formally launched by CEOs it interacts with physicians globally. In The number of calls to the Offi ce of from the Engineering & Construction, 2008, we implemented a more customer- Ethics/Ombudsman has declined since Energy and Metals and Mining indus- centric selling model that is designed 2005, possibly refl ecting strengthened tries in January 2004. Prior to the 2008 to provide a competitive advantage, help performance management processes, as annual meeting in Davos, Merck joined build trust with customers, and improve well as a reduction in employee numbers a global community of 138 companies patient outcomes. The strategy employs as part of our restructuring program. from various industries and regions new technologies and moves away from of the world that have committed to the traditional frequency-based sales FOSTERING A FAIR, TRANSPARENT strengthening eff orts to counter cor- and marketing approach. 34 AND OPEN ENVIRONMENT ruption and bribery through the PACI We believe that behaving ethically has by signing a statement supporting the In June 2008, Merck implemented many advantages for our business. A rep- PACI Principles for Countering Bribery. new Guiding Principles for Ethical utation for ethical working practices not Signing on to the PACI Principles is Business Practices with the Medical and only helps to attract, motivate and retain a natural extension of Merck’s long- Scientifi c Community (see box next talented individuals but it also means standing commitment to high ethical page), which are aligned with national

ETHICAL BUSINESS PRACTICES » PERFORMANCE DATA SUMMARY 2005–2008

GLOBAL 2008 2007 2006 2005*

Percentage of required employees who took Know the Code training 90 90 N/A N/A† Percentage of response to disclosure statement on confl icts of interest 99.9 97 95 93 Number of calls to the Merck AdviceLine 151 149 77 80 Number of calls to Offi ce of Ethics/Ombudsman 583 600 597 770 Percentage of substantiated (including alternative fi ndings) allegations 10.9 9.5 8.3 10.2 to concerns/issues raised in connection with our Code of Conduct through AdviceLine or Offi ce of Ethics/Ombudsman‡

* 2005 noted as baseline. † Know the Code was fi rst implemented globally in 2007. ‡ When Merck substantiates allegations of ethical misconduct, it imposes a variety of disciplinary actions on those responsible for the misconduct, such as dismissal from the Company, issuance of fi nal written warning letters and fi nancial penalties. MERCK GUIDING PRINCIPLES FOR ETHICAL BUSINESS PRACTICES WITH THE MEDICAL AND SCIENTIFIC COMMUNITY » 1. Focus interactions with the medical and scientifi c community on 6. Ensure that decision-making regarding activities associated with business and scientifi c objectives that support the Company’s grants, payments for services to the medical and scientifi c commission of putting patients fi rst. munity, and the generation and reporting of clinical information is free of any inappropriate commercial or other infl uences. 2. For Company-sponsored or supported activities, comply with all applicable laws, regulations and industry or professional codes 7. Apply good business judgment to all communications and docu- of conduct of both the host country and the resident country of mentation involving our interaction with the medical and scien- individual participants or organizations. tifi c community, and ensure proper implementation of activities. 3. Compensate for services at fair market value, purchasing only those 8. Conduct activities and interactions with the medical and scien- services that are required to address the business need at hand. tifi c community in a manner that protects our intellectual property and respects that of others. 4. Ensure that offering something of value to members of the medical and scientifi c community does not have the appear- 9. Ensure that all communications shared with the medical and ance or the intent of infl uencing regulatory, formulary pricing or scientifi c community are based on accurate and balanced scien- reimbursement decisions or inducing or rewarding the referral, tifi c information. recommendation, utilization or prescribing of Merck products. 10. Ensure that selection of experts from the medical and scientifi c 5. Maintain a business-like atmosphere for all interactions with community is based on their areas of expertise, experience the medical and scientifi c community, avoiding lavishness or and other appropriate, objective criteria aligned with the stated extravagance, as well as the appearance of such. purposes of the activity.

regulations worldwide, industry codes pursue external verifi cation. More at: PROMOTIONAL AND and the World Health Organization’s www.phrma.org/code_on_interactions_ EDUCATIONAL MATERIALS FOR Ethical Criteria for Medicinal Drug with_healthcare_professionals. HEALTHCARE PROFESSIONALS Promotion. The new Merck Guiding The basis of our interactions with Principles serve as a bridge between Merck is committed to the highest healthcare professionals is to provide country laws, regulations, industry ethical sales and marketing standards truthful, balanced and non-misleading guidelines, and the Company’s Values wherever it operates. We have developed information. Accordingly, the review and Standards, and are intended to enable a process to assess risks associated with and approval of global promotional and interactions with the medical and scien- sales and marketing-related business educational materials for healthcare tifi c community that comply with our practices and processes, benchmarked practitioners follows a comprehen- ethical and legal obligations and improve to industry best practices. It has been sive and strict process as specifi ed in human health. implemented so far in 29 countries International Medical Media Standards around the world. By the end of 2009, it (IMMS) guidance. At Merck all such Merck has also actively supported the will cover all major country operations. materials are reviewed and approved by strengthening of related industry stan- medical and legal personnel, captured in dards. In 2008, in his role as Chairman In 2008, Merck reached civil settle- a global database, and assigned a unique of PhRMA, Merck Chairman, President ments with Federal and State authorities identifying number and expiration date and CEO Richard T. Clark worked to resolve long-standing investigations to facilitate usage monitoring. with other PhRMA member com- related to disputes over the proper 35 panies to revise the PhRMA Code calculation of Medicaid rebates as Merck developed two new training on Interactions with Health Care well as certain past sales and market- programs in 2008 relating to interac- Professionals to respond substantively ing activities that ended in 2001. As tions with healthcare professionals. All to stakeholder concerns regarding the required by the Corporate Integrity regional and country medical person- industry’s sales and marketing practices Agreement (CIA), on May 15, 2009, nel involved in the review and approval in the United States. In 2009, Merck Merck submitted its fi rst Annual Report of promotional/educational material updated our own sales and market- to the U.S. Department of Health and receive comprehensive training that ing policies and practices in compli- Human Services Offi ce of Inspector focuses on Corporate policies, IMMS, ance with the revised PhRMA Code. General (HHS-OIG). For additional the medical reviewer role, and required We completed self-certifi cation of our details, please see our Form 10-K for database functionalities. compliance policies and procedures years ending December 31, 2007 and in early 2009, and we also plan to December 31, 2008.

ETHICAL SALES & MARKETING PRACTICES » PERFORMANCE DATA SUMMARY 2005–2008

2008 2007 2006 2005

Number of warning letters or untitled letters from DDMAC* or APLB† 0 N/R N/R N/R

* DDMAC – U.S. FDA Division of Drug Marketing, Advertising and Communication. † APLB – Advertising and Promotional Labeling Branch (“APLB”) of the FDA Center for Biologics Evaluation and Research. INCREASED TRANSPARENCY submit new DTC advertising campaigns OUR SPHERE OF INFLUENCE REGARDING FINANCIAL SUPPORT voluntarily to the FDA for their review Merck is committed to upholding In some cases, Merck provides grants to and comment prior to running any human rights both within our work- organizations for professional education DTC campaign in the United States. place and within our broader sphere of initiatives, including accredited continu- infl uence. Merck’s human rights sphere ing medical education (CME). As part In 2008, Merck began to include in of infl uence includes: of our broader policy of increased trans- all new Merck DTC print and tele- parency regarding support of third-party vision advertisements, information OUR EMPLOYEES: We respect the groups, in October 2008, Merck began on Merck’s Patient Assistance Programs human rights of our employees as reporting grants over $500 provided by along with a toll-free phone number established in the ILO’s Declaration of the Company’s Global Human Health for more information. To formalize Fundamental Principles and Rights at division to U.S. organizations in support our historical practice of informing Work. We have systems in place to of independent accredited educational healthcare professionals about our report incidents of discrimination and programs for healthcare professionals. products before we advertise them to procedures for follow-up action, In 2009, we have expanded this disclo- the consumer, we also adopted a policy and regularly monitor and report on sure to include other types of grants. requiring a minimum six-month time any operations where we might fi nd period following the approval of a new signifi cant risk for child labor or forced While disclosure of supported patient product before launching DTC broad- compulsory labor. To date, we have not organizations became mandatory in cast advertising in the United States. In identifi ed any signifi cant risks. Europe in March 2009, Merck has addition, Merck carries out comprehen- voluntarily disclosed support to patient sive programs to educate physicians and In 2008, Merck appointed a new Senior organizations in Europe, Middle East other prescribers about a new product Director, Global Labor Relations, who and Africa made by Merck offi ces in before commencing product-specifi c has overall responsibility for develop- those regions since 2008. In addition, DTC broadcast advertising. More on ing our labor policy and management in the second half of 2009, Merck plans our DTC policies and practices at: compliance system globally. We also to begin reporting payments made to www.merck.com/cr/ethicalmarketing. began a process to establish global labor patient organizations by Merck opera- guidelines and monitoring tools to tions in Canada from 2009 onward. Also RESPECTING AND ensure consistency worldwide; at the in 2009, Merck operations in Europe, PROMOTING HUMAN RIGHTS time of this writing, we were on track Middle East, Africa and Canada plan to Merck is committed to respecting human for approval and implementation by begin disclosing grants to other third- rights, as recognized by the United Nations the end of 2009. party institutions made beginning in Global Compact and as defi ned in the January 2009. United Nations Universal Declaration SUPPLIERS, DIRECT BUSINESS of Human Rights and its subsequent PARTNERS AND OTHER THIRD- Merck also supports broader disclosure changes, the International Covenant on PARTY REPRESENTATIVES: Merck of fi nancial relationships between physi- Economic Social and Cultural Rights, has implemented a Detailed Supplier cians and the pharmaceutical industry. the International Covenant on Civil and Ethical Assessment tool, which lays In 2008, Merck endorsed the Physicians Political Rights, the OECD Guidelines out the Company’s detailed ethical Payment Sunshine Act, mandating for Multinational Enterprises and requirements of suppliers across a wide disclosure of these fi nancial relationships. the core labor standards set out by the range of regulatory, legal and ethical In the absence of a legislative require- International Labor Organization (ILO). compliance topics, including labor and ment, we plan to voluntarily disclose employment practices. Merck is also in the fourth quarter of 2009 all pay- Respect for human rights is embed- one of the founding members of the 36 ments to U.S.-based healthcare profes- ded in the Company’s code of business Pharmaceutical Supply Chain Initiative sionals who speak on behalf of Merck conduct, Our Values and Standards. We do designed to help ensure that working or our products. For more information not tolerate human rights abuses in our conditions in the pharmaceutical sup- on Merck’s transparency initiatives, workplace or commercial operations, ply chain are safe and that workers go to p. 48. or by our suppliers or business partners, are treated with respect and dignity. and are committed to complying with More on p. 54. INFORMING PATIENT CHOICES national and international human rights Merck strives to enable consumers to laws and treaties. Further, we believe we COMMUNITIES: We strive to serve as achieve better health outcomes by have a responsibility to go beyond essen- a positive infl uence in the communi- delivering accurate, relevant information tial legal requirements and to support ties in which we operate, and to respect on disease prevention, identifi cation and the promotion and protection of human human rights both in these communities treatment in an understandable manner. rights through positive measures, includ- and on a global basis. As a global cor- To remain true to this goal, Merck ing public/private partnerships that porate citizen, we go beyond the essen- adheres to the letter and spirit of FDA address critical global health challenges. tial legal requirements to work with regulations and guidelines governing partners including governments and direct-to-consumer (DTC) promotion, other stakeholders to support human ensures all PhRMA guidelines are met rights – through off ering medicines and or exceeded, and follows a comprehen- vaccines that can help save and improve sive set of internal policies and practices lives, through public policy advocacy when engaging in DTC advertising. with governments to ensure they Merck has a long-standing policy to live up to their international human rights obligations, and through public/ private partnerships. HEALTH AS A HUMAN RIGHT: WHAT IS OUR ROLE? » Much attention has been given to the role of pharmaceutical compa- » Safeguarding the health, safety and privacy of patients involved in nies in ensuring the realization of health as a universal human right, our clinical trials as recognized in the United Nations Universal Declaration of Human Beyond these efforts we also have the ability – and we believe the Rights (UDHR) and the International Covenant on Economic, Social responsibility – to take positive steps to support the right to health and and Cultural Rights (ICESCR). Governments, in their role of protect- effect positive change. These steps include policies and actions around ing human rights, have the primary responsibility for managing a product registration, pricing, patenting and partnerships, as well health system that ensures the health of those living within their as public policy advocacy, that seek to strengthen healthcare capac- borders, a role that is recognized in the UDHR and the treaties that ity and address deep-rooted and multi-faceted barriers to access in follow from it. ways that are aligned with our business mission and core capabilities. The role of the pharmaceutical industry in respecting and promoting Others have roles and responsibilities too. Industrialized countries, this human right is a complex – and controversial – one. We believe where most research in life sciences takes place, must continue to that at a basic level we play an important role in supporting this right foster innovation by funding basic research and supporting related through our core activity of discovering, developing and delivering institutions, and by recognizing the value of innovative medicines and medicines and vaccines to address unmet medical needs. We also vaccines. Developing countries must continue to make health care recognize our ethical duty to support governments in their efforts a budget priority, remove taxes and import duties on medicines that to respect the right to health by “doing no harm.” We do this in a unnecessarily raise the price of medications, and seek to limit product number of ways, including by: diversion to richer countries by price arbitragers. Emerging or middle- » Monitoring and reporting on the safety of our products income countries should do the same and also recognize that they can and should pay more for medicines than the poorest countries, rather » Providing healthcare providers and consumers with important than take actions that remove incentives for innovation. information on the beneﬁ ts and side effects of our products

UPHOLDING DIGNITY AND RESPECT discussions with stakeholders to gain properly and thoroughly investigated. Merck believes in the fundamental agreement on the appropriate role of We also will ensure that the appro- dignity of every human being and in business in promoting and protecting priate disciplinary action is taken, respecting individual rights in all of human rights, particularly the right to up to and including dismissal, when our operations. the enjoyment of the highest attainable necessary. We plan to report on the standard of health. We are supporting fi rst results of this new program in » We condemn the use of forced labor The World Justice Project, a multina- our 2009 report. and exploitative child labor and tional, multidisciplinary initiative to expect the same of our suppliers. » We plan to develop a global train- strengthen the rule of law worldwide ing program based on Merck’s » We respect employees’ lawful freedom and raise awareness of the connection Guiding Principles for Business of association. between the rule of law and the essen- Practices Involving the Medical and tials of people’s daily lives. We also sup- » We compensate our employees fairly Scientifi c Community. port the process initiated by the United to ensure that basic needs are met Nations to evaluate this issue and, spe- » We will voluntarily disclose in the and provide our employees with the cifi cally, the ongoing work of Professor fourth quarter of 2009 all payments opportunity to improve their skills John Ruggie, the Special Representative to U.S.-based healthcare professionals and capabilities. of the U.N. Secretary-General, on busi- who speak on behalf of Merck or » We do not discriminate at any level of ness and human rights, to seek clarity our products, even in the absence of the organization on the basis of race, around human rights and the role of busi- legislation requiring us to do so. 37 gender, age, ethnicity, national origin, ness. In addition, we are working with » By the end of 2009, we plan to sexual orientation, marital status, dis- the Danish Institute for Human Rights formalize a Global Labor Relations ability, genetics or religious beliefs. and a number of other pharmaceutical Strategy, which will include global companies to develop a sector-specifi c » We provide a safe and healthy labor guidelines and principles, human rights risk assessment tool. We work environment. and monitoring tools to ensure continue to work with academic experts consistency worldwide. We will also » We respect individuals’ right to and other key stakeholders to help in establish labor relations advisory privacy in accordance with legal and better defi ning the role of business – and boards for every region globally to ethical standards. specifi cally the pharmaceutical industry – assist the Labor Relations Center of in supporting the right to health. Excellence with a variety of labor BUSINESS AND HUMAN RIGHTS relations activities, including adher- Business has an important role to play FUTURE GOALS ence and monitoring of our corporate in promoting and respecting the AND PRIORITIES Values and Standards and global Labor advancement of fundamental human » In accordance with Merck’s recently Relations Guidelines and Principles. rights, while not supplanting the pri- established comprehensive, global mary obligations of governments to guidelines for escalation, investigation, » Using the Danish Institute for Human protect the human rights of all people remediation and recognition of non- Rights pharmaceutical sector risk within their borders and as mem- compliance events, we will ensure that assessment tool, we intend to perform bers of the international community. events are escalated to the appropri- a human rights risk assessment analysis Merck supports meaningful eff orts and ate place within the Company, and at the headquarters level. KEY ISSUE Managing Our 5 Environmental Footprint

As a global pharmaceutical company, Merck resulting from a changing climate, which could can play a leadership role in achieving a healthy also off er growth opportunities. society and planet. In addressing the water challenge, we encourage In addressing the climate challenge, we encour- the industry to help pioneer new technolo- age pharmaceutical companies such as Merck gies and actions that will galvanize workable to reduce the lifecycle impact of their products and eff ective solutions to both water scarcity and and corporate supply chains as well as reducing water-quality issues. Newly available tools can their direct and indirect operational footprint. help companies analyze where the best opportu- We encourage companies to help build markets nities are for saving water and reducing pollution. for green power by procuring electricity from renewable sources, taking measures to reduce Merck’s size and capacity allows it to make a use of carbon-intensive transportation fuels, positive contribution to society through ELIZABETH COOK and off setting residual emissions using high- ambitious leadership while at the same time Vice President for Institutional quality carbon off sets. Further, companies must off ering product solutions that improve the help humanity prepare for new disease patterns quality of life around the world. Strategy and Development, World Resources Institute

…we encourage pharmaceutical companies to reduce the lifecycle impact of products and supply chains, as well as reduce their operational footprint. »

Merck published its ﬁ rst environmental report and publicly 38 announced our ﬁ rst environmental improvement goals in 1990 and we have been reporting on our progress since 1993.

We assess the environmental footprint of our operations across a broad set of measures, including energy and water use, greenhouse gas (GHG) and pollutant emissions to air and water, and waste generation and recycling rates. The data featured in this section focus Because pharmaceutical synthesis is of steam, are the largest sources of

on the direct footprint from our internal complex and requires multiple solvent our carbon dioxide (CO2) emissions. activities, which is primarily associated changes and rigorous cleaning, sol- None of our products contain or use with our research and manufacturing vent emissions and spent solvent wastes ozone-depleting substances. More operations. However, we are also work- have a large impact on our direct envi- on our environmental approach and ing to understand the environmental ronmental footprint. Some of our newer management at: www.merck.com/ footprint of our supply chain. For the products are being developed using cr/environment. past several years, we have included indi- biological processes that require signifi - rect footprint information on emissions cant amounts of very pure water. IMPROVING ENVIRONMENTAL of greenhouse gases associated with Our most signifi cant use of water is AND SAFETY COMPLIANCE the generation of energy we purchase. non-contact cooling for manufactur- At Merck, protecting the health and During 2008, we began to evaluate ing. Because of its importance to both well-being of our employees and the our indirect environmental footprint manufacturing and human health, water public, protecting and preserving related to employee travel. is an emerging focus area for our eff orts. the environment, ensuring the safety Utilities, including the production of our employees and those who live in Global human health cannot be achieved with- greenhouse gas emissions. We are mobilizing out a healthy environment. Merck took an early our strength in science and innovation by using step in the 1990s by setting goals and dramatically Green Chemistry to design safer and more effi - reducing our toxic emissions. Today it isn’t cient processes. We also seek to re-use and recycle, just toxics, but our changing climate and access both in our purchased materials and wastes, and to water resources that represent risks to to select partners who share our values, such as human health. renewable energy providers. Finally, we are currently looking at how and where we use water Merck recognizes that the manufacture and sale so that we can prioritize our eff orts in locations of our products and other aspects of our supply where water resources are most vulnerable. chain have environmental impacts within and outside of our fenceline. We focus on conserva- At Merck, we believe that protection of the KAREN KLIMAS tion, reducing the consumption of energy, water, environment and conservation of our natural solvents, and packaging components in our oper- resources are a part of delivering on our Vice President, ations and have taken proactive steps to reduce mission of improving global human health. Global Safety and Environment, Merck & Co., Inc.

…protection of the environment and conservation of our natural resources are part of our mission of « improving global human health.

the vicinity of our facilities and being interpretation by the Pennsylvania Merck received seven safety notices of in full compliance with the law are of Department of Environmental Protection violation in 2008, an increase from the fundamental importance to the way (DEP) that resulted in reporting of a three that were reported in 2007 and we operate. Our mission and values are number of events that were not previ- similar to the eight reported for 2006. 39 articulated by Merck’s corporate safety ously required to be reported, such as Over the past three years, approximately and environmental (S&E) policies. In spills of chilled water. Overall, approxi- 40 percent of the safety notices of viola- addition to compliance with all appli- mately 70 percent of the spills reported in tion received were from governmental cable country, regional and local safety 2008 were either spills of cooling water, safety inspections and 40 percent were fi re and environmental laws, we strive for or spills that were contained and cleaned department inspections. There were no S&E performance that is among the best up or directed to wastewater treatment. safety-related fi nes paid in 2008. More at: in the pharmaceutical industry. www.merck.com/cr/employeesafety. Merck experienced seven water permit In 2008, Merck received 176 inspections exceedances in 2008, one more than in Merck received nine notices of violation by EHS regulatory agencies around 2007. Approximately 42 percent of the (NOVs) for environmental matters in the world. This represents a 33 percent water events were related to pH, and 2008, four less than in 2007. During the increase in environmental inspections metals and organic exceedances each past three years, 63 percent of these NOVs and an 83 percent increase in safety accounted for 29 percent of the events. have been associated with air emissions, inspections in 2008 over 2007. While Merck also experienced 23 air permit 25 percent with water and 12 percent with the data set is limited, it is possible that exceedances, a decrease of fi ve from waste. Merck paid $1,579,600 in fi nes higher inspection frequencies may con- 2007. Fifty-six percent of the air events associated with environmental violations tinue in future years. were related to exceedances of an emis- in 2008, which refl ects a signifi cant sion limit during stack testing or routine environ mental settlement paid in early Twenty-three spills were reported by monitoring and 26 percent were related 2008 associated with three NOVs that Merck sites worldwide in 2008 versus to temperature deviations. resulted from three spills at one site 26 in 2007. Fifty percent of these spills in 2006. More at: www.merck.com/ are related to a modifi ed regulatory cr/community. ENVIRONMENTAL AND SAFETY COMPLIANCE » PERFORMANCE DATA SUMMARY 2005–2008

GLOBAL 2008 2007 2006 2005

Regulatory inspections » Environmental inspections 101 76 88 N/D » Safety inspections 75 41 65 N/D Environmental events » Reportable spills and releases 23 26* 4 4 » Water permit exceedances 7 6 5 3 » Air permit exceedances 23 28 19 25 Notices of Violations (NOVs)/Citations » Environmental 9 13 11 N/D » Safety 7 3 8 N/D Fines » Environmental fi nes paid (US$) 1,579,600† 31,515 10,652 281,025 (Number of fi nes) (7) (6) (3) (4) » Safety fi nes paid (US$) 0 1,500 1,975 1,000 (Number of fi nes) (1) (2) (2)

N/D – No data available. * The increase in number of reportable spills is due primarily to a modifi ed Pennsylvania Department of Environmental Protection interpretation in late 2006 that resulted in reporting of spills, such as chilled water spills into storm water drains, that were not previously required to be reported. † Refl ects a signifi cant environmental settlement ($1,575,000) paid in early 2008 associated with three spills that occurred in 2006.

For additional information on environ- stimulates the development and broad ENERGY DEMAND INTENSITY mental and safety performance, go to use of energy-effi cient technologies and www.merck.com/cr/environment. avoids unnecessary economic disruptions and the ineffi ciencies of disparate MMBTU/SQ FT ADDRESSING local, state or regional requirements. We CLIMATE CHANGE are working on establishing a long-term 0.8 Merck has adopted responsible policies goal for reductions in GHG emissions 0.7 and practices to reduce our energy in line with the global desire among demand and greenhouse gas (GHG) nations and regions to commit to mak- 0.6 emissions. We believe that taking early ing signifi cant reductions through 2020 0.5 action to understand how we use energy and 2050. More at: www.merck.com/ 0.4 and to reduce our GHG emissions will cr/climatechange. also help to minimize the impact on 0.3 Merck of anticipated regulatory require- REDUCING ENERGY DEMAND 0.2 ments associated with climate change. Since 1994, Merck has had a formal 40 energy policy. By implementing best 0.1 Merck recognizes that although practices for reducing energy use across 0.0 voluntary programs to reduce GHG the Company, we have made signifi - 2004 2005 2006 2007 2008 emissions can be eff ective, national and cant progress in enhancing our energy even multinational frameworks will effi ciency. In early 2005, Merck adopted 2008 Goal be required to address climate change. a cor porate goal to reduce our demand- Merck supports a global approach that based energy intensity by 25 percent

MERCK PARTNERSHIPS TO ADDRESS ENERGY AND CLIMATE NEEDS » » U.S. Environmental Protection Agency (EPA) ENERGY STAR: greenhouse gas emissions. Merck’s goal is to achieve 12 percent This partnership provides a broad energy management strategy absolute reduction in greenhouse gas (GHG) emissions from a OUR VALUES that serves as a useful framework in measuring our current baseline of 2004 through 2012. More at: www.epa.gov.stateply. energy performance, setting goals, tracking savings and reward- » Business Roundtable Climate RESOLVE (Responsible

IN ACTION ing improvements. Recently, the EPA recognized Merck with its Environmental Steps, Opportunities to Lead by Voluntary 2009 ENERGY STAR Sustained Excellence Award. An ENERGY Efforts): This initiative seeks to have every company in every STAR partner since 2004, Merck has been recognized by the EPA sector of the U.S. economy undertake voluntary actions to for four consecutive years – twice as Partner of the Year and twice control GHG emissions and improve GHG intensity. More at: for Sustained Excellence. More at: www.energystar.gov. www.businessroundtable.org. » U.S. EPA Climate Leaders: Member companies of this industry- » Carbon Disclosure Project: Merck has reported its greenhouse government partnership program develop comprehensive climate gas emissions since 2005 to the Carbon Disclosure Project and change strategies and commit to reducing their impact on the global participates in workshops and seminars sponsored by the CDP. environment by completing a corporate-wide inventory of their More at: www.cdproject.net. ENERGY AND GREENHOUSE GAS » PERFORMANCE DATA SUMMARY 2004–2008

GLOBAL 2008 2007 2006 2005 2004*

Total energy supply (Million BTUs x 106) 12.8 15.2 15.5 17.5 18.5 Energy demand intensity† (Million BTU/sq ft) 0.47 0.52 0.54 0.61 0.65 Energy source (% of total)‡ » Purchased electricity 36 29 29 28 28 » Natural gas 38 52 53 54 56 » Fuel oil 3 3 2 3 3 » Coal 0 0 0 0 0 » Fleet fuel 23 17 16 15 13

§ § § § Total GHG emissions (as CO2 eq) (Million metric tons) 1.18 1.38 1.38 1.47 1.51

Total GHG emissions (as CO2 eq) baseline adjusted 1.18 1.29 1.29 1.36 1.36 for sale of facilities.¶ (Million metric tons)

* 2004 noted as baseline. † The difference between demand energy and supply energy is losses in energy production at Merck facilities. ‡ Previously reported data have been modifi ed to refl ect the energy distribution with fl eet fuel included and to refl ect a change in calculation methodology. § Previously reported data have been modifi ed to refl ect the contribution of additional GHG compounds. ¶ In accordance with U.S. EPA Climate Leaders protocol, GHG generation baseline data have been adjusted to remove facilities that have been sold.

per unit area (measured in millions February 2008, we announced our goal However, approximately 50,000 metric of BTUs [MMBtu/ft2]) by the end of to reduce GHG emissions1 from the tons of this reduction is from a facil- 2008, from a baseline year of 2004. Company’s global facilities and auto- ity that has been closed but not yet We have achieved and exceeded the mobiles by 12 percent by the end of sold. If this facility were removed from goal, reducing our energy demand 2012 from the baseline year of 2004. the baseline, Merck’s net GHG emis- by 28 percent. In 2008, our Energy Merck’s GHG targets, accepted by the sion reduction would be 9.6 percent Center of Excellence (COE) developed EPA Climate Leaders program, are based from the corrected 2004 baseline. We effi ciency metrics for all major systems on an absolute reduction of 1.5 percent are committed to meeting our goal at Merck that demand energy and we per year for eight years. of a 12 percent reduction by 2012, are using these metrics to drive even even though new facilities currently better performance. Merck tracks four greenhouse gases: under construction will add to Merck’s

carbon dioxide (CO2), methane, nitrous total emissions. Specifi c energy effi ciency projects oxide and hydrofl uorocarbons. The vast included the installation of variable speed majority of our GHG emissions are TRACKING OUR TRAVEL-RELATED CARBON FOOTPRINT drives, re-commissioning of production, associated with CO2. Perfl uorocarbons research and offi ce buildings, and the use (PFCs) and sulfur hexafl uoride (SF6) The GHG emissions associated with our of free cooling and heat recovery from are not tracked because they are typi- vehicle fl eet are part of our GHG goal recirculating water systems. cally not used at Merck facilities. and 2004 emission reduction baseline. In 41 2008, Merck also began to track direct REDUCING GREENHOUSE Based on 2008 results, Merck’s net GHG emissions associated with the GAS EMISSIONS reduction in GHG emissions was Merck air fl eet. These emissions, which Since 2005, Merck has been reporting 180,400 metric tons or 13.2 percent totaled 4,150 metric tons, were not our GHG emissions annually through from a 2004 baseline that has been included in our original GHG emissions the Carbon Disclosure Project. In adjusted for sites that have been sold. IN ACTION IN ADOPTING SOLAR POWER OUR VALUES TO REDUCE GHG EMISSIONS » In April 2009, Merck inaugurated a 1.6 megawatt ground-mounted photovoltaic energy array at our corporate headquarters in Whitehouse Station, New Jersey. Spread out over 7.5 acres, it is one of the largest ground-mounted solar power tracking systems built in a corporate setting. Nearly 7,000 moving solar panels are tracking the sun to generate 2.5 million kilowatt hours of energy per year. As a Member of the U.S. EPA Climate Leaders, Merck is committed to reducing greenhouse gas emissions. A solar project of this size will avoid the emissions of more than 1,200 tons of carbon dioxide annually, which is about the same as taking 200 cars off the road per year.2 WATER USE » PERFORMANCE DATA SUMMARY 2004–2008

GLOBAL 2008 2007 2006 2005 2004 (baseline)

Total water usage (Billion gallons) 5.6 8.8 9.6 10.1 11.7 (Percent reduction v. prior year) (36) (8.3) (5) (13.6) » Purchased water (Billion gallons) 1.3 1.6 1.6 1.8 1.9 » Pumped water, surface and ground (Billion gallons) 4.3 7.2 8.0 8.3 9.7

goals and are small in comparison to Approximately 77 percent of the total awareness and green chemistry expertise overall GHG emissions. water we use is supplied from surface among our process development chemists and ground water. Much of the water to help them develop more sustainable We have also begun to gather the use at Merck is for utility systems in ways to synthesize our products. emissions associated with business our manufacturing plants, more specifi - travel and have estimated data for the cally to produce active pharmaceutical Solvents play a key role in the synthesis years 2006 through 2008 that will be ingredients that require large volumes of pharmaceutical compounds. In 2008, used to develop information about of cooling water. In 2008, approximately almost 40 million kilograms of solvent environmentally smarter travel options 50 percent of the water we used globally were used in Merck’s production and for employees. was for once-through non-contact cleaning processes. As a result of their cooling, where water is pumped into importance to our pharmaceutical WATER USE the plant, circulated through heat manufacturing process, we have active In recent years, a combination of indus- exchange piping to cool processes and programs to reuse and recycle our used trialization, urbanization and increasing then discharged at a higher temperature. solvents, as well as to fi nd other benefi - population growth have put pressure The vast majority of the once-through cial uses when reuse and recycling are on the availability and quality of fresh cooling water (98 percent) was used at not practical. water supplies. This has led to increasing facilities where there are ample sup- concern and eff orts to ensure effi cient plies of ground water. To reduce water Reuse of solvents on-site in our processes and sustainable use of water resources. consumption, many Merck facilities lowers our process costs by reducing Because clean water is critical to both employ water reuse and recovery strate- the amount of new solvent we need to human health and the environment as gies. During 2008, 1.8 billion gallons purchase and also decreases the amount well as to our business, we are taking of water were recycled or reused by of waste solvents we need to transport steps to improve our overall water Merck facilities. off -site for treatment. In 2008, more than use effi ciency and to understand our one-third of the solvents we used for water footprint. We achieved our goal of reducing water manufacturing were recovered solvents. use by 15 percent between 2004 and Merck’s strategy for improving our 2008. In 2008, we used 6.1 billion gallons WASTE water use effi ciency includes reducing of water less than in 2004: a 52 per- In 2008, Merck managed almost our overall demand for water, control- cent reduction. The closure and sale of 74,000 metric tons of wastes from ling our water discharges and under- two water intensive facilities accounted our operations. Of this, 46,800 metric standing the water-related challenges in for 59 percent of our total reduction. tons were wastes that require special the regions where we operate. Water use reductions at the rest of our handling, including but not limited to 42 facilities, since including new sites that hazardous, infectious and other special have been added, were 21.4 percent. wastes hereafter referred to as hazardous. Merck’s generation of these wastes WATER USE PERFORMANCE For details on Merck’s initiatives decreased 23 percent from 2005 to 2008. INDICATORS worldwide to reduce water use, go to Increases in solvent recovery and reduc- www.merck.com/cr/water. tions in on-site production volumes are BILLION GALLONS among the most signifi cant contributing 12 EMISSIONS, EFFLUENTS factors to this reduction. AND WASTE 10 Our strategy for minimizing our envi- The primary component of our hazard- ronmental footprint focuses on reducing ous wastes is solvent from our manufac- 8 our demand for hazardous materials, turing operations. Of the hazardous waste preventing the generation of waste, and we generate, 29 percent is recovered 6 reusing or recycling materials. off -site and reused either by Merck or by other industries. Another 26 percent is 4 Reducing emissions and wastes of all burned as a source of energy in industrial types begins with the original design furnaces or to generate power. 2 of our pharmaceutical manufacturing processes and continues through instal- Most of the remaining waste is product 0 lation. Our “green chemistry” program or research waste that is not recyclable. 2004 2005 2006 2007 2008 helps us design our new processes to Of the total hazardous waste gener- Purchased use more benign chemicals and reduce ated, 39 percent is incinerated and less than three percent of our hazardous Pumped our generation of waste and our consumption of energy, water and other waste, none of which is liquid, is sent 2008 Goal resources. We have been building to landfi lls. EMISSIONS, EFFLUENTS AND WASTE » PERFORMANCE DATA SUMMARY 2005–2008

GLOBAL 2008 2007 2006 2005

Manufacturing solvent use (Metric tons)* 39,000 N/D N/D N/D » Fresh solvents*,† 25,000 ~30,000 N/D N/D » Recovered solvents 14,000 N/D N/D N/D Air pollutant emissions by type (Metric tons) » Ozone-depleting substances (ODS) 1.2 1.4‡ N/D N/D § § § » Nitrogen Oxides (NOX) 297 318 322 471 § » Sulfur Oxides (SOX) 50 58 67 84 » Volatile Organic Compounds (VOCs) 353 401‡ 427 411 TRI emissions (Metric tons to air and water) 196 270 242 163 » TRI emissions to air 72 97 123 104 » TRI emissions to water 124 173 119 59

Waste generated (Metric tons) » Hazardous waste generated 46,800 54,000 62,300 60,900 » % Hazardous waste recycled 29 23 29 37 » % Other beneﬁ cial reuse 26 32 32 18 » Non-hazardous waste generated 27,000 32,000§,¶ N/D N/D » % Non-hazardous waste recycled 46 42§,¶ N/D N/D

* Data includes purchases of solvents in bulk (tank truck/railcar) and large packages (drums, Fisher Paks). † Data should be considered an estimate. ‡ Data unavailable for a site sold at the end of 2007. § Prior year data have been modifi ed to refl ect corrections identifi ed after publication of previous report. ¶ 2007 was the fi rst year we collected non-hazardous waste generation and recycling data. Data should be considered an estimate.

Merck has had a global waste manage- treatment of air emissions and solid waste The largest source of air emissions from ment services vendor approval program incinerators. These combustion processes our manufacturing processes is solvent since the late 1980s to ensure that the also result in emissions of nitrogen use, which is the primary component of wastes we send off site are managed in an oxides (NOX) and sometimes sulfur oxides both emissions to air of volatile organic environmentally responsible manner. (SOX), depending on the fuels used. compounds (VOC) and Toxic Release

Emissions of NOX and SOX from Merck Inventory (TRI) compounds. Emissions In 2007, we began to track our genera- facilities continued to trend downward, involving both of these parameters contin- tion of non-hazardous waste. Based on with a seven percent reduction in NOX ued to decrease between 2006 and 2008. the fi rst two years of data, on average from 2006 through 2008 and a 24 per- Although our solvent emissions vary year we recycle approximately 44 percent of cent decrease in SOX during the same to year due to the nature of our business the 27,000 to 32,000 metric tons of non- period. Energy conservation measures, and variability in the amount of solvents hazardous wastes we generated annually. production variability and the closure required for diff erent products, a large por- 43 or sale of sites all contributed to the tion of the decreases in air emissions were AIR EMISSIONS decreases. The use of cleaner fuels further due to the closure of two Merck sites. It

The largest source of air emissions at our contributed to declines in SOX during is noteworthy that since 1996, Merck has sites is CO2 from the production and that period. maintained its 90 percent reduction in use of energy, and from other combustion TRI emissions from 1987 levels, despite processes such as thermal oxidizers for Company growth. IN ACTION IN GREEN BUSINESS INITIATIVES » OUR VALUES

» Facility design: In 2008, Merck adopted a corporate commitment effi cient way to post low- and medium-value supplies and equip- to build all new laboratories and offices to achieve a LEED® Silver ment to seek other departments that can make use of them. Certification or its equivalent globally. Five years after its launch, thousands of transactions have been documented – saving money, avoiding waste, reducing » Packaging components: We are consolidating the number of upstream manufacturing impacts and reinforcing an employee unique product package images worldwide which will reduce ownership culture. packaging discards and packaging line waste. » Verizon Hopeline Partnership: Our U.S. facilities and fi eld sales » Offi ce Supplies: Merck’s Corporate headquarters is using staff actively participate in this program that benefi ts victims 46 percent less copy paper per employee now than in 2001. The of domestic abuse. In the last three years, more than 31,000 cell reduction is the result of employee awareness campaigns and phones, from both business and personal use, have been implementation of a global program that moved employees from donated for reuse or recycling. Recycling cell phones allows personal printers to network duplexing printers. the recovery of important precious metals and keeps waste » Surplus Exchange: On Earth Day 2004, Merck launched a out of landfi lls. user-driven on-line program to provide employees with an In 2007, we began tracking emissions of projects to ensure aggressive and appro- the use of raw materials, the generation ozone-depleting compounds. Our cur- priate cleanup actions where Merck of both hazardous and non-hazardous rent emissions, which are primarily due bears responsibility. waste, and reduce the use of energy and to minor leaks from temperature control water in pharmaceutical production. In systems, are small compared to other Expenditures for remediation and envi- addition, Merck has begun tracking new emissions from our sites. Nevertheless, ronmental liabilities, including formerly measurements of process effi ciency that we will continue to monitor them for owned and operated sites, were $19.5 mil- will be used in process selection and improvement opportunities. lion in 2007 and $34.5 million in 2008. drive continuous improvement. The increase in 2008 was primarily due WASTEWATER EFFLUENTS to execution of a guaranteed remedia- Merck is a founding member of the All of Merck’s process wastewater is tion program (GRiP®) with an envi- ACS GCI Pharmaceutical Roundtable, treated prior to discharge. Merck oper- ronmental consultant to complete the a collaborative partnership between ates our own biological wastewater ongoing remediation project at one the American Chemical Society’s treatment plants at four of our produc- of our former manufacturing sites. In Green Chemistry Institute® and tion facilities; the remainder of our addition, Merck currently is a poten- member pharmaceutical companies, production facilities wastewater is tially responsible party at 18 multi-party and has received several awards in the treated by local municipal facilities. Superfund sites in the United States. United States and the European Union In 2008, two Superfund claims were for its green chemistry eff orts. TRI emissions to water refl ect a reduc- successfully resolved as de minimis settle- tion in 2008 versus 2007, due primarily ments. These amounts do not consider ENVIRONMENTAL to the sale and/or closure of two major potential recoveries from other parties. RISK ASSESSMENTS manufacturing facilities, as well as In many countries around the world, an lower manufacturing volumes at certain PRODUCT STEWARDSHIP Environmental Risk Assessment must be facilities. In addition, we are currently Merck is committed to understanding conducted and submitted to regulatory installing technology that will reduce and managing the environmental authorities as part of either the offi cial the discharges of nitrates at one facility impacts of our products from discovery marketing approval or the new substance that accounted for the majority of the through manufacturing, patient use and notifi cation processes. To carry out these increases in 2006 and 2007. disposal. This commitment starts early in assessments, Merck puts our medicines the drug development process and con- through a battery of environmental During 2008, we began to track charac- tinues throughout the product lifecycle. fate and eff ects tests that are appropri- teristics of the wastewater discharged by ate for evaluating potential environ- our facilities, including chemical oxygen Merck scientists use green chemistry mental impacts from pharmaceutical demand, suspended solids, ammonia, principles to reduce the environmental residues in the environment. All tests and phosphorous. footprint of our manufacturing pro- are performed in independent research cesses. We also conduct environmental laboratories offi cially accredited to As part of the drug discovery and devel- risk assessments on our products to perform regulatory testing, and are car- opment process, Merck assesses the evaluate and mitigate any potential for ried out following protocols issued by potential environmental and human environmental impacts due to discharges the OECD and in full compliance with health eff ects of our products. Since the from our pilot plant and manufacturing Good Laboratory Practice regulations. early 1990s Merck has used that infor- facilities as well as to evaluate potential Envi ron mental risk assessments carried mation to establish compound-specifi c impacts resulting from normal patient out to date indicate that our products do criteria and procedures to assure that use. In addition, we strive to reduce not pose an unacceptable risk to human our factory discharges do not contain the amount of packaging material and health or the environment. 44 residual products that present a risk to waste associated with our products human health or the environment. For and to ensure that our suppliers also Merck scientists also are collaborating more on our eff orts on pharmaceuticals have responsible practices. More at: with other pharmaceutical companies, in the environment, go to p. 45. www.merck.com/cr/stewardship. governmental agencies and universities to foster greater awareness and use ENVIRONMENTAL REMEDIATION USING GREEN CHEMISTRY of the scientifi c methods used to assess Management practices for emissions, Merck applies green chemistry in both the potential impacts of pharmaceuti- effl uents and wastes have evolved our research activities and our manu- cals in the environment and to increase signifi cantly in the past 30 years. With facturing operations. In research, Merck the understanding of such impacts. In research and manufacturing operations scientists designed micro-column Sweden, Merck participated in establish- dating back more than 100 years, some chromatography to avoid the creation ing an environmental classifi cation facilities were operated during times of thousands of gallons of solvent waste system for pharmaceuticals, and vol- when regulations and the understand- and published their work in the scien- untarily provides environmental risk ing of good environmental practices tifi c literature where it is available to data on our products (see www.fass.se). were not at the level that they are today. researchers in other companies. In man- In Canada, Merck scientists are work- As a result, Merck has responsibility for ufacturing, Merck scientists and process ing with governmental agency and remediation of these historical envi- engineers have introduced chemistry university scientists to develop environmental concerns and has established innovations that signifi cantly reduce ronmental assessment regulations aimed at addressing risks to the environment NANOTECHNOLOGY » We continue to look for ways to and to human health posed by products Merck is actively pursuing nanotech- reduce our energy demand, including regulated under the Canadian Food and nology both through internal research through the increased use of renew- Drug Act. and external collaborations, because we able energy technologies. are always looking for better ways to » We aim to reduce our total global PHARMACEUTICALS IN improve patient care as well as protect GHG emissions by 12 percent by THE ENVIRONMENT (PIE) the environment and the health and the end of 2012, using 2004 as the Merck participates in many stakeholder safety of our employees. The testing baseline year. collaborations aimed at developing and required for all drugs will ensure that implementing a science-based approach nano-based pharmaceuticals are safe and » We are working on establishing to evaluating and setting policy related to eff ective for patient use. Based on our appropriate GHG reduction goals pharmaceuticals in the environment. In current knowledge of nanoparticles, our for the longer term that are in line addition, through our association with existing methods for assessing risks to with the global desire among nations the Graham Environmental Sustainability workers and the environment are valid and regions to commit to signifi cant Institute, Merck is collaborating with and our existing controls are well-suited reductions through 2020 and 2050. researchers at the University of Michigan for controlling employee exposures » Merck will continue to seek new and PhRMA to assess the environmental to nanomaterials. sources of GHG data in certain ele- footprints associated with methods of ments of our supply chain, including disposal of unused medicines. Merck is One of Merck’s products, EMEND, the amount of renewable energy we also a sponsor of the Water Environment uses a nanoscale milling approach to purchase, and will investigate our Research Foundation (WERF), where make the granules very small so they are ability to track emissions related to the signifi cance of trace constituents of more easily absorbed in the digestive materials shipments. consumer products, including pharma- tract. Merck also packages a new class of ceuticals in the environment, has been experimental drugs (siRNAs) by coat- » Although we have achieved our water identifi ed as a critical knowledge area and ing them with lipids (fats) for effi cient use reduction goal, Merck continues is the subject of numerous research proj- delivery to the inside of cells where they to place high priority on optimizing ects, including research on new waste- are active. our use of water. During 2009, we water treatment technologies to improve will continue to map our water use the removal of trace amounts of pharma- For more on Merck’s product steward- and create profi les of water avail- ceuticals from wastewater discharges. ship initiatives, go to www.merck.com/ ability and risks at our facilities around cr/productstewardship. the world, and use that information Although the primary source of to identify opportunities for water use pharmaceuticals in the environment is FUTURE GOALS improvements that optimize environ- patient use and excretion, given that AND PRIORITIES mental benefi t and business value. fl ushing of unused medicines contrib- » We continue to strive for full » We will continue to monitor TRI utes to the trace concentrations detected compliance with applicable laws and VOC emissions to ensure that in the environment, proper disposal is and regulations. we maintain reductions obtained also an important aspect of addressing from past initiatives. the issue. Merck, through its member- » Our major goal is to have zero signifi - ship in the PhRMA PIE Task Force, has cant safety or environmental events. » Merck will continue to work with worked to develop and implement the » We continue to enhance our stakeholders and the scientifi c com- SMARxT Disposal Program, designed audit, self-assessment and inspec- munity on the evolving issue of to provide the general public with infor- tion programs. pharmaceuticals in the environment mation on proper disposal of medicines. (PIE) to identify additional data needs 45 » We continue to enhance safety & on the transport, fate and eff ects of To view Merck’s policy on PIE, go to environmental (S&E) training for PIE and to conduct our own envi- www.merck.com/cr/docs/PIE_ S&E professionals, operations man- ronmental risk assessments based PUBLIC_statement.pdf. agers and employees. upon the best available science. ENDNOTES 1 www.merck.com/newsroom/press_releases/corporate_responsibility/2008_0220.html SECTION 2 www.merck.com/newsroom/press_releases/corporate/2009_0415a.html Advocacy and Outreach

As corporate political disclosure gains broad To make this disclosure more useful, companies acceptance, the challenge for companies is to need to take a further step and ask associations bring accountability to political spending by about the purpose, the recipients and the benefi - their trade associations. Underwritten by their ciaries of their political expenditures. Companies corporate members, associations are major politi- should include this information as a normal part of cal players. A large share of corporate political their political disclosure. This would help compa- spending is in fact done through associations. nies in evaluating the risks and benefi ts of their However, the absence of disclosure of payments trade association participation. It would further to or spending by associations on political activity enable companies to identify any confl icts between means that much of this activity remains hid- their values and public policy objectives and those den, even to their members. This secrecy is being of organizations that they support. Robust disclo- peeled back as a growing number of companies, sure and accountability are critical for determining including Merck, disclose their payments used for whether a company’s resources are being used to BRUCE F. FREED political purposes. achieve political goals which the company may not President, Center for share and may even oppose. Political Accountability

…one challenge for companies is to bring greater accountability to their public policy advocacy efforts and political spending… »

A major element of our Corporate Responsibility approach and practices is our public policy advocacy work and our outreach 46 to stakeholders. Merck informs and advocates for public policies that foster research into innovative medicines and improve access to medicines, vaccines and health care. While our positions support the sustainability of our business, we believe they also are beneﬁ cial to society as a whole. MAKING A RESPONSIBLE innovative products in the European Health Innovation in Canada to support CONTRIBUTION TO Union, Asia Pacifi c and Latin America. the local life sciences sector. PUBLIC POLICY DEBATES In Europe, we have contributed posi- tively to an active public dialogue on BIOSIMILARS During 2008 and more recently, Merck how governments can improve public Merck supports an abbreviated regula- has been contributing to numerous pol- health while effi ciently managing lim- tory pathway for approval of biosimilars, icy debates worldwide. Below are a few ited healthcare resources. See p. 26 for to assure patient safety and preserve noteworthy examples. Merck positions more details. incentives for continued biologics on many of these issues can be found at: innovation. The cost savings that could www.merck.com/about/public_policy. PROMOTING INNOVATION be realized by competing biosimilar HEALTHCARE REFORM Merck supports policy initiatives that products may provide additional resources foster an environment conducive to the to fund research, development, and pay- We have consistently promoted health- development of a robust life-sciences ment of new innovative products. We care reform in the U.S. and abroad, sector. Merck Frosst is partnering with have supported the adoption of regula- including initiatives to address pricing the Centre for the Advancement of tory guidelines for biosimilar products and reimbursement conditions for in numerous markets including the U.S., Merck recognizes it is our responsibility to work discussions of major trade associations of which with policymakers and other stakeholders to we are members to ensure that any confl icts with explain our views ethically and transparently. our policy positions or values are identifi ed and Our public policy and engagement practices are addressed. In 2008, we began to disclose the por- governed by numerous regulations worldwide tion of dues that major U.S.-based trade associa- as well as Merck’s own Code of Conduct. We tions report to us as being used for advocacy adhere to the Center for Political Accountability’s and/or political activity purposes, where dues are Model Code on political contributions and are greater than $50,000. Because we recognize the proud to say that we are in compliance with all concerns of stakeholders regarding potential trade major provisions of the Code’s eleven principles. association activity, we will continue to look for effi cient ways in which greater transparency can We also understand that accountability with be achieved with respect to the policy positions GERALYN S. RITTER respect to the actions of our trade associations is and activities of the trade associations we support. critical. We take a very active part in the strategy Vice President, Global Public Policy and Corporate Responsibility, Merck & Co., Inc.

Because we recognize stakeholder concerns regarding potential trade association activity, we will continue to « look for efﬁ cient ways to achieve transparency.

Japan, Australia, Korea, Taiwan, Malaysia worldwide. In 2008, our educational Pharmaceuticals Act in the U.S. and the and Mexico. eff orts have focused on preventing draft E.U. directive on counterfeiting issuance of compulsory licenses and (see p. 31). REGULATORY REFORM strengthening data protection. Merck supported systemic changes TRADE AGREEMENTS 47 to improve the quality and timing of ANTI-COUNTERFEITING We have advanced increasing access to regulatory review in Japan. In this way, We are working with numerous orga- innovative medicines in many coun- we aspire to increase access to needed, nizations to raise awareness about the tries by supporting bilateral and multi- new medicines. serious public health risks posed by lateral trade agreements that promote counterfeit medicines, and to promote more open and transparent markets. For INTELLECTUAL PROPERTY regulatory changes that will enhance example, Merck supported U.S. free trade PRO TEC TION public safety. Merck supports eff orts agreements with a signifi cant number Merck continues to defend strong to strengthen anti-counterfeiting laws, of countries and regions, such as Chile intellectual property protections including the Safeguarding America’s and Central America. IN ACTION IN SUPPORTING HEALTHCARE REFORM IN THE U.S. » OUR VALUES Merck supports healthcare system reform in the U.S. that incentives for unlimited healthcare spending. Furthermore, we will ensure affordable access to healthcare coverage for all believe all individuals should be required to purchase health Americans. Without coverage, millions of Americans are denied insurance, every employer should provide insurance or pay into a access to needed health care, including prescription medicines fund, and the government should provide subsidies or insurance and other basic services. We believe reforms should rely on for those who cannot afford it. Merck supports promoting greater market-based competition to improve quality, control costs, efﬁ ciency and enhanced quality of care in the healthcare system and continue to encourage the innovation that has made the U.S. through increased research and public dissemination of cost and system so unique. Merck also supports proposals to reduce quality information, including increased price transparency at the health spending by increasing competition around health out- point of service, as well as enhanced use of health information comes for patients, and by changing the tax code to remove the technology – such as electronic personal health records. MERCK CHAIRMANSHIP OF PHRMA FOCUSES ON TRANSPARENCY »

In April 2009, Merck Chairman Richard T. Clark completed a » Strengthening the PhRMA Guiding Principles on Direct to one-year term as Chairman of the Board of Directors of PhRMA. Consumer Advertising about Prescription Medicines. More at: OUR VALUES During this period, PhRMA adopted several important policies to www.phrma.org/ﬁ les/DTCGuidingprinciples.pdf. increase transparency and strengthen the industry’s marketing » Updating PhRMA’s Principles on Conduct of Clinical Trials and IN ACTION and research standards, including: Communications of Clinical Trial Results. More at: www.phrma. » Revising the PhRMA Code of Interactions with Health Care org/clinical_trials. Professionals to ensure that industry marketing practices comply with the highest ethical standards. More on p. 35.

TRANSPARENCY corporate funds for political purposes. responsibility – discovering and devel- Merck supports the creation of a uni- The Merck Board of Directors oping medicines and vaccines that make form, U.S. national program for disclos- recognizes that the use of Company a diff erence in people’s lives and create a ing certain fi nancial relations between resources in the political process is an healthier future. industry and physicians. In 2008, we important issue for shareholders. We supported legislation that would have closely monitor our contributions to That is why we have begun to disclose mandated such a system. In this spirit, political candidates and seek approval payment and grant information in a we have begun to disclose payments to by the Company’s General Counsel number of areas across our business in third parties. in the U.S., and report our spending the following areas: regularly to the Board. ENSURING OUR POLICY » GRANTS TO MEDICAL, SCIENTIFIC AND AND ENGAGEMENT CONDUCT We perform periodic audits to assess PATIENT ORGANIZATIONS: Starting in IS BEYOND REPROACH and enforce compliance with Company October 2008, Merck began report- policies, and Merck employees above ing grants over $500 provided by the Our public policy and engagement a certain level of responsibility are Company’s Global Human Health practices are governed by numerous required to certify annually their adher- division to U.S. organizations in regulations worldwide and by Merck’s ence to such policies. We are extending support of independent accredited Code of Conduct (see p. 32). We also certifi cation in 2009 to require indi- educational programs for health- adhere to the Center for Political viduals involved in corporate political care professionals. In 2009, we have Accountability’s (CPA) Model Code on contributions in the U.S. to certify as expanded this disclosure to include political contributions (www.political to their knowledge of and adherence to other types of grants, including accountability.net). We have engaged the CPA Model Code, in addition to the grants to patient organizations and with the CPA since 2007 to inform other required Company certifi cations. other groups by Merck operations discussions on best practices related in Europe, Middle East, Africa and to spending for political activities. In MERCK TRANSPARENCY Canada. More on p. 36. 2008 we believe we were compliant INITIATIVES: DISCLOSURE OF in all material respects with all major GRANTS AND PAYMENTS » PHILANTHROPIC GRANTS: Starting in provisions of the guidelines. There Merck believes that the best way to March 2009, Merck began reporting were no reports of possible viola- address the concerns, risks and questions all philanthropic grants made through tions of state law related to corporate facing our business and to build a foun- the Offi ce of Corporate Philanthropy political contributions. dation of trust is to be more transparent and The Merck Company Foundation. 48 about the way we operate. By doing this, Merck will update this list annually Additionally, we have long-standing we are confi dent that we will continue providing a full 2009 report in the policies governing the use of any to succeed in our most fundamental fi rst quarter of 2010.

ADVOCACY » PERFORMANCE DATA SUMMARY 2005–2008

2008 2007 2006 2005

Corporate political contributions (U.S., CAN, AUS) (US$)* U.S.: 597,775 470,625 611,975 337,140 AUS: 5,040 19,195 20,292 12,137 CAN: 30,965 58,396 45,765 46,700

Portion of dues that the major U.S.-based trade associations 6.8 paid to 6.9 paid to N/A N/A report to us as being used for advocacy and/or political activities 8 groups 8 groups in the U.S. where dues are >$50,000† (US$M)

Compliance with political contribution evaluation criteria used All 11 10 out of 11 N/A N/A by the Center for Political Accountability principles principles

* Totals reﬂ ect corporate contributions; employee contributions through the Merck PAC are not included. Political contributions in the United States, which are for state candidates, are always much greater in even-numbered calendar years, because that is when the overwhelming number of states hold their elections for state legislatures and governors. † Because the U.S. tax law that requires this reporting does not apply outside the United States, trade associations that are not subject to this do not provide break- outs of lobbying expenditures from membership dues. Thus, at this time, Merck is unable to report these data for such lobbying expenses in other countries. » PAYMENTS TO U.S.-BASED HEALTH- All Merck employees are required to For details on how we work with CARE PROFESSIONALS: We sup- adhere to the Company’s high standards specifi c stakeholder groups to address port broader disclosure of fi nancial and act with integrity when interacting their expectations and concerns, go to relationships between physicians with government agents or engaging www.merck.com/cr/stakeholders. and the pharmaceutical industry. In in any conduct related to governmen- 2008, Merck endorsed the Physicians tal healthcare programs. This includes WORKING IN PUBLIC/PRIVATE Payment Sunshine Act, mandating dis- ensuring that all information provided PARTNERSHIPS TO ADDRESS closure of these fi nancial relationships. to governmental entities is complete and SOCIETAL CHALLENGES But even in the absence of a legislative accurate to the best of the employee’s Merck recognizes that leveraging the requirement, we plan to voluntarily knowledge and belief. Our Code of expertise of all stakeholders can make a disclose in the fourth quarter of 2009 Conduct also makes clear that no illegal sustainable diff erence in addressing key all payments to U.S.-based healthcare payments of any kind are to be off ered societal challenges. We have decades of professionals who speak on behalf of or made, under any circumstances, to experience in developing public/private Merck or our products. government or political party offi cials partnerships (PPPs) and have pio- or candidates of any nation. neered far-reaching programs focused » CORPORATE POLITICAL CONTRIBU- on improving global health, on health TIONS: To improve access to informa- In addition to our own advocacy eff orts, and science education, environmental tion about Merck’s corporate political we are members of numerous industry protection and ethical business practices. contributions in the United States, and trade groups. We work with them Our activities range from small col- Merck annually posts the Company’s because they represent the pharmaceuti- laborations to global multi-stakeholder contributions categorized by state, cal industry and business community initiatives; among these are the Merck candidate and amount. Merck also and because they are important in MECTIZAN Donation Program, the discloses any contributions to com- reaching consensus on policy issues. African Comprehensive HIV/AIDS mittees known as 527 organizations. At times we may not share the views Partnerships, and the ROTATEQ Beginning in 2009, we have expanded of our peers or associations, in which Access Partnership. These and many this list to include corporate contribu- case our Company representatives will other of Merck’s numerous and varied tions in Australia and Canada, the only ensure we voice our questions or con- public/private partnership eff orts other two countries where Merck cerns, or even recuse themselves from are discussed in detail throughout this provides corporate contributions to specifi c activities. For a list of the major report and on our website. candidates or political parties. associations we work with, go to: www.merck.com/about/public_policy/ In 2009, we are requiring an annual » MERCK POLITICAL ACTION COMMITTEE trade_association_membership/ progress and evaluation report for all CONTRIBUTIONS: Merck provides an home.html. public/private partnerships to which opportunity for eligible employees to we provide fi nancial support. participate in the political process by ENGAGING WITH joining a nonpartisan political action OUR STAKEHOLDERS FUTURE GOALS committee (PAC) that allows them Merck’s interactions with various stake- AND PRIORITIES to pool their fi nancial resources to holders are fundamental to our under- » In 2010, Merck plans to draft a new support federal and state candidates. standing of – and response to – society’s model code of conduct for corporate Except for administrative expenses, expectations of our Company across political spending that includes both the Merck Employees Political Action many dimensions of our global activities. the provisions of the CPA Model Committee (Merck PAC) is comprised Throughout our operations, the process Code and additional provisions based completely of funds voluntarily con- of dialogue and engagement informs and on internal policies and practices. tributed by eligible Merck employees. 49 guides our business strategy and decision Merck publicly discloses all PAC making processes, and enhances the pub- » In 2010, we plan to disclose all of our contributions in reports fi led with the lic’s understanding of our business. memberships in U.S. state business- Federal Election Commission. More at: related associations, regardless of the www.merck.com/about/publicpolicy. By actively engaging with our stakehold- size of the dues. ers, taking responsible actions and main- » DUES TO MAJOR U.S.-BASED TRADE taining our commitments, we believe we » In 2010, Merck plans to publish on ASSOCIATIONS: In 2008, Merck began can build trust and support. Over time our website a list of policy positions to disclose the portion of dues that this can reduce fi nancial and other enter- being advocated within state legisla- major U.S.-based trade associations prise risks and costs. We engage stake- tures in the U.S. report to us as being used for advo- holders through fi nancial and technical cacy and/or political activities where support, and through dialogue to inform » In 2010, we plan to report on the dues are >$50,000. debates constructively and to foster prog- number of PPPs for which Merck ress toward solutions that benefi t society has provided support and that report More information on Merck’s dis- more broadly. We also have a long history annually against program objec- closures of grants and payments at: of collaboration with patient groups tives and performance require- www.merck.com/cr/grantsdisclosure. and health-related charities in areas that ments, including a measure of their are relevant to our business. As part progress against the United Nations of our eff orts to increase transparency in Millennium Development Goals our support of independent third parties, where applicable. Merck has begun to disclose our support of third-party organizations and individual healthcare providers. Executing the Basics

Merck’s Corporate Responsibility reporting is focused on priority environmental, social and governance issues in accordance with our materiality assessment.

However, in addition to these issues, there exist a number of other topics which are of importance to our business and to our key stakeholders. CORPORATE GOVERNANCE BOARD INDEPENDENCE complex and inter-related consider- Issues of concern to our stakeholders AND PERFORMANCE ations that are used to set compensa- are very often issues of concern to our A desire for complete independence of tion levels; the confi dential nature of shareholders. For this reason Merck the Merck Board has been expressed some information about the Company’s corporate governance concerns both by some shareholders. Our policy is strategies and performance that is used the Company’s relationship to our that the Merck Board should consist to assess executive performance and set shareholders, and also how we respond of a substantial majority of indepen- compensation; and the availability of on key social issues. Our corporate gov- dent directors in accordance with the other means for shareholders to express ernance objective is to balance fi duciary standard for independence set forth in their opinions on the Company’s execu- duty and accountability to generate our Policies of the Board. Currently, tive compensation strategy. For further long-term shareholder value, while also all directors other than the CEO are details, see pp. 73–74 of the Company’s considering in a transparent manner the considered to be independent. In 2007, 2009 Proxy Statement. feedback from other stakeholders. For Dr. Samuel Thier was appointed Lead details on various aspects of our cor- Director to provide independent CR GOVERNANCE AND porate governance, go to www.merck. leadership to the Board. For additional PERFORMANCE MANAGEMENT com/cr/corporategovernance. details on the responsibilities of the In 2009, Merck’s governance of Company’s Lead Director, see p. 14 of Corporate Responsibility (CR) has KEY CORPORATE Merck’s 2009 Proxy Statement. continued to develop, with the goal of GOVERNANCE ISSUES improving integration of CR-related ENGAGEMENT AND SUPPORT OF OPEN SHAREHOLDER ADVISORY VOTES ON processes and increasing accountability DIALOGUE WITH OUR SHAREHOLDERS EXECUTIVE AND BOARD COMPENSATION for performance across the Company. Merck supports productive dialogue and As a way of voicing their views on per- In 2007–2008, we established a formal engagement with our shareholders, and has formance, some shareholders have asked CR governance function and process – a a long-recognized track record of construc- for the ability to provide a non-binding new Offi ce of Corporate Responsibility 50 tive interaction through ongoing discus- vote on executive compensation. Merck and a senior-level, cross-functional CR sions and periodic meetings on key issues. believes this is unnecessary and not in Council responsible for the Company’s the best interests of the Company and its CR approach. We defi ned our priority shareholders, in view of the numerous ESG issues and developed metrics to

CORPORATE GOVERNANCE » PERFORMANCE DATA SUMMARY 2005–2008

PERFORMANCE INDICATORS 2008 2007 2006 2005

Number of independent directors on the Merck Board 13 12 11 11 (%) (93) (92) (92) (92) Separate Chairman of the Board and CEO* No No N/A N/A Lead Independent Director Yes Yes No No Independent Audit Committee Yes Yes Yes Yes

Independent Compensation Committee Yes Yes Yes Yes

Independent Committee on Public Policy and Social Responsibility Yes Yes Yes Yes

Number of Board meetings held or scheduled† 13 13 8 11

* There was no Chairman of the Board in 2005–2007. † Meetings were held in person and via telephone. measure the Company’s performance them to stay. Components of our work In many countries, we off er health and progress in numerous areas (see p. 3). environment include numerous oppor- insurance, life and injury insurance, Under this new process, Merck’s tunities for employee development and disability insurance, retirement income Executive Committee reviews Merck’s professional growth, competitive com- benefi ts and insurance for business CR approach and related performance pensation and benefi ts, our focus on travel. At certain Merck sites, employ- and approves our CR report. Merck’s health and safety, and our approach to ees can see a healthcare professional Board of Directors Committee on diversity and inclusion. on-site for such services as immuniza- Public Policy and Social Responsibility tions and health screenings. Worldwide, is responsible for advising the Board COMPENSATION AND BENEFITS Merck off ers retirement benefi ts that of Directors and management on Overall compensation at Merck is directly are competitive with our peers and Company policies and practices pertain- dependent on our corporate perfor- general industry. ing to our CR responsibilities; other mance, as well as on specifi c internal Board committees oversee specifi c issues metrics related to the performance DIVERSITY AND INCLUSION such as corporate governance, audit and of an individual employee and their We believe that our human and organi- compliance, and executive compensa- functional group. Employees at all levels zational diff erences, when managed suc- tion. More on our CR governance at: have objectives against which they are cessfully, will make us a more innovative, www. merck.com/cr/crgovernance. assessed by their supervisor. agile and profi table company. In 2007, Merck initiated a new global diversity BUILDING A POSITIVE In 2008, Merck paid a total of strategy, under which the performance WORK ENVIRONMENT US$5.03 billion in payroll expenses, and compensation of our managers and A positive work environment is essen- excluding benefi ts. Merck’s global leaders now is linked to measures related tial to allow our employees to achieve compensation and reward program also to fostering diversity and inclusion. As their potential. It also helps attract new includes an incentive plan of cash awards part of this strategy, in 2008, through an employees to Merck and motivates based on performance. innovative approach to diversity, Merck

POSITIVE WORK ENVIRONMENT » PERFORMANCE DATA SUMMARY 2005–2008*

2008 2007 2006 2005

Total compensation paid to employees/payroll excluding beneﬁ ts (US$B) 5.03 5.56 5.14 4.84

Women in workforce (globally) (%) 50 48 49 49 Women on the Board (%) 21 23 25 25 Women in executive roles (U.S.)† (%) 28 27 26 28 51 Women on Senior Management Team (U.S.) (%) 34 31 29 29 Women in workforce (U.S.) (%) 50 49 50 50 Women in management roles (U.S.) (%) 42 41 41 38 Under-represented ethnic groups on the Board (%) 14 17 17 17 Under-represented ethnic groups in executive roles (U.S.)† (%) 11 11 12 12 Under-represented ethnic groups on Senior Management Team (U.S.) (%) 15 14 15 14 Under-represented ethnic groups in workforce (U.S.) (%) 23 20 20 21 Under-represented ethnic groups in management roles (U.S.) (%) 20 20 19 18 Employee response rate to Merck Culture Assessment Survey (%) 65 72 77 N/A‡ Number of position eliminations through Merck’s restructuring program 5,800 2,400 3,700 1,110 Overall turnover rate§ 17.6 10.7 11.9 10.6 Overall voluntary turnover rate§ 8.1 6.6 7.1 7.1 Involuntary termination rate 9.8 4.1 4.8 3.5

* All data pertains to representation in Merck’s workforce. † Executives refer to the level of vice president. ‡ Survey not conducted prior to 2006. § Overall turnover includes all types of turnover; overall voluntary turnover excludes any involuntary terminations for performance or restructuring. MSD SINGAPORE WORKPLACE HEALTH PROGRAMS » Merck is committed to fostering and promoting employee health; ﬁ rst, because health is a key ingredient for optimal workforce per- OUR VALUES formance; second, because Merck’s business is health, we believe we must lead by example; and ﬁ nally, because a constructive

IN ACTION approach to employee health helps to recruit and retain top talent. In this spirit, MSD Singapore has demonstrated a ﬁ rm commitment to help their employees lead healthy and vibrant lives through innovative health promotion programs that have gained national recognition. In 2008, MSD earned the platinum (highest honor) level Singapore HEALTH (Helping Employees Achieve Life-Time Health) Award, presented by the Health Promotion Board to give national recognition to organizations with commendable Workplace Health Promotion (WHP) programs. In previous years, MSD has also earned two silver and three gold-level awards. MSD Singapore takes a holistic approach to health promotion, with a wellness program that encourages healthy eating habits, promotes MSD Singapore feels they have a competitive edge on other com- physical ﬁ tness, and provides voluntary educational workshops panies as a caring employer that values employees’ health and to increase health literacy. In addition, MSD consciously targets well-being. It has put in place metrics to gauge the success of its employees’ individual health needs by making available occupa- employee health initiatives in terms of increased productivity, tional health staff who work with employees and their doctors cost savings, and reduced employee illness. to manage health issues such as cholesterol levels, smoking cessation, and others.

launched the Global Constituency ENGAGING WITH OUR EMPLOYEES eliminated approximately 5,800 posi- Groups (GCGs). The goals of the GCGs To keep in touch with employee tions in connection with both the 2008 align with Merck business priorities and perspectives about our culture, Merck restructuring program and its previously support our corporate strategy (Plan to conducts an annual Culture Assessment announced 2005 restructuring program. Win). There are ten distinct GCG teams that measures Merck’s progress toward In implementing these diffi cult but including: Women; Men; Generational; becoming a high-performance orga- necessary actions, Merck is committed Hispanic; Black; Asia Pacifi c; Native nization. This includes questions on to treating employees with fairness and Indigenous; Lesbian, Gay, Bisexual, such topics as teamwork, capability respect. For more information, go to Transgender (LGBT); Diff erently Abled; development, customer focus, ability to www.merck.com/cr/restructuring. and Interfaith. The participants of the create change, strategic direction and GCGs develop and support the strategic intent. In direct response to employee POSITIVE WORK ENVIRONMENT initiatives that drive Company-wide feedback from our 2008 survey, the FUTURE GOALS AND PRIORITIES culture change that builds upon the goal Company is including certain areas as » We want to score at or above the of global interdependence and col- specifi c measures on our 2009 internal 75th percentile in each dimension of laboration, and will further enhance our company performance scorecard. We our annual Culture Assessment by 2011. eff orts to become a high-performance also have continued to reinforce our » We will strive to increase by 2010 organization that eff ectively leverages leadership standards by holding leaders the percentage of employees who say the full breadth and depth of our diverse and employees accountable for desired 52 they are satisfi ed with the opportu- global talent. behaviors, such as championing change, nity to work fl exibly to 80 percent, understanding our customers’ needs, and and increase overall engagement of WORK-LIFE EFFECTIVENESS, delivering value to our customers. employees by ten percent. We will SUPPORT AND FLEXIBILITY begin formally tracking global use of Merck implemented fl exible work MERCK’S RESTRUCTURING PROGRAM our fl exible work arrangements in arrangements in the United States more On October 22, 2008, Merck outlined 2009 and are committed to reporting than ten years ago with the intention the next steps in the Company’s ongoing this information in future reports. that they be used as a business tool and eff orts to reduce its cost structure, strategy to create a work environment in increase effi ciency and enhance competi- » By 2012, we plan to increase global which employees could simultaneously tiveness as part of our overall strategy to female representation at the senior achieve business objectives and main- regain an industry leadership position. As manager level (typically within two tain work-life eff ectiveness. In 2008, part of the 2008 restructuring program, reporting levels of our CEO) to we implemented a global fl exible work Merck expects to eliminate approxi- 36 percent, and in the United States, arrangement policy and launched tools mately 7,200 positions – 6,800 active to increase under-represented ethnic to increase access to such arrangements employees and 400 vacancies – across all group representation at the senior worldwide. As fl exible work arrange- areas of the Company worldwide by the manager level to 18 percent. ments grow to being used as a strategic end of 2011. During 2008, the Company business tool, we believe we will experience increased productivity and innovation as well as enhanced employee engagement. More at: www.merck.com/ cr/fl exiblework. FOSTERING SAFETY AND In early 2009, Merck responded to the injury rate and a 23.6 percent improve- HEALTH IN THE WORKPLACE outbreak of the Infl uenza A (H1N1 ment in the lost-time rate. The decrease AND IN OUR COMMUNITIES “swine fl u”) virus by mobilizing a in 2008 lost-time injury rate is primarily cross-functional team to develop and attributable to a 30 percent reduction Merck provides employees with a wide deliver to Merck managers and EHS in injuries associated with motor variety of health programs in alignment professionals, key documents and sup- vehicle accidents. with the highest standards of medical port for global employee health and care and regulatory requirements to safety guidance, and specifi c response Preventing motor vehicle accidents is a enhance their health and well-being. recommendations. For more on Merck’s key focus area of our global employee We are also committed to providing a contributions to pandemic preparedness, safety eff orts. In 2008, we reduced safe working environment through tak- see p. 18. the frequency of work-related vehicle ing preventive actions as well as closely Accidents per Million Miles (APMM) tracking accidents, injuries or illnesses so FOSTERING EMPLOYEE SAFETY by 25 percent. The reduction in vehicle- that we can address problems promptly Merck strives to eliminate work-related related injuries was the primary con- and work toward eliminating occupa- injuries and illnesses from our operations tributor to the 12.5 percent reduction tional injuries and illnesses. globally through full compliance with all in overall lost-time injury rate for the applicable country and local safety laws Company. Employee days away from In 2007, for U.S.-based employees, and regulations and implementation of work as a result of vehicle accidents were Merck introduced Health Matters to raise additional beyond-compliance programs. similarly reduced. awareness of health issues and motivate We have established numerous corporate employees to manage and improve their safety policies, procedures, guidelines Our 2008 capital project construction- health and well-being. To date, about and standards to aid our operations in related recordable injury rate (RIR) of 15 percent of U.S. employees have com- achieving these goals. 1.05 and our Days Away Restricted and pleted confi dential health assessments, Transferred (DART) rate of 0.15 are in and more than 75 percent of those In 2008, our workplace injury and line with performance in 2005 and 2006 contacted by a coach have opted to illness rates decreased from 2007. and represent a 27 percent and a 61 per- work on a health goal utilizing a lifestyle The recordable injury rate decreased cent reduction from the 2007 recordable coaching program. 1.8 percent while the lost-time injury injury and DART rates, respectively. rate decreased 12.5 percent. Our total Institutionalization of a behavioral In March 2009, Merck launched a recordable injury rate is down 9.1 per- “safety observation” program on our voluntary disease management program cent and our lost-time injury rate is construction projects in 2007 and 2008 that off ers confi dential professional down 4.5 percent from the end of 2005. are one of the main reasons for the support for ongoing treatment and Over this same time period, we also recent performance improvements. care for most U.S. employees and their undertook actions that dramatically dependents with specifi c signifi cant increased reporting of injuries, particu- For a full account of Merck’s employee medical conditions. The goal is to help larly from our international operations. safety programs and achievements, go to an individual achieve optimal health by Overall improvements from 2003 show www.merck.com/cr/employeesafety. providing evidence-based medical infor- a 40 percent reduction in the recordable mation and self-care guidance.

SAFETY AND HEALTH » PERFORMANCE DATA SUMMARY 2005–2008 2008 2007 2006 2005 53 WORKPLACE SAFETY*

Reportable injury rate (RIR) 1.10 1.12 1.11 1.21 » RIR change (%) –1.8 0.9 –8.3 –25.8 Lost-time incident rate (LTIR) 0.42 0.48 0.43 0.44 » LTIR change (%) –12.5 11.6 –2.3 –13.7 Fatalities 11 0 0 Motor Vehicle Safety » Accidents Per Million Miles (APMM) 7.03§ 9.64 9.92 10.40 Capital Projects Construction Safety*,† » RIR 1.05 1.45 0.92 1.12 » DART‡/LTIR 0.15‡ 0.39‡ 0.07‡ 0.15 » Fatalities 0 0 0 1 Number of U.S. employees who belong to a Merck ﬁ tness center 2,728 3,051 2,757 2,952

Number of U.S. employees who completed the Health Matters 2,140 1,877 N/A N/A health assessment¶

* LTIR/RIR: Calculated per OSHA methodology. † Primarily refl ects capital projects over $100,000 managed by our global engineering group. ‡ DART: Days Away, Reassignment or Transferred calculated per Construction Users Round Table methodology. § Change made in defi nition of accidents to include only business-related accidents. ¶ Health Matters not launched until 2007. This metric has been made more specifi c since reporting last year; prior year data have been adjusted accordingly. SAFETY AND HEALTH counterfeits can enter the legitimate Merck is committed to providing the FUTURE GOALS AND PRIORITIES supply chain or that legitimate products global community with quality products » Our overarching safety goal is will be diverted, and thereby ensuring and a reliable supply of safe and eff ective zero fatalities. that patients and healthcare professionals medicines and vaccines. We maintain can trust that the Merck products they strict product quality standards and mul- » In 2009, Merck will build upon the take and prescribe are genuine. More on tiple supply chain safeguards to ensure success of our recent motor vehicle our anti-counterfeiting eff orts on p. 31. the safety and supply of our products safety initiatives, and strive to reduce no matter where our medicines and the motor vehicle accident rate EXTERNAL MANUFACTURERS vaccines are manufactured in the (percentage of vehicles involved in OF OUR PRODUCTS world. For more information, go to accidents) by ten percent in 2009 Our mission is to provide the global www.merck.com/cr/productsafety. versus 2008 performance. community with a reliable supply of safe » Another key target is to reduce and eff ective medicines and vaccines. PROMOTING RESPONSIBLE Company-wide recordable and lost- Accordingly, we work hard to protect ENVIRONMENTAL, LABOR AND time injury rates by 15 percent each the integrity of our internal and exter- HUMAN RIGHTS STANDARDS IN OUR in 2009 versus 2008 performance. nal manufacturing network. EXTERNAL MANUFACTURERS In 2006, Merck was one of the fi ve MANAGING OUR Merck’s supply strategy combines the initial companies to support publicly the SUPPLY CHAIN best skills and talents of our internal Pharmaceutical Industry Principles for Merck purchases goods and services, manufacturing organization with those Responsible Supply Chain Management, ranging from offi ce furniture to waste of external manufacturers who pro- which outline industry, including treatment and disposal services to vide us with specialized skills and/or Merck’s, expectations for suppliers’ active pharmaceutical ingredients used expertise and types of manufacturing operations with regard to labor, health in manufacturing our products, from services. The factors Merck evaluates and safety, environment, ethics and man- hundreds of suppliers around the world; when deciding to source internally or agement systems. All Merck suppliers we also work with numerous licensees externally include capacity, technical are expected to understand and comply worldwide to market and distribute our capabilities, core competencies, company with these principles. products. In conducting our business, we priorities and cost. Once we have made follow a global sourcing and relationship a decision to use an external manufac- New potential external manufacturers management strategy for materials and turer, we then select the most appropri- of active pharmaceutical ingredients and services worldwide, with a special focus ate manufacturer based on its ability to fi nished products are screened prior to on the top suppliers of critical goods meet our business requirements with selection for any major safety, envi- and services. We maintain strict qual- respect to supply, quality, service, cost ronmental or human rights issues, in ity, environmental, ethical, health and and innovation, regardless of geography. addition to other business requirements safety, and labor standards in our own In addition to the above criteria, Merck such as quality, supply and technical operations – and we insist on responsible is committed to business relationships competence. Through 2008, Merck has standards from our external manufac- with suppliers that share the Company’s performed EHS-specifi c evaluations turers and licensees. dedication to conducting business in of approximately 30 potential exter- a legal and ethical manner that is both nal manufacturers. As a result of these We recognize our responsibility to protective of the safety of our suppliers’ evaluations, certain potential manufac- infl uence our suppliers and licens- workers and surrounding communities turers were deemed to be unacceptable ees to respect human rights standards and the environment. due to environmental, health or safety defi ned in the Universal Declaration of (EHS) issues. 54 In recent years, we have concentrated Human Rights of the United Nations and the core labor standards set out by our internal manufacturing capabilities In 2007, we provided all of our exist- the International Labor Organization. on core competencies and leveraged ing external manufacturers with our Beginning in 2007, Merck’s Global external capabilities. This focus has, and guidelines, a statement of Merck’s Procurement department introduced will continue to, shift some operations expectation that each supplier strive a new Detailed Supplier Ethical historically conducted internally to our for continuous improvement, as well as Assessment questionnaire for suppliers of external suppliers. We currently project the screening survey. We have received new products and services globally. This that external manufacturers will eventu- completed surveys from approximately assessment tool is used to help identify ally provide up to 35 percent of Merck’s 81 percent of them as of year end 2008 any signifi cant ethical or human rights manufacturing volume. and are following up actively with the concerns and is based on the ethics remaining companies. Starting in 2009, parameters set forth in Merck’s Code of In this regard, external suppliers are we will begin to inspect existing sup- Conduct known as Our Values & Standards. those external to Merck, not necessarily pliers, starting with the highest risk If responses to the questionnaire raise external to the U.S. In fact, many of suppliers, to assess conformance with the concerns, Merck will investigate further our external suppliers are located in the Pharmaceutical Industry Principles for and may determine not to do business U.S. or are U.S. entities with manu- Responsible Supply Chain Management. with the potential supplier. More at: facturing operations outside the U.S. www.merck.com/cr/supplychain. In 2008, approximately 42 percent of When concerns arise from either sup- Merck’s external manufacturing was plier survey responses or on-site inspec- Our approach to supply chain manage- spent on external manufacturing operations, Merck works with the supplier ment aims to ensure the integrity of the tions conducted in the U.S. to understand the issue, establish an supply chain, minimizing the risk that improvement plan, and off er tech nical SUPPLY CHAIN MANAGEMENT » PERFORMANCE DATA SUMMARY 2005–2008

2008 2007 2006 2005

Completed Screening Surveys* received from existing external 81 54 N/A N/A manufacturers (%) Spending on diverse suppliers (%) 14 12 8 5 Merck procurement employees who have been trained in 100 100 100 0 supplier diversity (%)

* Survey ﬁ rst implemented in 2007. support if necessary to enable the sup- (LGBT) enterprises. We believe that in the program: Research, Information plier to achieve the desired outcome. working with qualifi ed suppliers from Technology, Construction, Professional If an existing supplier does not show diverse segments of the business com- Services, Marketing, Direct Materials improvement over a defi ned period munity supports our business objec- and Site Services. of time, Merck may seek alternative tives and economic development in the suppliers or discontinue work with the diverse communities that we serve. SUPPLY CHAIN MANAGEMENT existing supplier. FUTURE GOALS AND PRIORITIES In 2008, Merck expanded its supplier » We plan to increase supplier diversity ENSURING CONTINUITY OF SUPPLY diversity program to the United Kingdom to 17 percent of total applicable spend AMONG EXTERNAL MANUFACTURERS and Canada, where Merck is a char- in the U.S, and Puerto Rico by 2010. Millions of people worldwide depend ter member of the Minority Supplier » We plan to achieve 100 percent on our medicines and vaccines every Development U.K. and a national completion of pre-selection Detailed day, many of which need to be avail- member of the Canadian Aboriginal Suppliers Ethical Assessment by able without interruption. To minimize Minority Supplier Council. Plans for potential suppliers of new business disruptions in the supply chain of raw further expansion to other countries are globally by 2010. materials, key intermediates, active underway. In addition, in 2008, we made pharmaceutical ingredients or fi nished a supplier diversity commitment to reach » We plan to implement annual supplier products, Merck manages its manufac- 14 percent of total applicable spend in supplemental ethics standards train- turing network by assigning relationship the U.S. and Puerto Rico, and to increase ing for each procurement employee managers to monitor supplier perfor- that number to 17 percent by 2010. by 2010, and develop a Supplier Code mance, measuring supplier performance of Conduct by 2010. against specifi c quality, supply, service, Our supplier diversity program also » We plan to achieve 100 percent cost and innovation metrics, and put- seeks to support the development of completion of the EHS and human ting in place plans to manage inventory qualifi ed, diverse suppliers through rights Screening Survey by existing and capacity. a number of programs and external external manufacturers of pharma- eff orts. In addition to providing coach- ceutical intermediates and compounds FOSTERING SUPPLIER DIVERSITY ing and feedback on performance, in by end of 2009. Merck is committed to diversity both in 2008, Merck launched Phase II of our our workforce and among our suppli- Supplier Diversity Mentor/Champion » We plan to develop formal risk ers. We cast the widest net in our search Program, through which we conduct mitigation plans, where required, for talent, seeking qualifi ed suppliers, supplier assessments and create joint for external manufacturers who 55 large and small, from all segments of development plans with the qualifi ed, require improvements to conform the business community. These include diverse suppliers that focus on increas- with the Pharmaceutical Industry minority-, women-, veteran-, service ing supplier growth, competitiveness and Principles for Responsible Supply disabled-veteran, HUBZone small sustainability. Suppliers in the follow- Chain Management. and gay- and lesbian-owned business ing categories are currently enrolled Philanthropy at Merck

Philanthropy is a major element of Merck’s commitment to corporate citizenship. Through our philanthropic programs we have the ability to make a positive impact on healthcare access and capacity-building, science education and quality of life issues facing the world’s communities.

We believe that making charitable contributions to improve global health is one of the most responsible and important ways we can actively engage in ﬁ nding solutions to global problems. Merck’s philanthropic investments and Four strategic areas guide Merck’s Encourage environments that fos- program portfolio are guided by several Corporate Giving strategy: ter and support innovation. Key key principles. We seek to: initiatives include: Increase access to health care for » Address critical social issues and needs underserved populations through » Program on Pharmaceutical that matter to Merck’s business and strategic partnerships and capacity- Policy Issues our stakeholders; building. Key initiatives include: » Regional Strategic Grants Program » Collaborate eff ectively with key » Merck MECTIZAN » Ethics Resource Centers partners for optimal impact and suc- Donation Program cess in changing outcomes around Identify and initiate community proj- » Merck Medical Outreach Program these issues; ects that address critical quality of life » Merck Childhood Asthma Network issues. Key initiatives include: » Measure and report our progress in meeting these critical needs; » The Alliance to Reduce Disparities » R x to Fight Hunger in Diabetes » Leverage not only cash and prod- » Neighbor of Choice uct donations, but also knowledge » The African Comprehensive HIV/ » Champions for the Environment and technical expertise across AIDS Partnerships our Company. » Disaster Relief » China-MSD HIV/AIDS Partnership » Partnership for Giving We recognize that our customers, com- » The Merck Vaccine Network–Africa munities, neighbors and investors have » Global Volunteering 56 » The GARDASIL Access Program an interest in how we conduct our- » Dollars for Doers selves and how we support our com- Develop a world-class pool of scien- mitment to society. Our philanthropy tists through strengthening educational More detailed information on each must also refl ect effi cient, responsible opportunities. Key initiatives include: of these programs can be found at and ethical judgment and behavior. www.merck.com/cr/philanthropy. To this end, the Merck Philanthropy » The Merck Institute for Advisory Council (MPAC), the Merck Science Education This strategy is managed through Executive Committee and the Board of » The UNCF/Merck Science Initiative three mechanisms: Directors Committee on Public Policy and Social Responsibility provide » Rutgers University Future Merck’s Offi ce of Corporate oversight, strategic counsel and regular Scholars Program Philanthropy supports charitable work review of Merck’s overall corporate » AAAS/Merck Undergraduate Science through cash donations and employee philanthropy portfolio. In July 2009, Research Program volunteerism that contributes not only The Merck Company Foundation to the health and well-being of people underwent a voluntary internal audit » The Alliance/Merck Ciencia (Science) around the world, but also to Merck to ensure uniform giving, accurate Hispanic Scholars Program employees, our neighbors and others impact data, compliance and support for in communities where employees live Company transparency eff orts. Internal and work, and where the Company audits will be conducted on a regularly conducts business. scheduled basis. The Offi ce of Corporate Responsibility amount of the grant provided. Merck » Following the May 12, 2008 earth- and Global Policy Support engages plans to update this list annually begin- quake in China’s Sichuan Province, with a range of stakeholders on initia- ning with a full 2009 report in 1Q2010. Merck donated more than $1 mil- tives that build healthcare capacity, and lion in resources to address immedi- provides donations of Merck’s medicines MAKING AN IMPACT IN OUR ate needs of the recovery eff orts. As and vaccines, primarily in the devel- LOCAL COMMUNITIES part of a post-earthquake recovery oping world. The group manages the In a variety of ways, Merck’s philanthropic program organized by the White Merck Medical Outreach Program, programs address local community House and the U.S. Agency for the primary mechanism through which needs, support environmental steward- International Development (USAID), Merck donates our pharmaceuticals ship, respond in times of emergency, and Merck is addressing health infrastruc- and vaccines for humanitarian assistance, enable our employees to contribute ture needs in Sichuan Province. In as well as the Merck MECTIZAN and participate in community well-being. May 2008, Merck also donated more Donation Program, developing world than $720,000 in cash, product and vaccine access programs and our global » In a collaborative partnership with the employee contributions to relief eff orts HIV/AIDS partnerships. National Alliance for Hispanic Health, in the wake of the Myanmar Cyclone. we launched the Alliance/Merck The Merck Company Foundation, a Ciencia (Science) Hispanic Scholars » After thousands of Americans were 52-year-old, U.S.-based, private chari- Program in 2008 to improve the abil- left without food and shelter due to table foundation funded entirely by ity of Hispanic students to achieve the hurricanes that struck the Gulf Merck, provides funding to The African access to higher education and pursue Coast region in late summer 2008, Comprehensive HIV/AIDS Partner- science, technology, engineering The Merck Company Foundation ships, China-MSD HIV/AIDS Partnership, and mathematics careers. The Merck responded with a $250,000 contri- Merck Childhood Asthma Network and Company Foundation committed bution to the American Red Cross The Merck Institute for Science Education, $4 million in funding to this program Disaster Relief Fund to help provide among other programs. Since its incep- over fi ve years; The Merck Institute food, shelter, counseling and other tion, the Foundation has contributed for Science Education is working critical services for individuals and more than $560 million to projects and closely with the Alliance to imple- families battered by hurricanes Dolly, partnerships around the world. ment the program. Edouard, Fay, Gustav, Hanna and Ike. In a new eff ort to help prevent CHARITABLE GRANTS » In April 2008, we created The Alliance future damage from natural disasters, In accordance with its commitment to Reduce Disparities in Diabetes – the Foundation donated $200,000 made in last year’s report, in March 2009 a new initiative to help reduce to the Nature Conservancy to build Merck reported on its website charitable healthcare disparities related to dia- up natural protective marshlands contributions made in 4Q2008 through betes among minority, low-income along both the Gulf Coast and the 57 the Offi ce of Corporate Philanthropy and underserved groups in the U.S. New Jersey shoreline. The Offi ce of and The Merck Company Foundation.1 The Merck Company Foundation Corporate Responsibility and Global Information provided on our website offi cially launched the initiative in Policy Support donated $64,855 in includes the name of the organization, February 2009 (see box on p. 58). Merck medicines specifi cally to sup- program name and description, and the port Hurricane Gustav relief eff orts. IN ACTION IN Rx FOR HUNGER » OUR VALUES In response to the recent acceleration and expansion of a national where Merck has a major presence – and to organizations, such as food shortage crisis in the United States, Merck has launched a com- Meals on Wheels Association of America and Witnesses to Hunger, munity initiative to increase access to healthy foods and nutrition a Drexel University program. In addition, food drives were held at and to support the food bank safety net for children and seniors in most major Merck facilities in the U.S. In February 2009, Merck – in U.S. communities. Through contributions, volunteering, and con- partnership with the Healthcare Institute of New Jersey and the ferences to speak out about the urgency of addressing the sharp Liberty Science Center – hosted the Rx to Fight Hunger conference – drop of U.S. food supplies, Merck hopes to lessen the effects of mal- a no-cost, participatory conference for funders in the New Jersey, nutrition and food insecurity on vulnerable individuals and families. New York, Pennsylvania and Delaware region, through which an additional $400,000 was committed by other, non-Merck funders To date, Merck has made more than $200,000 in ﬁ nancial contribu- towards nutrition and hunger programs. tions to local food banks and pantries – particularly in communities THE ALLIANCE TO REDUCE DISPARITIES IN DIABETES »

On February 25, 2009, The Merck Company Foundation launched Through a rigorous, competitive application process, the a new initiative, The Alliance to Reduce Disparities in Diabetes Foundation selected ﬁ ve grantee programs from among the more OUR VALUES (www.alliancefordiabetes.org), in collaboration with the Centers than 190 applications received from around the United States. for Disease Control and Prevention (CDC) and U.S. Department The program sites are: Camden, New Jersey; Chicago, Illinois;

IN ACTION of Health and Human Services’ Offi ce of Minority Health (OMH). Dallas, Texas; Fort Washakie, Wyoming and Memphis, Tennessee. Supported by a $15 million commitment through 2013, this initiative Funding will support community-based efforts to decrease diabe- is designed to improve healthcare delivery among those popula- tes disparities and enhance the quality of health care by improving tions most at risk for diabetes – African-American, Hispanic and prevention and management services among low-income and Native American adults in the United States. The Alliance will underserved populations with a high prevalence of type 2 diabetes. engage a range of healthcare stakeholders, including patients, providers and health system leaders, in supporting proven approaches The University of Michigan’s Center for Managing Chronic Disease to comprehensive diabetes prevention and management. will serve as the Alliance Program Offi ce and support the program efforts of the grantee communities over the next fi ve years as well as provide leadership in building the Alliance as a national partnership.

CHAMPIONS FOR 40 diff erent high schools how to protect review boards; others host neighbor or THE ENVIRONMENT and conserve the area’s lush natural “town hall” meetings to seek input from Through the Champions for the habitat. The center hosted educational communities on key developments. Sites Environment program, Merck provides workshops and volunteers were involved also use community surveys and focus grants for environmentally focused and in activities such as building footpaths, groups with fenceline neighbors and educational projects. Successful proj- establishing a medicinal garden, planting employees to assess community interests, ects have another key element: Merck trees and putting up interpretive signage concerns and needs. Based on the input, employee volunteers work alongside featuring local fl ora and fauna. Merck seeks issue-specifi c proposals community volunteers to accomplish developed by community organiza- CHINA – Employees at Merck’s the projects. Since the program’s incep- tions to address those needs, taking into Hangzhou, China facility helped tion, Merck employees have “cham- account the impact of a problem on the “Green Zhejiang,” a youth volunteer pioned” hundreds of projects – and local community, the urgency of the issue group, select and implement proposals volunteered thousands of hours on behalf and the resources available to address the for creating environmentally-friendly of local non-profi t partners, including problem. Proposals are reviewed by local communities in the city. The project was schools, local government and environ- site philanthropy committees, based upon inspired by China’s “Green Olympics” mental and youth organizations. Projects uniform guidelines and funding criteria, campaign to integrate environmentally- focus on a range of community-based which make funding recommendations friendly concepts into the venues for the environmental needs such as wildlife to Merck. The NOC program follows 2008 Olympics. habitat preservation, stream cleanups Merck’s philanthropic guidelines, but rec- and bank restoration, phytoremediation, ognizes that our stakeholders value other NEIGHBOR OF CHOICE energy conservation and climate change, educational, civic, art and cultural, and Through the “Neighbor of Choice” and recycling and resource conservation. environmental programs and therefore (NOC) program, Merck demonstrates these are considered for funding under its sensitivity and responsiveness to the The following is a representative sample the NOC program. specifi c concerns and needs of local 58 of Merck’s 2008 Champions for the communities in which we operate. Environment programs: The following is a representative sample of Merck’s NOC programs: U.S. – Triangle Land Conservancy (TLC) The NOC program, which Merck is the local non-profi t land trust for the developed in the mid-1990s, is based U.S. – In Harrisonburg/Rockingham Triangle region of North Carolina. upon three fundamental principles: County, Virginia, a grant from Merck’s Champions for the Environment Merck’s NOC program supports the » Listen to and identify the com- grant helped TLC conduct biological Harrisonburg-Rockingham Free Clinic, munity’s essential needs, issues inventories, create management plans, which provides outpatient health and concerns; and perform other duties as part of services to the uninsured. The grant TLC’s mission to care for the natural » Respond appropriately to these needs, specifi cally supports the Pharmacy and areas of the region. Merck employee issues and concerns; Medication Assistance Program, which volunteers from our Durham facility provides free medications and supplies » Establish and develop relationships were stewards of the properties by clean- to all Free Clinic patients. of trust with community groups ing up litter, establishing boundaries and and individuals. MEXICO – Merck employees and parents access barriers, and posting signage. of children at three public schools COSTA RICA – A team of Merck volun- At the heart of the NOC program is near the Merck manufacturing site – a teers helped the Tropical Sierra Foundation relationship building. Merck facilities kindergarten, an elementary school and turn the area of Monte de la Cruz, develop culturally appropriate mecha- a special education school – are work- San Rafael de Heredia Costa Rica into nisms to engage and build relationships ing together on a project in which the an outdoor environmental education with their community stakeholders. schools are being painted, play areas center designed to teach children from Some sites have created community and classrooms are being repaired and IN ACTION IN EMPLOYEE VOLUNTEERING » OUR VALUES

In January 2009, Merck initiated a Global Volunteering policy encouraging individual employees and teams of employees to become involved in appropriate volunteering activities in Merck communities. Under this policy, eligible Merck employees may receive up to 20 paid work hours per calendar year to volunteer. Merck volunteers address a variety of societal challenges, from HIV education in Brazil, “Roll Up Your Sleeves” in the Netherlands, “Lend a Hand” in Malaysia and “Clean Up Australia Day,” to an award-winning pro-bono legal assistance program in the United States and “Community Days” in the Philippines. To date Merck employees across 26 sites have volunteered close to 50,000 hours in community volunteer projects. To read about these local programs, go to www.merck.com/cr/employeegiving. enhanced, handrails are being installed to FUTURE GOALS We recognize that measurable goals improve safety, and other improvements AND PRIORITIES with reasonable timeframes for success are being made. Through Merck philanthropy and part- will help Merck understand how it can best create shared social and busi- SPAIN – Merck made a NOC con- nerships with the non-profi t community, ness value. tribution to support the Rainbow we plan to continue to address access to Foundation – a social and economic health care for underserved populations, » Expand our global volunteering growth initiative in Madrid that employs strengthening science education oppor- program to include skills-based place- people with disabilities at a center that tunities, support for innovation, and ment to help develop our employ- specializes in the packaging of diverse critical quality of life issues. We will also ees’ skills and talents, and to help goods. With this grant, the Rainbow strive to achieve the following goals: strengthen the non-profi t sector. Foundation was able to purchase a » Incorporate “best practices” and con- » Drive more in-depth relationships cellophane banding machine, install an tinue to make our grants and grant with employees, community organiza- assembly line and start-up the operation. making processes transparent, integrat- tions and partners who share a com- In addition, the Rainbow Foundation ing Merck’s guiding principles, values mon interest in charitable work. was able to expand its activities by hir- and philanthropic priorities. ing 12 new employees. » Improve evaluation approaches by incorporating performance measurement tools into appropriate programs. 59

CONTRIBUTIONS » DATA SUMMARY, 2005–2008 » (US$, MILLIONS)

2008 2007 2006 2005

Merck’s philanthropic contributions (Total cash and product) 821 828 826 1,039 Cash contributions 55 62 58 60 Product donations through Merck Medical Outreach Program and the 592 605 442 437 MECTIZAN Donation Program Product donations through U.S. Patient Assistance Program* 174 161 326 542

* Decline due in part to an increasing number of patients with prescription drug coverage, including Medicare Prescription Drug Program; another contributing factor to usage decline was the removal of one Merck product – FOSAMAX – from the product list in mid-2008 (six months after patent expiry) once patients had broad access to lower-cost generic equivalents. ENDNOTES 1 www.merck.com/corporate-responsibility/docs/TMCF_Grants_Trans_Report-4Q08.pdf SECTION KEY PERFORMANCE INDICATORS

2008 2007 2006 2005

Economic indicators Sales (US$M) 23,850.3 24,197.7 22,636.0 22,011.9 Annual cash dividend paid per share (US$) 1.52 1.52 1.52 1.52 Global tax expense as reported on income statement 1,999.4 95.3 1,787.6 2,732.0 (US$M)[a] Researching new medicines and vaccines to address unmet needs Merck’s investment in R&D programs (US$B)[b] 4.8 4.9 4.8 3.8 Number of new products approved (Number of products 1 (47) 2 (49) 5 (57) 2 (58) in pipeline [Phase I–III] and under regulatory review) Percentage of top 20 global burdens of illness addressed by 53 60 N/A N/R our products and pipeline (as defi ned by WHO and excluding accidents, premature birth and self-infl icted injuries)[c] Phase II–V clinical trials initiated (in number of countries)[d,e] 36 (62) 45 (54) 43 (49) N/R Manuscripts of clinical trial results and related papers 235 172 172 N/R submitted to peer-reviewed journals Improving access to medicines, vaccines and health care Number of Merck products for which not-for-profi t 66 2 2 prices are offered to least developed countries Number of patients on Merck ARV therapy – all formula- 653,867 (76) 763,118 (91) 701,391 (93) N/D tions, all products (Percentage in the developing world) Percentage of total patients on Merck ARVs estimated to 17 15 19 N/D be children taking pediatric formulations of Merck’s ARVs Number of countries where Merck has committed to 72 72 N/R N/R not-for-profi t prices for ROTATEQ and GARDASIL Number of low- and middle-income countries using 16 11 N/R N/R Merck’s vaccines in their public sectors Number of new country registrations of GARDASIL and 18 (196) 72 (178) 105 (106) 1 (1) ROTATEQ globally (and cumulative to date)[e] Product donations (US$M) (% in the developing world)[f] 766 (77) 766 (79) 768 (58) 979 (45) Millions of treatments approved for river blindness 174.2 128 118 114 through the MECTIZAN Donation Program (at three tablets per treatment) Number of patients utilizing Merck’s Patient 250,285 (174) 350,000 (161.5) 540,240 (326) 730,000 (502) Assistance Program (total value of Merck medicines 60 dispensed under Merck’s PAP[g] [US$M]) Major PPPs to improve access to medicines, vaccines 12 13 12 10 or health care[h] Ensuring confi dence in the safety and quality of our products Product recalls in the United States 0 2 0 1 Number of investigations of suspected counterfeit 45 102 73 51 Merck product Number of substantiated cases of counterfeit Merck product 29 72 54 46 Conducting ourselves ethically and transparently Percentage of required employees who took Know the 90 90 N/A N/A Code training Percentage of response to disclosure statement on 99.9 97 95 93 confl icts of interest Number of calls to the Merck AdviceLine 151 149 77 80 Number of calls to the Offi ce of Ethics/Ombudsman 583 600 597 770 Percentage of substantiated (including alternative 10.9 9.5 8.3 10.2 fi ndings) allegations to concerns/issues raised in connection with our Code of Conduct through AdviceLine or Offi ce of Ethics/Ombudsman[i] 2008 2007 2006 2005

Conducting ourselves ethically and transparently (continued) Number of warning letters or untitled letters from 0 N/R N/R N/R DDMAC or APLB Merck operations at signiﬁ cant risk of forced or compulsory 0 0 0 N/D labor, incidents of child labor, or violations of the right to exercise freedom of association and collective bargaining. Managing our environmental footprint Environmental inspections 101 76 88 N/D Environmental events[j] 53 60 28 32 Environmental notices of violation 9 13 11 N/A Environmental ﬁ nes paid (US$)[k] 1,579,600 31,515 10,652 281,025 Total energy supply (Million BTUs x 106) 12.8 15.2 15.5 17.5 Energy demand intensity (Million BTU/sq ft) 0.47 0.52 0.54 0.61

[l] Total GHG emissions (as C02 eq) (Million metric tons) 1.18 1.29 1.29 1.36 Total water usage (billion gallons) [% reduction versus 5.6 [36] 8.8 [8.3] 9.6 (5] 10.1 [13.6] prior year] Emissions of ozone-depleting substances (metric tons) 1.2 1.4[m] N/D N/D

Nitrogen oxides (NOx) emissions (metric tons) 297 318[n] 322[n] 471[n] Sulfur oxides (SOx) emissions (metric tons) 50 58 67[n] 84 Emissions of volatile organic compounds (VOCs) 353 401[m] 427 411 (metric tons) TRI emissions (metric tons to air and water) 196 270 242 163 Hazardous waste generated in metric tons (% recycled) 46,800 (29) 54,000 (23) 62,300 (29) 60,900 (37) Metric tons non-hazardous waste generated 27,000 32,000[n][o] N/D N/D Percentage of non-hazardous waste recycled 46 42[n][o] N/D N/D Advocacy and outreach Corporate political contributions US: 597,775 US: 470,625 US: 611,975 US: 337,140 (U.S., CAN, AUS) (US$)[p] AUS: 5,040 AUS: 19,195 AUS: 20,292 AUS: 12,137 CAN: 30,695 CAN: 58,396 CAN: 45,765 CAN: 46,700 Portion of dues that major U.S.-based trade associations 6.8 paid to 6.9 paid to N/A N/A report to us as being used for advocacy and/or political 8 groups 8 groups activities in the U.S., where dues are >$50,000 (US$M)[q] Compliance with political contribution evaluation All 11 principles 10 of 11 principles N/A N/A criteria used by the Center for Political Accountability Valuing our employees Number of employees 55,200 59,800 60,000 61,000 Total compensation paid to employees/payroll 5.03 5.56 5.14 4.84 excluding beneﬁ ts (US$B) Women in workforce (globally) [%] 50 48 49 49 Women on the Board [%] 21 23 25 25 Women in executive roles (U.S.) [%] 28 27 26 28 Under-represented ethnic groups on the Board [%] 14 17 17 17 Under-represented ethnic groups in executive roles [%] 11 11 12 12 Employee response rate to Merck Culture 65 72 77 N/A[r] Assessment survey [%] Number of position eliminations through Merck’s 5,800 2,400 3,700 1,100 restructuring program Overall turnover rate[s] 17.6 10.7 11.9 10.6 Safety inspections 75 41 65 N/D Notices of safety violations/citations 7 3 8 N/D 2008 2007 2006 2005

Valuing our employees (continued) Safety ﬁ nes paid (US$) (Number of ﬁ nes) 0 (0) 1,500 (1) 1,975 (2) 1,000 (2) Reportable Injury Rate (RIR)[t) 1.10 1.12 1.11 1.21 RIR change [%] –1.8 0.9 –8.3 –25.8 Lost-Time Incident Rate (LTIR)[t] 0.42 0.48 0.43 0.44 LTIR change [%] –12.5 11.6 –2.3 –13.7 Fatalities 1 1 0 0 Accidents per million miles (APMM)[u] 7.03 9.64 9.92 10.40 Supply chain management[v] Spending on diverse suppliers in the U.S. [%] 14 12 8 5 Completed Screening Surveys received from existing 81 54 N/A N/A external manufacturers [%][w] Philanthropy Merck’s philanthropic contributions (total cash 821 828 826 1,039 and product) (US$M) Cash contributions (US$M) 55 62 58 60

KEY N/A: Not applicable. N/D: No data. N/R: Not reported; many of these indicators are new for Merck and for this reason some prior year data points are not reported. [a] Amounts from 2008 include a gain on distribution from AstraZeneca LP, a gain related to the sale of the Company’s remaining worldwide rights to Aggrastat, the favorable impact of certain tax items, the impact of restructuring actions, additional legal defense costs and an expense for a contribution to The Merck Company Foundation. [b] Research activities and investments include all Merck divisions. [c] The decrease in 2008 is due mainly to the changing nature of the Global Burden of Disease as defi ned by WHO. [d] We have modifi ed this KPI from last year to report clinical trials initiated vs. clinical trials conducted. [e] Prior year data have been adjusted due to a change in methodology. [f] We value our product donations based on the U.S. wholesale price. The decrease in product donations is due in part to declining patient enrollment in our Corporate U.S. Patient Assistance Program, attributed in part to an increasing number of patients with prescription drug coverage, including through the Medicare Prescription Drug Program, which began in January 1, 2006. Figure includes Merck Medical Outreach Program (including ACHAP), MECTIZAN Donation Program, and Merck U.S. Patient Assistance Program. [g] Totals include the U.S. Merck Vaccine Patient Assistance Program and are based on the U.S. wholesale price. Decrease in numbers due in part to increasing number of patients with prescription drug coverage, including Medicare Prescription Drug Program. [h] Major is defi ned as with an investment by Merck of more than $500,000 per year and/or engagement with a national government. Therefore, in 2008 these included ACHAP, AAI, C-MAP, Diabetes Alliance, GARDASIL Access Program, MCAN, MDP, MISE, MMOP, MVN-A, ROTATEQ Access Program and the UN Foundation Measles Initiative. [i] When Merck substantiates allegations of ethical misconduct, it imposes a variety of disciplinary actions on those responsible for the misconduct, such as dismissal from the Company, issuance of fi nal written warning letters and fi nancial penalties. [j] The increase in the number of environmental events is due primarily to a modifi ed Pennsylvania Department of Environmental Protection interpretation in late 2006 that resulted in reporting of spills, such as chilled water spills into storm water drains, that were not previously required to be reported. [k] Refl ects a signifi cant environmental settlement ($1,575,000) paid in early 2008 associated with three spills that occurred in 2006. [l] In accordance with US EPA Climate Leaders Protocol, GHG generation baseline data have been adjusted to remove facilities that have been sold. [m] Data unavailable for a site sold at the end of 2007. [n] Prior year data have been modifi ed to refl ect corrections identifi ed after publication of previous report. [o] 2007 was the fi rst year we collected non-hazardous waste generation and recycling data. Data should be considered estimates. [p] Totals refl ect corporate contributions. Employee contributions through the Merck PAC are not included. Political contributions in the U.S., which are for state candidates, are always much greater in even-numbered calendar years, because that is when most states hold their elections for state legislatures and governors. [q] Because the U.S. tax law that requires reporting does not apply outside the United States, trade associations do not provide break-outs of lobbying expenditures from membership dues. Thus, Merck is unable to report this data in other countries. This line includes dues for advocacy purposes for major U.S. national and regional associations where dues are $50,000 or more. [r] Survey not conducted prior to 2006. [s] Overall turnover includes all types of turnover including restructuring. [t] LTIR/RIR: Calculated per OSHA methodology. [u] Change made in defi nition of accidents to include only business-related accidents. [v] We no longer report percentage of facility visits conducted of potential manufacturers of new business as our screening surveys are adequate for exploratory purposes. We have, therefore, removed the percentage of facility visits from our list of KPIs. (w) Survey fi rst conducted in 2007. OUR MEDICINES AND VACCINES

PRODUCT NAME THERAPEUTIC AREA ATHEROSCLEROSIS & CARDIOVASCULAR COZAAR® (losartan potassium)* High blood pressure HYZAAR® (losartan potassium and hydrochlorothiazide) High blood pressure TREDAPTIVE® (ER niacin/laropiprant)† High cholesterol VYTORIN® (ezetimibe/simvastatin)‡ High cholesterol ZETIA® (ezetimibe)‡ High cholesterol DIABETES & OBESITY JANUMET® (sitagliptin/metformin HCl) Type 2 diabetes JANUVIA® (sitagliptin phosphate) Type 2 diabetes INFECTIOUS DISEASES ATRIPLA® (efavirenz 600mg/emtricitabine 200 mg/tenofovir disoproxil fumarate 300 mg)§ HIV infection CANCIDAS® (caspofungin acetate) Certain fungal infections CRIXIVAN® (indinavir sulfate) HIV infection INVANZ® (ertapenem sodium) Certain bacterial infections ISENTRESS® (raltegravir) HIV infection PRIMAXIN® (imipenem and cilastatin) Certain bacterial infections STOCRIN® (efavirenz)¶ HIV infection NEUROSCIENCE & OPHTHALMOLOGY COSOPT® (dorzolamide hydrochloride and timolol maleate) Elevated intraocular pressure MAXALT® (rizatriptan benzoate) Acute migraine SAFLUTAN® (tafl uprost)\\ Elevated intraocular pressure TIMOPTIC-XE® (timolol maleate ophthalmic gel forming solution)** Elevated intraocular pressure TRUSOPT® (dorzolamide hydrochloride) Elevated intraocular pressure ONCOLOGY EMEND® (aprepitant) Prevention of postoperative or chemotherapy-induced nausea and vomiting EMEND® for Injection (fosaprepitant dimeglumine) Intravenous prevention of chemotherapy-induced nausea and vomiting ZOLINZA® (vorinostat) Cancer (cutaneous T-cell lymphoma [CTCL]) RESPIRATORY, BONE, ARTHRITIS & ANALGESIA ARCOXIA® (etoricoxib) Pain and arthritis FOSAMAX® (alendronate sodium) Osteoporosis FOSAMAX PLUS D® (alendronate sodium/cholecalciferol) Osteoporosis SINGULAIR® (montelukast sodium) Asthma, indoor and outdoor allergies SPECIALTY PROPECIA® (fi nasteride) Male pattern hair loss VACCINES COMVAX® [Haemophilus b conjugate (meningococcal protein conjugate) and hepatitis B Haemophilus infl uenzae type b and hepatitis B (recombinant) vaccine] GARDASIL® [human papillomavirus quadrivalent (types 6, 11, 16, 18) vaccine, recombinant] Cervical cancer, cervical lesions, vulvar lesions, vaginal lesions and genital warts caused by HPV types 6, 11, 16 and 18 M-M-R® II (measles, mumps and rubella virus vaccine live) Measles, mumps, rubella (German measles) PEDVAXHIB® [Haemophilus b conjugate vaccine (meningococcal protein conjugate)] Haemophilus infl uenzae type b PNEUMOVAX® 23 (pneumococcal vaccine polyvalent) Pneumococcal disease PROQUAD® [measles, mumps, rubella and varicella (Oka/Merck) virus vaccine live] Measles, mumps, rubella (German measles) and chickenpox RECOMBIVAX HB® [hepatitis B vaccine (recombinant)] Hepatitis B ROTATEQ® (rotavirus vaccine, live, oral pentavalent) Rotavirus VAQTA® (hepatitis A vaccine inactivated) Hepatitis A VARIVAX® [varicella virus vaccine live (Oka/Merck)] Chickenpox ZOSTAVAX® (zoster vaccine live) Shingles

* COZAAR and HYZAAR are registered trademarks of E. I. DuPont de Nemours, Wilmington, Delaware, U.S.A. † TREDAPTIVE is to be marketed under the trademark CORDAPTIVE in Latin America. ‡ VYTORIN (marketed as INEGY outside the United States) and ZETIA (marketed as EZETROL outside the United States) are trademarks of and are marketed through a partnership known as MSP Singapore Company LLC. § ATRIPLA is marketed by and is a trademark of Bristol-Myers Squibb and Gilead in the United States, Canada and Europe. Merck and Gilead are working to register and distribute ATRIPLA in 106 developing countries around the world. ¶ Efavirenz is marketed by Bristol-Myers Squibb as SUSTIVA in the United States, Canada and certain European countries, and by Merck in the rest of the world as STOCRIN. \\ Taﬂ uprost is marketed by Santen Pharmaceutical Co., Ltd. in Germany, Eastern Europe and Northern Europe under the trademark of TAFLOTAN®, and in Japan under the trademark of TAPROS®. ** TIMOPTIC-XE is a trademark of and marketed by Aton Pharma, Inc. in the United States. INDEX

A E M Public/private Accelerating Access Initiative 24 Economic contribution 4 Marketing practices 34,36 partnerships 17,19,20,23,24,27,49 Access to medicines, vaccines Effl uents 42–44 Manufacturers, external 54,55 developing world 20 and health care 1,2,16–27,49,56,57 Emissions 7,38–45 Materiality assessment process 3 HIV and AIDS 24 developed world 25–27 Employees 4,5,32–36,51–54,59 Merck AdviceLine 34 scientifi c 20 developing/emerging countries 19–25 communications and engagement 52 Merck Alliance to Reduce U.S.-based 27 partnerships 19–27,49,56,57 compensation and benefi ts 51 Disparities in Diabetes 27,58 vaccine demonstration projects 23 policy 16–18 development and training 51 Merck BioVentures 6,11 Q priorities and goals 21,23,25,27 health and safety 52,53 Merck Childhood Asthma Network 27 Quality, of products 30,31 strategy 16 rights 36 Merck Company Foundation, The 48,56,57 R Access to volunteering 59 Merck Institute of Science Regenerative medicines research 11 Medicines Index Inside front cover,2 Energy use 38–42 Education (MISE) 14,15 Registration of products 17,18 Adverse Experience Reporting 29,30 Environmental footprint 38–45 Merck Manuals 26 Remediation, environmental 44 Advertising of medicines (DTCA) 36,48 EPA Climate Leaders 40 Merck MECTIZAN Donation Renewable technologies/resources 38,39,45 African Comprehensive Ethical business practices 6,32–37,48 Program 2,6,18,19 Research and development 8–15 HIV/AIDS Partnerships 25 Guiding Principles for Ethical Business Merck Medical Outreach Program 18,21 agenda and strategy 8 Alzheimer’s 8–10,12 Practices with the Medical and Merck medicines and governance 8 Animal research 11 Scientifi c Community 35 vaccines list Inside back cover impact and performance 9,10 Anti-counterfeiting 28,29,31,47,54 training and development 33 Merck mission and values Inside front cover pipeline chart 10 Awards and recognition Inside back cover resources for employees 34 Merck Sharp & Restructuring program 52 B Executive compensation 50 Dohme (MSD) Inside front cover Revenue, by region 5 Biosimilars 6,11,46 F Merck Vaccines Network– Risk assessments, environmental 44 Board independence 50 Financial information 4 Africa (MVN–A) 23 ROTATEQ Access Partnership 23 C Financial support disclosures 36,48,49 Millennium Development S Goals Table of contents,20 Capacity-building, healthcare 1,16,20 Flexible work arrangements 52 Safety, of employees 53 Carbon Disclosure Project 40,41 G N Safety, of products 28–31 Carbon footprint 41 GARDASIL Access Program 6,23 Nanotechnology 45 post-marketing studies 28–30 Center for Political Accountability 46,47,48 GARDASIL safety 30 Neglected tropical diseases 6,12,16,20,21 Science education 14,15 Champions for the Environment 58 GAVI Alliance 6,20,23 Neighbor of Choice 58,59 SINGULAIR safety 30 Charitable grants 57 Genetic research 11 Notices of Violation 39,40 Solar power 41 China-MSD HIV/AIDS Partnership 24 Global Reporting O Stakeholder engagement Inside front cover, Climate change 1,40,58 Initiative (GRI) Table of contents, Offi ce of Ethics 33 1,3,46,47,49,58 Climate Resolve 40 Inside front cover Ombudsman Program 34 Stockholders/shareholders 4,50 Clinical trials 4,6,12–15,28 Good Clinical Practices Our Values and Standards Supply chain 6,7,29,30,37,54,55 disclosure policy 13 (GCP) Guidelines 13,28 (Code of Conduct) 32–37,54 continuity of supply 55 registration and registries 13 Good Manufacturing Practices (GMP) 29,30 P diversity 55 Code of Conduct 7,8,13,32–37,47,48,49,54 Green chemistry 39,42,44 Pandemic preparedness 18,53 ethics and human rights 37 Community, supporting 5,56–59 Greenhouse gases 1,2,7,38–42 Patient Assistance Programs 1,18,26,27,36 quality 30 Compensation and benefi ts 51 H Patents 10,18 management 37–39,54 Compliance 6,28,32–36,38,39,47,48 Hazardous waste 42,43 Pediatric formulations/ T environmental and safety 38,39 Healthcare reform 1,6,25–26,46,47 indications 10,12,13,24 Tax expense 4,5 marketing and sales 34–36 Health information 26 Pharmaceutical Research and Trade agreements 47 Contract Research Organizations 13 Health insurance coverage 25,26,47 Manufacturers of America 14,35,36,48 Transparency Inside front cover, Continuing Medical Education 36 Health literacy 24,52 Code of Interactions with 1,2,4,36,47–49 Corporate Governance 50,51 Health Matters 53 Health Care Professionals 35 U Corporate responsibility HIV/AIDS 6,12,14,18,23–25 Guiding Principles on Direct- UNCF/Merck Science Initiative 15 approach Inside front cover,3,46 partnerships 24,25 to-Consumer Advertisements UN Global Compact Table of contents, about the report Inside front cover product pricing 18 about Prescription Medicines 36 Inside front cover,1,2,5,36 Board of Directors’ PPSR Committee 2,51,56 public policy 25 Principles on Conducting Clinical Uninsured people 26,27 CR Council 3,50 research and development 12,14,21 Trials and Communication of V integration in our Human rights 36,37 Clinical Trial Results 48 Vaccines and immunization 22,23 business principles Inside front cover,1,2 business and 37 Pharmaceuticals in the environment 44,45 reporting approach Inside front cover of employees 36 Philanthropy 56–59 W D right to health 37 Pipeline 4,6,9–11 Waste and waste reduction 38,39,42–44 Developing world 6,12,19–25 I Political contributions 7,47–49 Water use 42 Work-life eff ectiveness 52 access to medicines 19–25 Informed consent 13 Post-marketing studies 28–30 World Health Organization 17–21,34 diseases 12 Injury and Illness Rate 7,53 Predictive Safety Testing Consortium 12 Ethical Criteria for Medicinal partnerships 20,23,24 Innovation 8–11,14,18,20,37,46 Pricing 1,17,18,25 Drug Promotion 34 public policy and advocacy 21 Intellectual property protection 18,27,47 Products 63 Guidelines for Drug Donations 18 research initiatives 12,20 Interactions with labeling and information 29,30 prequalifi cation of medicines and vaccines 17 Disaster relief 21,57 healthcare professionals 6,34–37,48 packaging 16,39,43,44 Diversity and inclusion 51–52,55 K registration 17,18 Special Program for Research and Training in Tropical Diseases 20 supplier diversity 55 Key Performance Indicators (KPIs) 60–62 safety 5,6,28–31 Dividend 4 L stewardship 44 Donations 18,21,56–59 Public policy 11,13,21,25,46–48 Labor relations strategy 37 Product 18,21 access in the developing world 21 Licensing 6,10,11,18 Cash 57–59 HIV and AIDS 25 Lost-Time Injury and Illness Rate 7,53 WHO Guidelines 21 research and innovation 11,13 Awards and Recognition Merck has received recognition for our commitment and performance worldwide on various aspects of our corporate responsibilities, including the following:

» Dow Jones Sustainability Indexes – Merck has been placed on the Dow Jones Sustainability North America Index, which is based on a thorough analysis of corporate economic, environmental, and social 9 10 performance. The North American Index captures the leading 20 percent in terms of sustainability out of the largest 600 North American companies. (2009)

» FTSE4Good – Merck is a FTSE4Good constituent member. The FTSE4Good Index Series has been designed to measure the performance of companies that meet globally recognized corporate responsibility standards. (2008, 2009)

» KLD Research and Analytics – In 2008 Merck was a member of the Domini 400 Social Index, KLD Global Sustainability Index, KLD North America Sustainability Index and the KLD Select Social Index. In 2009 Merck is a member of the FTSE KLD US All Cap Sustainability Index (USSA), FTSE KLD 400 Social Index, FTSE KLD US Large Cap Sustainability Index, FTSE KLD US Large-Mid Cap Sustainability Index and FTSE KLD Select Social Index. The FTSE KLD indices measure companies’ environmental, social and governance (ESG) performance.

» Access to Medicines Index – Ranked Merck No. 3 on its inaugural Index, which assesses and ranks the world’s 20 largest pharmaceutical companies based on various criteria around global access to medicines. (2008)

» Corporate Responsibility Ofﬁ cer Magazine – Ranked Merck No. 4 on the 10th Annual 100 Best Corporate Citizens List. The tenth annual list rates companies on their performance in seven key areas: environment, climate change, human rights, philanthropy, employee relations, ﬁ nancial and governance. (2009)

» DiversityInc – Ranked Merck No. 8 in its annual list of the “Top 50 Companies for Diversity” marking the Company’s seventh consecutive appearance on the list. (2008) ions and Lamine Smaali (Kloiber) Writing support: Zoe Bell Consulting ions and Lamine Smaali (Kloiber)

» Environmental Protection Agency (EPA) – Recognized Merck with the 2009 ENERGY STAR Sustained Excellence Award for continued efforts to protect the environment. Merck, an ENERGY STAR partner since 2004, has been recognized by the EPA for four consecutive years – twice as Partner of the Year and twice for Sustained Excellence. (2009)

For a full listing of past awards, recognition and index memberships go to www.merck.com/cr/awards.

Environmental Savings

Based on 5,100 lbs. of Mohawk Via Cool White 100% PC Recycled Paper, actual environmental savings are as follows:

» 48.96 trees saved » 20,797 gallons of waste water ﬂ ow saved » 4,531 pounds of net greenhouse gases prevented » 2,354 pounds of air emissions not generated » 141.38 pounds of water-borne waste not created FPO » 2,301 pounds of solid waste not generated » 34,680,000 BTUs of energy not consumed » 5,601 cubic feet of natural gas unused Design by Addison www.addison.com Visual Communicat (Cook), Merck Frankfurter Michelle (Weinberg), Bob Burgess from Photography Contact us: Send us your comments and feedback about this report at: www.merck.com/cr/contacts

Or write to us at: Merck & Co., Inc. Offi ce of Corporate Responsibility WS 2A-55 1 Merck Drive PO Box 100 Whitehouse Station, NJ 08889 USA

GEN-2009-WS10024-PU