Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Oct. 31, 2018 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | MRK | |
Entity Registrant Name | Merck & Co., Inc. | |
Entity Central Index Key | 310,158 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding | 2,600,376,500 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENT OF INCOME - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
Sales | $ 10,794 | $ 10,325 | $ 31,296 | $ 29,689 |
Costs, Expenses and Other | ||||
Materials and production | 3,619 | 3,307 | 10,220 | 9,472 |
Marketing and administrative | 2,443 | 2,459 | 7,459 | 7,432 |
Research and development | 2,068 | 4,413 | 7,538 | 8,024 |
Restructuring costs | 171 | 153 | 494 | 470 |
Other (income) expense, net | (172) | (207) | (512) | (351) |
Total Costs, Expenses and Other | 8,129 | 10,125 | 25,199 | 25,047 |
Income Before Taxes | 2,665 | 200 | 6,097 | 4,642 |
Taxes on Income | 707 | 251 | 1,682 | 1,186 |
Net Income (Loss) | 1,958 | (51) | 4,415 | 3,456 |
Less: Net Income Attributable to Noncontrolling Interests | 8 | 5 | 22 | 16 |
Net Income (Loss) Attributable to Merck & Co., Inc. | $ 1,950 | $ (56) | $ 4,393 | $ 3,440 |
Basic Earnings (Loss) per Common Share Attributable to Merck & Co., Inc. Common Shareholders (in dollars per share) | $ 0.73 | $ (0.02) | $ 1.64 | $ 1.26 |
Earnings (Loss) per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders (in dollars per share) | $ 0.73 | $ (0.02) | $ 1.63 | $ 1.25 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Statement of Comprehensive Income [Abstract] | ||||
Net Income (Loss) Attributable to Merck & Co., Inc. | $ 1,950 | $ (56) | $ 4,393 | $ 3,440 |
Other Comprehensive (Loss) Income Net of Taxes: | ||||
Net unrealized gain (loss) on derivatives, net of reclassifications | 27 | (66) | 223 | (441) |
Net unrealized gain (loss) on investments, net of reclassifications | 40 | 135 | (56) | 213 |
Benefit plan net gain and prior service credit, net of amortization | 40 | 13 | 106 | 86 |
Cumulative translation adjustment | (136) | 67 | (240) | 423 |
Other comprehensive income (loss), net of taxes | (29) | 149 | 33 | 281 |
Comprehensive Income Attributable to Merck & Co., Inc. | $ 1,921 | $ 93 | $ 4,426 | $ 3,721 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Current Assets | ||
Cash and cash equivalents | $ 7,826 | $ 6,092 |
Short-term investments | 2,459 | 2,406 |
Accounts receivable (net of allowance for doubtful accounts of $229 in 2018 and $210 in 2017) | 7,374 | 6,873 |
Inventories (excludes inventories of $1,294 in 2018 and $1,187 in 2017 classified in Other assets - see Note 7) | 5,416 | 5,096 |
Other current assets | 3,761 | 4,299 |
Total current assets | 26,836 | 24,766 |
Investments | 7,606 | 12,125 |
Property, Plant and Equipment, at cost, net of accumulated depreciation of $16,568 in 2018 and $16,602 in 2017 | 12,755 | 12,439 |
Goodwill | 18,258 | 18,284 |
Other Intangibles, Net | 12,175 | 14,183 |
Other Assets | 7,500 | 6,075 |
Total Assets | 85,130 | 87,872 |
Current Liabilities | ||
Loans payable and current portion of long-term debt | 3,656 | 3,057 |
Trade accounts payable | 3,091 | 3,102 |
Accrued and other current liabilities | 9,776 | 10,427 |
Income taxes payable | 759 | 708 |
Dividends payable | 1,304 | 1,320 |
Total current liabilities | 18,586 | 18,614 |
Long-Term Debt | 19,936 | 21,353 |
Deferred Income Taxes | 2,065 | 2,219 |
Other Noncurrent Liabilities | 11,887 | 11,117 |
Merck & Co., Inc. Stockholders’ Equity | ||
Common stock, $0.50 par value Authorized - 6,500,000,000 shares Issued - 3,577,103,522 shares in 2018 and 2017 | 1,788 | 1,788 |
Other paid-in capital | 39,762 | 39,902 |
Retained earnings | 42,189 | 41,350 |
Accumulated other comprehensive loss | (5,151) | (4,910) |
Stockholders' equity before deduction for treasury stock | 78,588 | 78,130 |
Less treasury stock, at cost: 918,364,126 shares in 2018 and 880,491,914 shares in 2017 | 46,166 | 43,794 |
Total Merck & Co., Inc. stockholders’ equity | 32,422 | 34,336 |
Noncontrolling Interests | 234 | 233 |
Total equity | 32,656 | 34,569 |
Liabilities and Equity | $ 85,130 | $ 87,872 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 229 | $ 210 |
Inventories classified in Other assets | 1,294 | 1,187 |
Accumulated depreciation | $ 16,568 | $ 16,602 |
Common stock, par value (in dollars per share) | $ 0.50 | $ 0.50 |
Common stock, shares authorized (shares) | 6,500,000,000 | 6,500,000,000 |
Common stock, shares issued (in shares) | 3,577,103,522 | 3,577,103,522 |
Treasury stock, shares (shares) | 918,364,126 | 880,491,914 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash Flows from Operating Activities | ||
Net income | $ 4,415 | $ 3,456 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 3,424 | 3,509 |
Intangible asset impairment charges | 0 | 376 |
Charge for future payments related to collaboration license options | 650 | 750 |
Charge for collaboration termination | 420 | 0 |
Deferred income taxes | (391) | (601) |
Share-based compensation | 261 | 232 |
Other | 585 | (31) |
Net changes in assets and liabilities | (2,034) | (5,259) |
Net Cash Provided by Operating Activities | 7,330 | 2,432 |
Cash Flows from Investing Activities | ||
Capital expenditures | (1,686) | (1,173) |
Purchases of securities and other investments | (6,899) | (8,397) |
Proceeds from sales of securities and other investments | 11,243 | 12,533 |
Acquisitions, net of cash acquired | (372) | (347) |
Other | (150) | 121 |
Net Cash Provided by Investing Activities | 2,136 | 2,737 |
Cash Flows from Financing Activities | ||
Net change in short-term borrowings | 2,294 | 1,962 |
Payments on debt | (3,007) | (301) |
Purchases of treasury stock | (3,158) | (2,312) |
Dividends paid to stockholders | (3,895) | (3,884) |
Proceeds from exercise of stock options | 461 | 481 |
Other | (289) | (167) |
Net Cash Used in Financing Activities | (7,594) | (4,221) |
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | (140) | 438 |
Net Increase in Cash, Cash Equivalents and Restricted Cash | 1,732 | 1,386 |
Cash, Cash Equivalents and Restricted Cash at Beginning of Year (includes restricted cash of $4 million at January 1, 2018 included in Other Assets) | 6,096 | 6,515 |
Cash, Cash Equivalents and Restricted Cash at End of Period (includes restricted cash of $2 million at September 30, 2018 included in Other Assets) | $ 7,828 | $ 7,901 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Parenthetical) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Cash Flows [Abstract] | ||
Restricted cash | $ 2 | $ 4 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Merck & Co., Inc. (Merck or the Company) have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements are not included herein. These interim statements should be read in conjunction with the audited financial statements and notes thereto included in Merck’s Form 10-K filed on February 27, 2018. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. In the Company’s opinion, all adjustments necessary for a fair statement of these interim statements have been included and are of a normal and recurring nature. Certain reclassifications have been made to prior year amounts to conform to the current presentation. Recently Adopted Accounting Standards In May 2014, the Financial Accounting Standards Board (FASB) issued amended accounting guidance on revenue recognition (ASU 2014-09) that applies to all contracts with customers. The objective of the new guidance is to improve comparability of revenue recognition practices across entities and to provide more useful information to users of financial statements through improved disclosure requirements. The new standard permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of adopting the guidance being recognized at the date of initial application (modified retrospective method). The new standard was effective as of January 1, 2018 and was adopted using the modified retrospective method. The Company recorded a cumulative-effect adjustment upon adoption increasing Retained earnings by $5 million . See Note 2 for additional information related to the adoption of this standard. In January 2016, the FASB issued revised guidance for the accounting and reporting of financial instruments (ASU 2016-01) and in 2018 issued related technical corrections (ASU 2018-03). The new guidance requires that equity investments with readily determinable fair values currently classified as available for sale be measured at fair value with changes in fair value recognized in net income. The Company has elected to measure equity investments without readily determinable fair values at cost, less impairment, adjusted for subsequent observable price changes, which will be recognized in net income. The new guidance also changed certain disclosure requirements. ASU 2016-01 was effective as of January 1, 2018 and was adopted using a modified retrospective approach. The Company recorded a cumulative-effect adjustment upon adoption increasing Retained earnings by $8 million . ASU 2018-03 was also adopted as of January 1, 2018 on a prospective basis and did not result in any additional impacts upon adoption. In October 2016, the FASB issued guidance on the accounting for the income tax consequences of intra-entity transfers of assets other than inventory (ASU 2016-16). The new guidance requires the recognition of the income tax consequences of an intra-entity transfer of an asset (with the exception of inventory) when the intra-entity transfer occurs, replacing the prohibition against doing so. The current exception to defer the recognition of any tax impact on the transfer of inventory within the consolidated entity until it is sold to a third party remains unaffected. The new standard was effective as of January 1, 2018 and was adopted using a modified retrospective approach. The Company recorded a cumulative-effect adjustment upon adoption increasing Retained earnings by $54 million with a corresponding decrease to Deferred Income Taxes . In August 2017, the FASB issued new guidance on hedge accounting (ASU 2017-12) that is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. The new guidance makes more financial and nonfinancial hedging strategies eligible for hedge accounting, amends the presentation and disclosure requirements, and changes how companies assess effectiveness. The Company elected to early adopt this guidance as of January 1, 2018 on a modified retrospective basis. The new guidance was applied to all existing hedges as of the adoption date. For fair value hedges of interest rate risk outstanding as of the date of adoption, the Company recorded a cumulative-effect adjustment upon adoption to the basis adjustment on the hedged item resulting from applying the benchmark component of the coupon guidance. This adjustment decreased Retained earnings by $11 million . Also, in accordance with the transition provisions of ASU 2017-12, the Company was required to eliminate the separate measurement of ineffectiveness for its cash flow hedging instruments existing as of the adoption date through a cumulative-effect adjustment to retained earnings; however, all such amounts were de minimis . In February 2018, the FASB issued new guidance to address a narrow-scope financial reporting issue that arose as a consequence of the Tax Cuts and Jobs Act of 2017 (TCJA) (ASU 2018-02). Existing guidance requires that deferred tax liabilities and assets be adjusted for a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date. That guidance is applicable even in situations in which the related income tax effects of items in accumulated other comprehensive income were originally recognized in other comprehensive income (rather than in net income), such as amounts related to benefit plans and hedging activity. As a result, the tax effects of items within accumulated other comprehensive income do not reflect the appropriate tax rate (the difference is referred to as stranded tax effects). The new guidance allows for a reclassification of these amounts to retained earnings thereby eliminating these stranded tax effects. The Company elected to early adopt the new guidance in the first quarter of 2018 and reclassified the stranded income tax effects of the TCJA increasing Accumulated other comprehensive loss in the provisional amount of $266 million with a corresponding increase to Retained earnings (see Note 16). The Company’s policy for releasing disproportionate income tax effects from Accumulated other comprehensive loss is to utilize the item-by-item approach. The impact of adopting the above standards is as follows: ($ in millions) ASU 2014-09 (Revenue) ASU 2016-01 (Financial Instruments) ASU 2016-16 (Intra-Entity Transfers of Assets Other than Inventory) ASU 2017-12 (Derivatives and Hedging) ASU 2018-02 (Reclassification of Certain Tax Effects) Total Assets - Increase (Decrease) Accounts receivable $ 5 $ 5 Liabilities - Increase (Decrease) Income Taxes Payable (3 ) (3 ) Debt 14 14 Deferred Income Taxes (54 ) (54 ) Equity - Increase (Decrease) Retained earnings 5 8 54 (11 ) 266 322 Accumulated other comprehensive loss (8 ) (266 ) (274 ) In March 2017, the FASB amended the guidance related to net periodic benefit cost for defined benefit plans that requires entities to (1) disaggregate the current service cost component from the other components of net benefit cost and present it with other employee compensation costs in the income statement within operations if such a subtotal is presented; (2) present the other components of net benefit cost separately in the income statement and outside of income from operations; and (3) only capitalize the service cost component when applicable. The Company adopted the new standard as of January 1, 2018 using a retrospective transition method as to the requirement for separate presentation in the income statement of service costs and other components and a prospective transition method as to the requirement to limit the capitalization of benefit costs to the service cost component. The Company utilized a practical expedient that permits it to use the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. Upon adoption, net periodic benefit cost (credit) other than service cost was reclassified to Other (income) expense, net from the previous classification within Materials and production costs, Marketing and administrative expenses and Research and development costs (see Note 13). In August 2016, the FASB issued guidance on the classification of certain cash receipts and payments in the statement of cash flows intended to reduce diversity in practice. The Company adopted the new standard effective as of January 1, 2018 using a retrospective application. There were no changes to the presentation of the Consolidated Statement of Cash Flows in the prior year period as a result of adopting the new standard. In November 2016, the FASB issued guidance requiring that amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new standard was effective as of January 1, 2018 and was adopted using a retrospective application. The adoption of the new guidance did not have a material effect on the Company’s Consolidated Statement of Cash Flows. In May 2017, the FASB issued guidance clarifying when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The Company adopted the new standard effective as of January 1, 2018 and will apply the new guidance to future share-based payment award modifications should they occur. Recently Issued Accounting Standards Not Yet Adopted In February 2016, the FASB issued new accounting guidance for the accounting and reporting of leases and subsequently issued several updates to the new guidance. The new guidance requires that lessees recognize a right-of-use asset and a lease liability recorded on the balance sheet for each of its leases (other than leases that meet the definition of a short-term lease). Leases will be classified as either operating or finance. Operating leases will result in straight-line expense in the income statement (similar to current operating leases) while finance leases will result in more expense being recognized in the earlier years of the lease term (similar to current capital leases). The Company will adopt the new standard on January 1, 2019 using a modified retrospective approach. Merck will elect the transition method that allows for application of the standard at the adoption date rather than at the beginning of the earliest comparative period presented in the financial statements. The Company intends to elect available practical expedients. The Company is currently evaluating the impact of adoption on its consolidated financial statements. Merck has selected a lease accounting tool and made significant progress regarding lease data validation for contracts that are in the Company’s current lease portfolio. Merck continues to assess the potential impact of embedded leases in certain agreements. In June 2016, the FASB issued amended guidance on the accounting for credit losses on financial instruments. The guidance introduces an expected loss model for estimating credit losses, replacing the incurred loss model. The new guidance also changes the impairment model for available-for-sale debt securities, requiring the use of an allowance to record estimated credit losses (and subsequent recoveries). The new guidance is effective for interim and annual periods beginning in 2020, with earlier application permitted in 2019. The new guidance is to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings in the beginning of the period of adoption. The Company is currently evaluating the impact of adoption on its consolidated financial statements. In January 2017, the FASB issued guidance that provides for the elimination of Step 2 from the goodwill impairment test. Under the new guidance, impairment charges are recognized to the extent the carrying amount of a reporting unit exceeds its fair value with certain limitations. The new guidance is effective for interim and annual periods in 2020. Early adoption is permitted. The Company does not anticipate that the adoption of the new guidance will have a material effect on its consolidated financial statements. In April 2018, the FASB issued new guidance on the accounting for costs incurred to implement a cloud computing arrangement that is considered a service arrangement. The new guidance requires the capitalization of such costs, aligning it with the accounting for costs associated with developing or obtaining internal-use software. The new guidance is effective for interim and annual periods in 2020. Early adoption is permitted, including adoption in any interim period. Prospective adoption for eligible costs incurred on or after the date of adoption or retrospective adoption is permitted. The Company is currently evaluating the impact of adoption on its consolidated financial statements and may elect to early adopt this guidance. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers , and subsequent amendments (ASC 606 or new guidance), using the modified retrospective method. Merck applied the new guidance to all contracts with customers within the scope of the standard that were in effect on January 1, 2018 and recognized the cumulative effect of initially applying the new guidance as an adjustment to the opening balance of retained earnings (see Note 1). Comparative information for prior periods has not been restated and continues to be reported under the accounting standards in effect for those periods. The new guidance provides principles that an entity applies to report useful information about the amount, timing, and uncertainty of revenue and cash flows arising from its contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to in exchange for those goods or services. The new guidance introduces a 5-step model to recognize revenue when or as control is transferred: identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when or as the performance obligations are satisfied. The Company’s significant accounting policies are detailed in Note 2 to the consolidated financial statements included in Merck’s Annual Report on Form 10-K for the year ended December 31, 2017. Changes to the Company’s revenue recognition policy as a result of adopting ASC 606 are described below. See Note 17 for disaggregated revenue disclosures. Revenue Recognition — Recognition of revenue requires evidence of a contract, probable collection of sales proceeds and completion of substantially all performance obligations. Merck acts as the principal in substantially all of its customer arrangements and therefore records revenue on a gross basis. The majority of the Company’s contracts related to the Pharmaceutical and Animal Health segments have a single performance obligation - the promise to transfer goods. Shipping is considered immaterial in the context of the overall customer arrangement and damages or loss of goods in transit are rare. Therefore, shipping is not deemed a separately recognized performance obligation. The vast majority of revenues from sales of products are recognized at a point in time when control of the goods is transferred to the customer, which the Company has determined is when title and risks and rewards of ownership transfer to the customer and the Company is entitled to payment. Certain Merck entities, including U.S. entities, have contract terms under which control of the goods passes to the customer upon shipment; however, either pursuant to the terms of the contract or as a business practice, Merck retains responsibility for goods lost or damaged in transit. Prior to the adoption of the new standard, Merck would recognize revenue for these entities upon delivery of the goods. Under the new guidance, the Company is now recognizing revenue at time of shipment for these entities. For businesses within the Company’s Healthcare Services segment and certain services in the Animal Health segment, revenue is recognized over time, generally ratably over the contract term as services are provided. Merck’s payment terms for U.S. pharmaceutical customers are typically net 36 days from receipt of invoice and for U.S. animal health customers are typically net 30 days from receipt of invoice; however, certain products, including Keytruda , have longer payment terms up to 90 days. Outside of the United States, payment terms are typically 30 days to 90 days although certain markets have longer payment terms. The nature of the Company’s business gives rise to several types of variable consideration including discounts and returns, which are estimated at the time of sale generally using the expected value method, although the most likely amount method is also used for certain types of variable consideration. In the United States, sales discounts are issued to customers at the point-of-sale, through an intermediary wholesaler (known as chargebacks), or in the form of rebates. Additionally, sales are generally made with a limited right of return under certain conditions. Revenues are recorded net of provisions for sales discounts and returns, which are established at the time of sale. In addition, revenues are recorded net of time value of money discounts if collection of accounts receivable is expected to be in excess of one year. The provision for aggregate customer discounts covers chargebacks and rebates. Chargebacks are discounts that occur when a contracted customer purchases through an intermediary wholesaler. The contracted customer generally purchases product from the wholesaler at its contracted price plus a mark-up. The wholesaler, in turn, charges the Company back for the difference between the price initially paid by the wholesaler and the contract price paid to the wholesaler by the customer. The provision for chargebacks is based on expected sell-through levels by the Company’s wholesale customers to contracted customers, as well as estimated wholesaler inventory levels. Rebates are amounts owed based upon definitive contractual agreements or legal requirements with private sector and public sector (Medicaid and Medicare Part D) benefit providers, after the final dispensing of the product by a pharmacy to a benefit plan participant. The provision for rebates is based on expected patient usage, as well as inventory levels in the distribution channel to determine the contractual obligation to the benefit providers. The Company uses historical customer segment utilization mix, sales forecasts, changes to product mix and price, inventory levels in the distribution channel, government pricing calculations and prior payment history in order to estimate the expected provision. Amounts accrued for aggregate customer discounts are evaluated on a quarterly basis through comparison of information provided by the wholesalers, health maintenance organizations, pharmacy benefit managers, federal and state agencies, and other customers to the amounts accrued. These discounts, in the aggregate, reduced U.S. sales by $2.6 billion and $2.9 billion in the third quarter of 2018 and 2017 , respectively, and by $7.7 billion and $8.2 billion for the first nine months of 2018 and 2017 , respectively. Outside of the United States, variable consideration in the form of discounts and rebates are a combination of commercially-driven discounts in highly competitive product classes, discounts required to gain or maintain reimbursement, or legislatively mandated rebates. In certain European countries, legislatively mandated rebates are calculated based on an estimate of the government’s total unbudgeted spending and the Company’s specific payback obligation. Rebates may also be required based on specific product sales thresholds. The Company applies an estimated factor against its actual invoiced sales to represent the expected level of future discount or rebate obligations associated with the sale. The Company maintains a returns policy that allows its U.S. pharmaceutical customers to return product within a specified period prior to and subsequent to the expiration date (generally, three to six months before and 12 months after product expiration). The estimate of the provision for returns is based upon historical experience with actual returns. Additionally, the Company considers factors such as levels of inventory in the distribution channel, product dating and expiration period, whether products have been discontinued, entrance in the market of generic competition, changes in formularies or launch of over-the-counter products, among others. Outside of the United States, returns are only allowed on a limited basis in certain countries. The following table provides the effects of adopting ASC 606 on the Consolidated Statement of Income: Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 ($ in millions) As Reported Effects of Adopting ASC 606 Amounts Without Adoption of ASC 606 As Reported Effects of Adopting ASC 606 Amounts Without Adoption of ASC 606 Sales $ 10,794 $ (1 ) $ 10,793 $ 31,296 $ (30 ) $ 31,266 Materials and production 3,619 (1 ) 3,618 10,220 (18 ) 10,202 Income before taxes 2,665 — 2,665 6,097 (12 ) 6,085 Taxes on income 707 — 707 1,682 (3 ) 1,679 Net income attributable to Merck & Co., Inc. 1,950 — 1,950 4,393 (9 ) 4,384 The following table provides the effects of adopting ASC 606 on the Consolidated Balance Sheet: September 30, 2018 ($ in millions) As Reported Effects of Adopting ASC 606 Amounts Without Adoption of ASC 606 Assets Accounts receivable $ 7,374 $ (45 ) $ 7,329 Inventories 5,416 19 5,435 Liabilities Accrued and other current liabilities 9,776 (6 ) 9,770 Income taxes payable 759 (5 ) 754 Equity Retained earnings 42,189 (15 ) 42,174 |
Acquisitions, Divestitures, Res
Acquisitions, Divestitures, Research Collaborations and License Agreements | 9 Months Ended |
Sep. 30, 2018 | |
Business Combinations [Abstract] | |
Acquisitions, Divestitures, Research Collaborations and License Agreements | Acquisitions, Divestitures, Research Collaborations and License Agreements The Company continues to pursue the acquisition of businesses and establishment of external alliances such as research collaborations and licensing agreements to complement its internal research capabilities. These arrangements often include upfront payments, as well as expense reimbursements or payments to the third party, and milestone, royalty or profit share arrangements, contingent upon the occurrence of certain future events linked to the success of the asset in development. The Company also reviews its marketed products and pipeline to examine candidates which may provide more value through out-licensing and, as part of its portfolio assessment process, may also divest certain assets. Pro forma financial information for acquired businesses is not presented if the historical financial results of the acquired entity are not significant when compared with the Company’s financial results. In the third quarter of 2018, the Company recorded an aggregate charge of $420 million within Materials and production costs in conjunction with the termination of a collaboration agreement entered into in 2014 with Samsung Bioepis Co., Ltd. (Samsung) for insulin glargine. The aggregate charge reflects a termination payment of $155 million , which represents the reimbursement of all fees previously paid by Samsung to Merck under the agreement, plus interest, as well as the release of Merck’s ongoing obligations under the agreement. The aggregate charge also included fixed asset abandonment charges of $137 million , inventory write-offs of $122 million , as well as other related costs of $6 million . The termination of this agreement has no impact on the Company’s other collaboration with Samsung. In June 2018, Merck acquired Viralytics Limited (Viralytics), an Australian publicly traded company focused on oncolytic immunotherapy treatments for a range of cancers, for AUD 502 million ( $378 million ). The transaction provided Merck with full rights to Cavatak (V937, formerly CVA21), Viralytics’s investigational oncolytic immunotherapy. Cavatak is based on Viralytics’s proprietary formulation of an oncolytic virus (Coxsackievirus Type A21) that has been shown to preferentially infect and kill cancer cells. Cavatak is currently being evaluated in multiple Phase 1 and Phase 2 clinical trials, both as an intratumoral and intravenous agent, including in combination with Keytruda , Merck’s anti-PD-1 (programmed death receptor-1) therapy. Under a previous agreement between Merck and Viralytics, a study is investigating the use of the Keytruda and Cavatak combination in melanoma, prostate, lung and bladder cancers. The transaction was accounted for as an acquisition of an asset. Merck recorded net assets of $34 million (primarily cash) at the acquisition date and Research and development expenses of $344 million for the first nine months of 2018 related to the transaction. There are no future contingent payments associated with the acquisition. In April 2018, Merck sold C3i Solutions, a multi-channel customer engagement services provider which was part of the Healthcare Services segment, to HCL Technologies Limited for $65 million . The transaction resulted in a loss of $11 million recorded in Other (income) expense, net . In March 2018, Merck and Eisai Co., Ltd. (Eisai) entered into a strategic collaboration for the worldwide co-development and co-commercialization of Lenvima, an orally available tyrosine kinase inhibitor discovered by Eisai (see Note 4). In July 2017, Merck and AstraZeneca PLC (AstraZeneca) entered into a global strategic oncology collaboration to co-develop and co-commercialize AstraZeneca’s Lynparza for multiple cancer types (see Note 4). In March 2017, Merck acquired a controlling interest in Vallée S.A. (Vallée), a leading privately held producer of animal health products in Brazil. Vallée has an extensive portfolio of products spanning parasiticides, anti-infectives and vaccines that include products for livestock, horses, and companion animals. Under the terms of the agreement, Merck acquired 93.5% of the shares of Vallée for $358 million . Of the total purchase price, $176 million was placed into escrow pending resolution of certain contingent items. The transaction was accounted for as an acquisition of a business. Merck recognized intangible assets of $297 million related to currently marketed products, net deferred tax liabilities of $102 million , other net assets of $32 million and noncontrolling interest of $25 million . In addition, the Company recorded liabilities of $37 million for contingencies identified at the acquisition date and corresponding indemnification assets of $37 million , representing the amounts to be reimbursed to Merck if and when the contingent liabilities are paid. The excess of the consideration transferred over the fair value of net assets acquired of $156 million was recorded as goodwill. The goodwill was allocated to the Animal Health segment and is not deductible for tax purposes. The estimated fair values of identifiable intangible assets related to currently marketed products were determined using an income approach. The probability-adjusted future net cash flows of each product were discounted to present value utilizing a discount rate of 15.5% . Actual cash flows are likely to be different than those assumed. The intangible assets related to currently marketed products are being amortized over their estimated useful lives of 15 years. In the fourth quarter of 2017, Merck acquired an additional 4.5% interest in Vallée for $18 million , which reduced the noncontrolling interest related to Vallée. |
Collaborative Arrangements
Collaborative Arrangements | 9 Months Ended |
Sep. 30, 2018 | |
Collaborative Arrangements [Abstract] | |
Collaborative Arrangements | Collaborative Arrangements Merck has entered into collaborative arrangements that provide the Company with varying rights to develop, produce and market products together with its collaborative partners. Both parties in these arrangements are active participants and exposed to significant risks and rewards dependent on the commercial success of the activities of the collaboration. Merck’s more significant collaborative arrangements are discussed below. AstraZeneca In July 2017, Merck and AstraZeneca entered into a global strategic oncology collaboration to co-develop and co-commercialize AstraZeneca’s Lynparza for multiple cancer types. Lynparza is an oral poly (ADP-ribose) polymerase (PARP) inhibitor currently approved for certain types of ovarian and breast cancer. The companies are jointly developing and commercializing Lynparza, both as monotherapy and in combination trials with other potential medicines. Independently, Merck and AstraZeneca will develop and commercialize Lynparza in combinations with their respective PD-1 and PD-L1 medicines, Keytruda and Imfinzi. The companies will also jointly develop and commercialize AstraZeneca’s selumetinib, an oral, potent, selective inhibitor of MEK, part of the mitogen-activated protein kinase (MAPK) pathway, currently being developed for multiple indications. Under the terms of the agreement, AstraZeneca and Merck will share the development and commercialization costs for Lynparza and selumetinib monotherapy and non-PD-L1/PD-1 combination therapy opportunities. Gross profits from Lynparza and selumetinib product sales generated through monotherapies or combination therapies are shared equally. Merck will fund all development and commercialization costs of Keytruda in combination with Lynparza or selumetinib. AstraZeneca will fund all development and commercialization costs of Imfinzi in combination with Lynparza or selumetinib. AstraZeneca is currently the principal on Lynparza sales transactions. Merck records its share of Lynparza product sales, net of cost of sales and commercialization costs, as alliance revenue within the Pharmaceutical segment and its share of development costs associated with the collaboration as part of Research and development expenses. Reimbursements received from AstraZeneca for research and development expenses are recognized as reductions to Research and development costs. As part of the agreement, Merck made an upfront payment to AstraZeneca of $1.6 billion and is making payments totaling $750 million over a multi-year period for certain license options ( $250 million of which was paid in 2017). The Company recorded an aggregate charge of $2.35 billion in Research and development expenses in 2017 related to the upfront payment and future license options payments. In addition, the agreement provides for additional contingent payments from Merck to AstraZeneca related to the successful achievement of regulatory and sales-based milestones. In the second quarter of 2018, Merck determined it was probable that annual sales of Lynparza in the future would trigger a $200 million sales-based milestone payment from Merck to AstraZeneca. Accordingly, in the second quarter of 2018, Merck recorded a $200 million noncurrent liability and a corresponding intangible asset and also recognized $17 million of cumulative amortization expense within Materials and production costs. Merck previously accrued a $150 million sales-based milestone in the first quarter of 2018 (along with $9 million of cumulative amortization expense) and a $100 million sales-based milestone in 2017 (which was paid in 2018). The remaining $3.65 billion of potential future sales-based milestone payments have not yet been accrued as they are not deemed by the Company to be probable at this time. In January 2018, Lynparza received approval in the United States for the treatment of certain patients with metastatic breast cancer, triggering a $70 million capitalized milestone payment from Merck to AstraZeneca. Potential future regulatory milestone payments of $1.93 billion remain under the agreement. The asset balance related to Lynparza (which includes capitalized sales-based and regulatory milestone payments) was $468 million at September 30, 2018 and is included in Other Assets on the Consolidated Balance Sheet. The amount is being amortized over its estimated useful life through 2028 as supported by projected future cash flows, subject to impairment testing. Summarized information related to this collaboration is as follows: Three Months Ended Nine Months Ended ($ in millions) 2018 2017 2018 2017 Alliance revenues $ 49 $ 5 $ 125 $ 5 Materials and production (1) 12 — 48 — Marketing and administrative 12 — 28 — Research and development (2) 47 2,377 118 2,377 ($ in millions) September 30, 2018 December 31, 2017 Receivables from AstraZeneca $ 46 $ 12 Payables to AstraZeneca (3) 892 643 (1) Represents amortization of capitalized milestone payments. (2) Amounts for the third quarter and first nine months of 2017 include $2.35 billion related to the upfront payment and future license option payments. (3) Includes accrued milestone and license option payments. Eisai In March 2018, Merck and Eisai announced a strategic collaboration for the worldwide co-development and co-commercialization of Lenvima, an orally available tyrosine kinase inhibitor discovered by Eisai. Under the agreement, Merck and Eisai will develop and commercialize Lenvima jointly, both as monotherapy and in combination with Merck’s anti-PD-1 therapy, Keytruda . Eisai records Lenvima product sales globally (Eisai is the principal on Lenvima sales transactions), and Merck and Eisai share gross profits equally. Merck records its share of Lenvima product sales, net of cost of sales and commercialization costs, as alliance revenue. Expenses incurred during co-development, including for studies evaluating Lenvima as monotherapy, are shared equally by the two companies and reflected in Research and development expenses. Under the agreement, Merck made upfront payments to Eisai of $750 million and will make payments of up to $650 million for certain option rights through 2021 ( $325 million in January 2019 or earlier in certain circumstances, $200 million in January 2020 and $125 million in January 2021). The Company recorded an aggregate charge of $1.4 billion in Research and development expenses in the first nine months of 2018 related to the upfront payments and future option payments. In addition, the agreement provides for Eisai to receive up to $385 million associated with the achievement of certain clinical and regulatory milestones and up to $3.97 billion for the achievement of milestones associated with sales of Lenvima. In the third quarter of 2018, Merck determined it was probable that annual sales of Lenvima in the future would trigger a $50 million sales-based milestone payment from Merck to Eisai. Accordingly, in the third quarter of 2018, Merck recorded a $50 million noncurrent liability and a corresponding intangible asset. The remaining $3.92 billion of potential future sales-based milestone payments have not yet been accrued as they are not deemed by the Company to be probable at this time. Lenvima was approved for the treatment of patients with unresectable hepatocellular carcinoma in Japan in March 2018, in the United States and European Union in August 2018, and in China in September 2018, triggering capitalized milestone payments of $25 million , $125 million , $50 million , and $25 million , respectively, to Eisai. Potential future regulatory milestone payments of $160 million remain under the agreement. The asset balance related to Lenvima (which includes capitalized sales-based and regulatory milestones payments) was $266 million at September 30, 2018 and is included in Other Assets on the Consolidated Balance Sheet. The amount is being amortized over its estimated useful life through 2026 as supported by projected future cash flows, subject to impairment testing. Summarized information related to this collaboration is as follows: ($ in millions) Three Months Ended Nine Months Ended September 30, 2018 Alliance revenues $ 43 $ 78 Materials and production (1) 8 9 Marketing and administrative 5 7 Research and development (2) 36 1,473 ($ in millions) September 30, 2018 Receivables from Eisai $ 42 Payables to Eisai (3) 733 (1) Represents amortization of capitalized milestone payments. (2) Amount for the first nine months of 2018 includes $1.4 billion related to the upfront payment and future license option payments. (3) Includes accrued milestone and license option payments. Bayer AG In 2014, the Company entered into a worldwide clinical development collaboration with Bayer AG (Bayer) to market and develop soluble guanylate cyclase (sGC) modulators including Bayer’s Adempas, which is approved to treat pulmonary arterial hypertension and chronic thromboembolic pulmonary hypertension. The two companies have implemented a joint development and commercialization strategy. The collaboration also includes clinical development of Bayer’s vericiguat, which is in Phase 3 trials for worsening heart failure, as well as opt-in rights for other early-stage sGC compounds in development by Bayer. Merck in turn made available its early-stage sGC compounds under similar terms. Under the agreement, Bayer leads commercialization of Adempas in the Americas, while Merck leads commercialization in the rest of the world. For vericiguat and other potential opt-in products, Bayer will lead commercialization in the rest of world and Merck will lead in the Americas. For all products and candidates included in the agreement, both companies will share in development costs and profits on sales and will have the right to co-promote in territories where they are not the lead. In 2016, Merck began promoting and distributing Adempas in Europe. Transition from Bayer in other Merck territories, including Japan, continued in 2017. Revenue from Adempas includes sales in Merck’s marketing territories, as well as Merck’s share of profits from the sale of Adempas in Bayer’s marketing territories. In the second quarter of 2018, Merck determined it was probable that annual worldwide sales of Adempas in the future would trigger a $375 million sales-based milestone payment from Merck to Bayer. Accordingly, in the second quarter of 2018, Merck recorded a $375 million noncurrent liability and a corresponding intangible asset and also recognized $106 million of cumulative amortization expense within Materials and production costs. In 2017, annual worldwide sales of Adempas exceeded $500 million triggering a $350 million milestone payment from Merck to Bayer, which was accrued for in 2016 when Merck deemed the payment to be probable. The milestone was paid in the first quarter of 2018. There is an additional $400 million potential future sales-based milestone payment that has not yet been accrued as it is not deemed by the Company to be probable at this time. The intangible asset balance related to Adempas (which includes the remaining acquired intangible asset balance, as well as capitalized sales-based milestones payments) was $1.1 billion at September 30, 2018 and is included in Other Intangibles, Net on the Consolidated Balance Sheet. The amount is being amortized over its estimated useful life through 2027 as supported by projected future cash flows, subject to impairment testing. Summarized information related to this collaboration is as follows: Three Months Ended Nine Months Ended ($ in millions) 2018 2017 2018 2017 Net product sales recorded by Merck $ 47 $ 38 $ 138 $ 105 Merck’s profit share from sales in Bayer’s marketing territories 47 32 100 116 Total sales 94 70 238 221 Materials and production (1) 29 25 188 73 Marketing and administrative 11 6 26 18 Research and development 34 27 90 78 ($ in millions) September 30, 2018 December 31, 2017 Receivables from Bayer $ 36 $ 33 Payables to Bayer (2) 375 352 (1) Includes amortization of intangible assets. (2) Includes accrued milestone payments. |
Restructuring
Restructuring | 9 Months Ended |
Sep. 30, 2018 | |
Restructuring and Related Activities [Abstract] | |
Restructuring | Restructuring In 2010 and 2013, the Company commenced actions under global restructuring programs designed to streamline its cost structure. The actions under these programs include the elimination of positions in sales, administrative and headquarters organizations, as well as the sale or closure of certain manufacturing and research and development sites and the consolidation of office facilities. The Company also continues to reduce its global real estate footprint and improve the efficiency of its manufacturing and supply network. The Company recorded total pretax costs of $169 million and $180 million in the third quarter of 2018 and 2017 , respectively, and $508 million and $605 million for the first nine months of 2018 and 2017, respectively, related to restructuring program activities. Since inception of the programs through September 30, 2018 , Merck has recorded total pretax accumulated costs of approximately $14.0 billion and eliminated approximately 45,220 positions comprised of employee separations, as well as the elimination of contractors and vacant positions. The Company estimates that approximately two-thirds of the cumulative pretax costs are cash outlays, primarily related to employee separation expense. Approximately one-third of the cumulative pretax costs are non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested. While the Company has substantially completed the actions under these programs, approximately $50 million of additional pretax costs are expected to be incurred in the fourth quarter of 2018 relating to anticipated employee separations and remaining asset-related costs. For segment reporting, restructuring charges are unallocated expenses. The following tables summarize the charges related to restructuring program activities by type of cost: Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 ($ in millions) Separation Costs Accelerated Depreciation Other Total Separation Costs Accelerated Depreciation Other Total Materials and production $ — $ 1 $ 1 $ 2 $ — $ 1 $ 10 $ 11 Marketing and administrative — — — — — 1 1 2 Research and development — (9 ) 5 (4 ) — (12 ) 13 1 Restructuring costs 137 — 34 171 392 — 102 494 $ 137 $ (8 ) $ 40 $ 169 $ 392 $ (10 ) $ 126 $ 508 Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017 ($ in millions) Separation Costs Accelerated Depreciation Other Total Separation Costs Accelerated Depreciation Other Total Materials and production $ — $ 5 $ 20 $ 25 $ — $ 52 $ 69 $ 121 Marketing and administrative — — — — — 2 1 3 Research and development — 1 1 2 — 7 4 11 Restructuring costs 100 — 53 153 302 — 168 470 $ 100 $ 6 $ 74 $ 180 $ 302 $ 61 $ 242 $ 605 Separation costs are associated with actual headcount reductions, as well as those headcount reductions which were probable and could be reasonably estimated. In the third quarter of 2018 and 2017 , approximately 525 positions and 205 positions, respectively, and for the first nine months of 2018 and 2017, 1,870 positions and 1,225 positions, respectively, were eliminated under restructuring program activities. Accelerated depreciation costs primarily relate to manufacturing, research and administrative facilities and equipment to be sold or closed as part of the programs. Accelerated depreciation costs represent the difference between the depreciation expense to be recognized over the revised useful life of the asset, based upon the anticipated date the site will be closed or divested or the equipment disposed of, and depreciation expense as determined utilizing the useful life prior to the restructuring actions. All of the sites have and will continue to operate up through the respective closure dates and, since future undiscounted cash flows were sufficient to recover the respective book values, Merck is recording accelerated depreciation over the revised useful life of the site assets. Anticipated site closure dates, particularly related to manufacturing locations, have been and may continue to be adjusted to reflect changes resulting from regulatory or other factors. Other activity in 2018 and 2017 includes asset abandonment, shut-down and other related costs, as well as pretax gains and losses resulting from sales of facilities and related assets. Additionally, other activity includes certain employee-related costs associated with pension and other postretirement benefit plans (see Note 12) and share-based compensation. The following table summarizes the charges and spending relating to restructuring program activities for the nine months ended September 30, 2018 : ($ in millions) Separation Costs Accelerated Depreciation Other Total Restructuring reserves January 1, 2018 $ 619 $ — $ 128 $ 747 Expense 392 (10 ) 126 508 (Payments) receipts, net (535 ) — (170 ) (705 ) Non-cash activity — 10 13 23 Restructuring reserves September 30, 2018 (1) $ 476 $ — $ 97 $ 573 (1) The remaining cash outlays are expected to be substantially completed by the end of 2020. |
Financial Instruments
Financial Instruments | 9 Months Ended |
Sep. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Financial Instruments | Financial Instruments Derivative Instruments and Hedging Activities The Company manages the impact of foreign exchange rate movements and interest rate movements on its earnings, cash flows and fair values of assets and liabilities through operational means and through the use of various financial instruments, including derivative instruments. A significant portion of the Company’s revenues and earnings in foreign affiliates is exposed to changes in foreign exchange rates. The objectives and accounting related to the Company’s foreign currency risk management program, as well as its interest rate risk management activities are discussed below. Foreign Currency Risk Management The Company has established revenue hedging, balance sheet risk management and net investment hedging programs to protect against volatility of future foreign currency cash flows and changes in fair value caused by volatility in foreign exchange rates. The objective of the revenue hedging program is to reduce the variability caused by changes in foreign exchange rates that would affect the U.S. dollar value of future cash flows derived from foreign currency denominated sales, primarily the euro and Japanese yen. To achieve this objective, the Company will hedge a portion of its forecasted foreign currency denominated third-party and intercompany distributor entity sales (forecasted sales) that are expected to occur over its planning cycle, typically no more than two years into the future. The Company will layer in hedges over time, increasing the portion of forecasted sales hedged as it gets closer to the expected date of the forecasted sales. The portion of forecasted sales hedged is based on assessments of cost-benefit profiles that consider natural offsetting exposures, revenue and exchange rate volatilities and correlations, and the cost of hedging instruments. The Company manages its anticipated transaction exposure principally with purchased local currency put options, forward contracts and purchased collar options. The fair values of these derivative contracts are recorded as either assets (gain positions) or liabilities (loss positions) in the Condensed Consolidated Balance Sheet. Changes in the fair value of derivative contracts are recorded each period in either current earnings or Other comprehensive income ( OCI ), depending on whether the derivative is designated as part of a hedge transaction and, if so, the type of hedge transaction. For derivatives that are designated as cash flow hedges, the unrealized gains or losses on these contracts is recorded in Accumulated other comprehensive income ( AOCI ) and reclassified into Sales when the hedged anticipated revenue is recognized. For those derivatives which are not designated as cash flow hedges, but serve as economic hedges of forecasted sales, unrealized gains or losses are recorded in Sales each period. The cash flows from both designated and non-designated contracts are reported as operating activities in the Condensed Consolidated Statement of Cash Flows. The Company does not enter into derivatives for trading or speculative purposes. The Company manages operating activities and net asset positions at each local subsidiary in order to mitigate the effects of exchange on monetary assets and liabilities. The Company also uses a balance sheet risk management program to mitigate the exposure of net monetary assets that are denominated in a currency other than a subsidiary’s functional currency from the effects of volatility in foreign exchange. In these instances, Merck principally utilizes forward exchange contracts to offset the effects of exchange on exposures denominated in developed country currencies, primarily the euro and Japanese yen. For exposures in developing country currencies, the Company will enter into forward contracts to partially offset the effects of exchange on exposures when it is deemed economical to do so based on a cost-benefit analysis that considers the magnitude of the exposure, the volatility of the exchange rate and the cost of the hedging instrument. The cash flows from these contracts are reported as operating activities in the Condensed Consolidated Statement of Cash Flows. Monetary assets and liabilities denominated in a currency other than the functional currency of a given subsidiary are remeasured at spot rates in effect on the balance sheet date with the effects of changes in spot rates reported in Other (income) expense, net . The forward contracts are not designated as hedges and are marked to market through Other (income) expense, net . Accordingly, fair value changes in the forward contracts help mitigate the changes in the value of the remeasured assets and liabilities attributable to changes in foreign currency exchange rates, except to the extent of the spot-forward differences. These differences are not significant due to the short-term nature of the contracts, which typically have average maturities at inception of less than one year . The Company also uses forward exchange contracts to hedge its net investment in foreign operations against movements in exchange rates. The forward contracts are designated as hedges of the net investment in a foreign operation. The Company hedges a portion of the net investment in certain of its foreign operations. The unrealized gains or losses on these contracts are recorded in foreign currency translation adjustment within OCI , and remain in AOCI until either the sale or complete or substantially complete liquidation of the subsidiary. The Company excludes certain portions of the change in fair value of its derivative instruments from the assessment of hedge effectiveness (excluded component). Changes in fair value of the excluded components are recognized in OCI . In accordance with the new guidance adopted on January 1, 2018 (see Note 1), the Company has elected to recognize in earnings the initial value of the excluded component on a straight-line basis over the life of the derivative instrument, rather than using the mark-to-market approach. The cash flows from these contracts are reported as investing activities in the Condensed Consolidated Statement of Cash Flows. Foreign exchange risk is also managed through the use of foreign currency debt. The Company’s senior unsecured euro-denominated notes have been designated as, and are effective as, economic hedges of the net investment in a foreign operation. Accordingly, foreign currency transaction gains or losses due to spot rate fluctuations on the euro-denominated debt instruments are included in foreign currency translation adjustment within OCI . The effects of the Company’s net investment hedges on OCI and the Consolidated Statement of Income are shown below: Amount of Pretax (Gain) Loss Recognized in Other Comprehensive Income (1) Amount of Pretax (Gain) Loss Recognized in Other (income) expense, net for Amounts Excluded from Effectiveness Testing Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended September 30, Nine Months Ended September 30, ($ in millions) 2018 2017 2018 2017 2018 2017 2018 2017 Net Investment Hedging Relationships Foreign exchange contracts $ (10 ) $ — $ (24 ) $ — $ (4 ) $ — $ (7 ) $ — Euro-denominated notes 38 128 (54 ) 467 — — — — (1) No amounts were reclassified from AOCI into income related to the sale of a subsidiary. Interest Rate Risk Management The Company may use interest rate swap contracts on certain investing and borrowing transactions to manage its net exposure to interest rate changes and to reduce its overall cost of borrowing. The Company does not use leveraged swaps and, in general, does not leverage any of its investment activities that would put principal capital at risk. In May 2018, four interest rate swaps with notional amounts of $250 million each matured. These swaps effectively converted the Company’s $1.0 billion , 1.30% fixed-rate notes due 2018 to variable rate debt. At September 30, 2018 , the Company was a party to 22 pay-floating, receive-fixed interest rate swap contracts designated as fair value hedges of fixed-rate notes in which the notional amounts match the amount of the hedged fixed-rate notes as detailed in the table below. September 30, 2018 ($ in millions) Par Value of Debt Number of Interest Rate Swaps Held Total Swap Notional Amount 5.00% notes due 2019 1,250 3 550 1.85% notes due 2020 1,250 5 1,250 3.875% notes due 2021 1,150 5 1,150 2.40% notes due 2022 1,000 4 1,000 2.35% notes due 2022 1,250 5 1,250 The interest rate swap contracts are designated hedges of the fair value changes in the notes attributable to changes in the benchmark London Interbank Offered Rate (LIBOR) swap rate. The fair value changes in the notes attributable to changes in the LIBOR swap rate are recorded in interest expense along with the offsetting fair value changes in the swap contracts. The cash flows from these contracts are reported as operating activities in the Condensed Consolidated Statement of Cash Flows. The table below presents the location of amounts recorded on the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges: Carrying Amount of Hedged Liabilities Cumulative Amount of Fair Value Hedging Adjustment Increase (Decrease) Included in the Carrying Amount ($ in millions) September 30, 2018 December 31, 2017 September 30, 2018 December 31, 2017 Balance Sheet Line Item in which Hedged Item is Included Loans payable and current portion of long-term debt $ 553 $ 983 $ 3 $ (17 ) Long-Term Debt (1) 4,503 5,146 (138 ) (41 ) (1) Amounts include hedging adjustment gains related to discontinued hedging relationships of $6 million and $11 million at September 30, 2018 and December 31, 2017 , respectively. Presented in the table below is the fair value of derivatives on a gross basis segregated between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments: September 30, 2018 December 31, 2017 Fair Value of Derivative U.S. Dollar Notional Fair Value of Derivative U.S. Dollar Notional ($ in millions) Balance Sheet Caption Asset Liability Asset Liability Derivatives Designated as Hedging Instruments Interest rate swap contracts Other assets $ — $ — $ — $ 2 $ — $ 550 Interest rate swap contracts Accrued and other current liabilities — 2 550 — 3 1,000 Interest rate swap contracts Other noncurrent liabilities — 138 4,650 — 52 4,650 Foreign exchange contracts Other current assets 175 — 6,115 51 — 4,216 Foreign exchange contracts Other assets 85 — 2,682 38 — 1,936 Foreign exchange contracts Accrued and other current liabilities — 5 657 — 71 2,014 Foreign exchange contracts Other noncurrent liabilities — 1 66 — 1 20 $ 260 $ 146 $ 14,720 $ 91 $ 127 $ 14,386 Derivatives Not Designated as Hedging Instruments Foreign exchange contracts Other current assets $ 127 $ — $ 6,531 $ 39 $ — $ 3,778 Foreign exchange contracts Accrued and other current liabilities — 58 5,298 — 90 7,431 $ 127 $ 58 $ 11,829 $ 39 $ 90 $ 11,209 $ 387 $ 204 $ 26,549 $ 130 $ 217 $ 25,595 As noted above, the Company records its derivatives on a gross basis in the Condensed Consolidated Balance Sheet. The Company has master netting agreements with several of its financial institution counterparties (see Concentrations of Credit Risk below). The following table provides information on the Company’s derivative positions subject to these master netting arrangements as if they were presented on a net basis, allowing for the right of offset by counterparty and cash collateral exchanged per the master agreements and related credit support annexes: September 30, 2018 December 31, 2017 ($ in millions) Asset Liability Asset Liability Gross amounts recognized in the consolidated balance sheet $ 387 $ 204 $ 130 $ 217 Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet (135 ) (135 ) (94 ) (94 ) Cash collateral received (54 ) — (3 ) — Net amounts $ 198 $ 69 $ 33 $ 123 The table below provides information regarding the location and amount of pretax (gains) losses of derivatives designated in fair value or cash flow hedging relationships: Sales Other (income) expense, net (1) Other comprehensive income (loss) Sales Other (income) expense, net (1) Other comprehensive income (loss) Three Months Ended September 30, Three Months Ended September 30, Three Months Ended September 30, Nine Months Ended September 30, Nine Months Ended September 30, Nine Months Ended September 30, ($ in millions) 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 Financial Statement Line Items in which Effects of Fair Value or Cash Flow Hedges are Recorded $ 10,794 $ 10,325 $ (172 ) (207 ) $ (29 ) $ 149 31,296 $ 29,689 $ (512 ) $ (351 ) $ 33 $ 281 (Gain) loss on fair value hedging relationships Interest rate swap contracts Hedged items — — (9 ) (9 ) — — — — (86 ) (5 ) — — Derivatives designated as hedging instruments — — 15 2 — — — — 100 (25 ) — — Impact of cash flow hedging relationships Foreign exchange contracts Amount of gain (loss) recognized in OCI on derivatives — — — — 29 (88 ) — — — — 113 (520 ) (Decrease) increase in Sales as a result of AOCI reclassifications (6 ) 13 — — 6 (13 ) (172 ) 157 — — 172 (157 ) (1) Interest expense is a component of Other (income) expense, net. The table below provides information regarding the income statement effects of derivatives not designated as hedging instruments: Amount of Derivative Pretax (Gain) Loss Recognized in Income Three Months Ended September 30, Nine Months Ended September 30, ($ in millions) Income Statement Caption 2018 2017 2018 2017 Derivatives Not Designated as Hedging Instruments Foreign exchange contracts (1) Other (income) expense, net $ (57 ) $ 119 $ (224 ) $ 70 Foreign exchange contracts (2) Sales — — (5 ) — (1) These derivative contracts mitigate changes in the value of remeasured foreign currency denominated monetary assets and liabilities attributable to changes in foreign currency exchange rates. (2) These derivative contracts serve as economic hedges of forecasted transactions. At September 30, 2018 , the Company estimates $75 million of pretax net unrealized gains on derivatives maturing within the next 12 months that hedge foreign currency denominated sales over that same period will be reclassified from AOCI to Sales . The amount ultimately reclassified to Sales may differ as foreign exchange rates change. Realized gains and losses are ultimately determined by actual exchange rates at maturity. Investments in Debt and Equity Securities Information on investments in debt and equity securities is as follows: September 30, 2018 December 31, 2017 Fair Value Amortized Cost Gross Unrealized Fair Value Amortized Cost Gross Unrealized ($ in millions) Gains Losses Gains Losses Corporate notes and bonds $ 6,866 $ 6,952 $ 2 $ (88 ) $ 9,806 $ 9,837 $ 9 $ (40 ) U.S. government and agency securities 1,431 1,448 — (17 ) 2,042 2,059 — (17 ) Asset-backed securities 1,288 1,300 1 (13 ) 1,542 1,548 1 (7 ) Foreign government bonds 538 546 — (8 ) 733 739 — (6 ) Mortgage-backed securities 23 24 — (1 ) 626 634 1 (9 ) Commercial paper 30 30 — — 159 159 — — Total debt securities $ 10,176 $ 10,300 $ 3 $ (127 ) $ 14,908 $ 14,976 $ 11 $ (79 ) Publicly traded equity securities (1) 378 275 265 16 (6 ) Total debt and publicly traded equity securities $ 10,554 $ 15,183 $ 15,241 $ 27 $ (85 ) (1) Pursuant to the adoption of ASU 2016-01 (see Note 1), beginning on January 1, 2018, changes in the fair value of publicly traded equity securities are recognized in net income. Unrealized net gains of $10 million and $60 million , respectively, were recognized in Other (income) expense, net during the third quarter and first nine months of 2018 on equity securities still held at September 30, 2018 . At September 30, 2018 , the Company also had $749 million of equity investments without readily determinable fair values included in Other Assets . During the first nine months of 2018 , the Company recognized unrealized gains of $199 million on certain of these equity investments recorded in Other (income) expense, net based on favorable observable price changes from transactions involving similar investments of the same investee. In addition, during the first nine months of 2018 , the Company recognized unrealized losses of $25 million in Other (income) expense, net related to certain of these investments based on unfavorable observable price changes. Available-for-sale debt securities included in Short-term investments totaled $2.4 billion at September 30, 2018 . Of the remaining debt securities, $7.1 billion mature within five years. At September 30, 2018 and December 31, 2017 , there were no debt securities pledged as collateral. Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses a fair value hierarchy which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. There are three levels of inputs used to measure fair value with Level 1 having the highest priority and Level 3 having the lowest: Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities, Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities, Level 3 - Unobservable inputs that are supported by little or no market activity. Level 3 assets or liabilities are those whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques with significant unobservable inputs, as well as assets or liabilities for which the determination of fair value requires significant judgment or estimation. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis Financial assets and liabilities measured at fair value on a recurring basis are summarized below: Fair Value Measurements Using Fair Value Measurements Using Quoted Prices In Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Quoted Prices In Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total ($ in millions) September 30, 2018 December 31, 2017 Assets Investments Corporate notes and bonds $ — $ 6,765 $ — $ 6,765 $ — $ 9,678 $ — $ 9,678 Asset-backed securities (1) — 1,271 — 1,271 — 1,476 — 1,476 U.S. government and agency securities — 1,265 — 1,265 68 1,767 — 1,835 Foreign government bonds — 538 — 538 — 732 — 732 Commercial paper — 30 — 30 — 159 — 159 Mortgage-backed securities — — — — — 547 — 547 Publicly traded equity securities 196 — — 196 104 — — 104 196 9,869 — 10,065 172 14,359 — 14,531 Other assets (2) U.S. government and agency securities 54 112 — 166 — 207 — 207 Corporate notes and bonds — 101 — 101 — 128 — 128 Mortgage-backed securities — 23 — 23 — 79 — 79 Asset-backed securities (1) — 17 — 17 — 66 — 66 Foreign government bonds — — — — — 1 — 1 Publicly traded equity securities 182 — — 182 171 — — 171 236 253 — 489 171 481 — 652 Derivative assets (3) Forward exchange contracts — 233 — 233 — 48 — 48 Purchased currency options — 154 — 154 — 80 — 80 Interest rate swaps — — — — — 2 — 2 — 387 — 387 — 130 — 130 Total assets $ 432 $ 10,509 $ — $ 10,941 $ 343 $ 14,970 $ — $ 15,313 Liabilities Other liabilities Contingent consideration $ — $ — $ 852 $ 852 $ — $ — $ 935 $ 935 Derivative liabilities (3) Interest rate swaps — 140 — 140 — 55 — 55 Forward exchange contracts — 60 — 60 — 162 — 162 Written currency options — 4 — 4 — — — — — 204 — 204 — 217 — 217 Total liabilities $ — $ 204 $ 852 $ 1,056 $ — $ 217 $ 935 $ 1,152 (1) Primarily all of the asset-backed securities are highly-rated (Standard & Poor’s rating of AAA and Moody’s Investors Service rating of Aaa), secured primarily by auto loan, credit card and student loan receivables, with weighted-average lives of primarily 5 years or less. (2) Investments included in other assets are restricted as to use, primarily for the payment of benefits under employee benefit plans. (3) The fair value determination of derivatives includes the impact of the credit risk of counterparties to the derivatives and the Company’s own credit risk, the effects of which were not significant. There were no transfers between Level 1 and Level 2 during the first nine months of 2018 . As of September 30, 2018 , Cash and cash equivalents of $7.8 billion included $7.1 billion of cash equivalents (which would be considered Level 2 in the fair value hierarchy). Contingent Consideration Summarized information about the changes in liabilities for contingent consideration is as follows: Nine Months Ended September 30, ($ in millions) 2018 2017 Fair value January 1 $ 935 $ 891 Changes in estimated fair value (1) 144 151 Additions 8 3 Payments (235 ) (100 ) Fair value September 30 (2) $ 852 $ 945 (1) Recorded in Research and development expenses, Materials and production costs and Other (income) expense, net . Includes cumulative translation adjustments. (2) Balance at September 30, 2018 includes $95 million recorded as a current liability for amounts expected to be paid within the next 12 months. The payments of contingent consideration in the first nine months of 2018 include $175 million related to the achievement of a clinical milestone in connection with the 2016 acquisition of Afferent Pharmaceuticals. The remaining payments in 2018 relate to liabilities recorded in connection with the 2016 termination of the Sanofi-Pasteur MSD joint venture. The payments of contingent consideration in the first nine months of 2017 relate to the achievement of a clinical milestone in connection with the 2016 acquisition of IOmet Pharma Ltd. Other Fair Value Measurements Some of the Company’s financial instruments, such as cash and cash equivalents, receivables and payables, are reflected in the balance sheet at carrying value, which approximates fair value due to their short-term nature. The estimated fair value of loans payable and long-term debt (including current portion) at September 30, 2018 , was $24.0 billion compared with a carrying value of $23.6 billion and at December 31, 2017 , was $25.6 billion compared with a carrying value of $24.4 billion . Fair value was estimated using recent observable market prices and would be considered Level 2 in the fair value hierarchy. Concentrations of Credit Risk On an ongoing basis, the Company monitors concentrations of credit risk associated with corporate and government issuers of securities and financial institutions with which it conducts business. Credit exposure limits are established to limit a concentration with any single issuer or institution. Cash and investments are placed in instruments that meet high credit quality standards as specified in the Company’s investment policy guidelines. The majority of the Company’s accounts receivable arise from product sales in the United States and Europe and are primarily due from drug wholesalers and retailers, hospitals, government agencies, managed health care providers and pharmacy benefit managers. The Company monitors the financial performance and creditworthiness of its customers so that it can properly assess and respond to changes in their credit profile. The Company also continues to monitor global economic conditions, including the volatility associated with international sovereign economies, and associated impacts on the financial markets and its business. At September 30, 2018 , the Company’s total net accounts receivable outstanding for more than one year were approximately $40 million . The Company does not expect to have write-offs or adjustments to accounts receivable which would have a material adverse effect on its financial position, liquidity or results of operations. Derivative financial instruments are executed under International Swaps and Derivatives Association master agreements. The master agreements with several of the Company’s financial institution counterparties also include credit support annexes. These annexes contain provisions that require collateral to be exchanged depending on the value of the derivative assets and liabilities, the Company’s credit rating, and the credit rating of the counterparty. As of September 30, 2018 and December 31, 2017 , the Company had received cash collateral of $54 million and $3 million , respectively, from various counterparties and the obligation to return such collateral is recorded in Accrued and other current liabilities . The Company had not advanced any cash collateral to counterparties as of September 30, 2018 or December 31, 2017 . |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories Inventories consisted of: ($ in millions) September 30, 2018 December 31, 2017 Finished goods $ 1,585 $ 1,334 Raw materials and work in process 4,933 4,703 Supplies 202 201 Total (approximates current cost) 6,720 6,238 (Decrease) increase to LIFO costs (10 ) 45 $ 6,710 $ 6,283 Recognized as: Inventories $ 5,416 $ 5,096 Other assets 1,294 1,187 Amounts recognized as Other assets are comprised almost entirely of raw materials and work in process inventories. At September 30, 2018 and December 31, 2017 , these amounts included $1.3 billion and $1.1 billion , respectively, of inventories not expected to be sold within one year. In addition, these amounts included $3 million and $80 million at September 30, 2018 and December 31, 2017 , respectively, of inventories produced in preparation for product launches. |
Other Intangibles
Other Intangibles | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Other Intangibles | Other Intangibles In connection with acquisitions, the Company measures the fair value of research and development pipeline programs and marketed products and capitalizes these amounts. See Note 3 for information on intangible assets acquired as a result of business acquisitions in the first nine months of 2018 and 2017. During the third quarter and first nine months of 2017, the Company recorded $245 million and $253 million , respectively, of IPR&D impairment charges within Research and development expenses. In the third quarter of 2017, Merck made a strategic decision to discontinue the development of the investigational combination regimens MK-3682B (grazoprevir/ruzasvir/uprifosbuvir) and MK-3682C (ruzasvir/uprifosbuvir) for the treatment of chronic hepatitis C virus (HCV) infection. This decision was made based on a review of available Phase 2 efficacy data and in consideration of the evolving marketplace and the growing number of treatment options available for patients with chronic HCV infection, including Zepatier , which is marketed by the Company for the treatment of adult patients with chronic HCV infection. As a result of this decision, the Company recorded an IPR&D impairment charge of $240 million in the third quarter and first nine months of 2017 to write-off the remaining intangible asset related to uprifosbuvir. Also, during the first nine months of 2017, the Company recorded an intangible asset impairment charge of $47 million within Materials and production costs related to Intron A , a treatment for certain types of cancers. Sales of Intron A were being adversely affected by the availability of new therapeutic options. Sales of Intron A in the United States eroded more rapidly than previously anticipated by the Company, which led to changes in the cash flow assumptions for Intron A. These revisions to cash flows indicated that the Intron A intangible asset value was not fully recoverable on an undiscounted cash flows basis. The Company utilized market participant assumptions to determine its best estimate of the fair value of the intangible asset related to Intron A that, when compared with its related carrying value, resulted in the impairment charge noted above. |
Contingencies
Contingencies | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Contingencies The Company is involved in various claims and legal proceedings of a nature considered normal to its business, including product liability, intellectual property, and commercial litigation, as well as certain additional matters including governmental and environmental matters. In the opinion of the Company, it is unlikely that the resolution of these matters will be material to the Company’s financial position, results of operations or cash flows. Given the nature of the litigation discussed below and the complexities involved in these matters, the Company is unable to reasonably estimate a possible loss or range of possible loss for such matters until the Company knows, among other factors, (i) what claims, if any, will survive dispositive motion practice, (ii) the extent of the claims, including the size of any potential class, particularly when damages are not specified or are indeterminate, (iii) how the discovery process will affect the litigation, (iv) the settlement posture of the other parties to the litigation and (v) any other factors that may have a material effect on the litigation. The Company records accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. For product liability claims, a portion of the overall accrual is actuarially determined and considers such factors as past experience, number of claims reported and estimates of claims incurred but not yet reported. Individually significant contingent losses are accrued when probable and reasonably estimable. Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. The Company’s decision to obtain insurance coverage is dependent on market conditions, including cost and availability, existing at the time such decisions are made. The Company has evaluated its risks and has determined that the cost of obtaining product liability insurance outweighs the likely benefits of the coverage that is available and, as such, has no insurance for most product liabilities effective August 1, 2004. Product Liability Litigation Fosamax As previously disclosed, Merck is a defendant in product liability lawsuits in the United States involving Fosamax ( Fosamax Litigation). As of September 30, 2018 , approximately 3,955 cases are filed and pending against Merck in either federal or state court. In four of these actions, plaintiffs allege, among other things, that they have suffered osteonecrosis of the jaw (ONJ), generally subsequent to invasive dental procedures, such as tooth extraction or dental implants and/or delayed healing, in association with the use of Fosamax . In addition, plaintiffs in approximately 3,950 of these actions generally allege that they sustained femur fractures and/or other bone injuries (Femur Fractures) in association with the use of Fosamax . Cases Alleging ONJ and/or Other Jaw Related Injuries In August 2006, the Judicial Panel on Multidistrict Litigation (JPML) ordered that certain Fosamax product liability cases pending in federal courts nationwide should be transferred and consolidated into one multidistrict litigation ( Fosamax ONJ MDL) for coordinated pre-trial proceedings. In 2014, Merck settled approximately 95% of the ONJ cases pending in the Fosamax ONJ MDL and in state courts for a payment of $27.3 million . The escrow agent under the agreement has been making settlement payments to qualifying plaintiffs. The ONJ Master Settlement Agreement has no effect on the cases alleging Femur Fractures discussed below. The Fosamax ONJ MDL was closed in June 2018. Cases Alleging Femur Fractures In March 2011, Merck submitted a Motion to Transfer to the JPML seeking to have all federal cases alleging Femur Fractures consolidated into one multidistrict litigation for coordinated pre-trial proceedings. All federal cases involving allegations of Femur Fracture have been or will be transferred to a multidistrict litigation in the District of New Jersey (Femur Fracture MDL). In the only bellwether case tried to date in the Femur Fracture MDL, Glynn v. Merck , the jury returned a verdict in Merck’s favor. In addition, in June 2013, the Femur Fracture MDL court granted Merck’s motion for judgment as a matter of law in the Glynn case and held that the plaintiff’s failure to warn claim was preempted by federal law. In August 2013, the Femur Fracture MDL court entered an order requiring plaintiffs in the Femur Fracture MDL to show cause why those cases asserting claims for a femur fracture injury that took place prior to September 14, 2010, should not be dismissed based on the court’s preemption decision in the Glynn case. Pursuant to the show cause order, in March 2014, the Femur Fracture MDL court dismissed with prejudice approximately 650 cases on preemption grounds. Plaintiffs in approximately 515 of those cases appealed that decision to the U.S. Court of Appeals for the Third Circuit (Third Circuit). In March 2017, the Third Circuit issued a decision reversing the Femur Fracture MDL court’s preemption ruling and remanding the appealed cases back to the Femur Fracture MDL court. Merck filed a petition for a writ of certiorari to the U.S. Supreme Court in August 2017 seeking review of the Third Circuit’s decision. In December 2017, the Supreme Court invited the Solicitor General to file a brief in the case expressing the views of the United States, and in May 2018, the Solicitor General submitted a brief stating that the Third Circuit’s decision was wrongly decided and recommended that the Supreme Court grant Merck’s cert petition. The Supreme Court granted Merck’s petition in June 2018, and final decision on the Femur Fracture MDL court’s preemption ruling is now pending before the Supreme Court. Accordingly, as of September 30, 2018 , three cases were actively pending in the Femur Fracture MDL, and approximately 1,055 cases have either been dismissed without prejudice or administratively closed pending final resolution by the Supreme Court of the appeal of the Femur Fracture MDL court’s preemption order. As of September 30, 2018 , approximately 2,610 cases alleging Femur Fractures have been filed in New Jersey state court and are pending before Judge James Hyland in Middlesex County. The parties selected an initial group of 30 cases to be reviewed through fact discovery. Two additional groups of 50 cases each to be reviewed through fact discovery were selected in November 2013 and March 2014, respectively. A further group of 25 cases to be reviewed through fact discovery was selected by Merck in July 2015, and Merck has continued to select additional cases to be reviewed through fact discovery from 2016 to the present. As of September 30, 2018 , approximately 275 cases alleging Femur Fractures have been filed and are pending in California state court. All of the Femur Fracture cases filed in California state court have been coordinated before a single judge in Orange County, California. In March 2014, the court directed that a group of 10 discovery pool cases be reviewed through fact discovery and subsequently scheduled the Galper v. Merck case, which plaintiffs selected, as the first trial. The Galper trial began in February 2015 and the jury returned a verdict in Merck’s favor in April 2015, and plaintiff appealed that verdict to the California appellate court. In April 2017, the California appellate court issued a decision affirming the lower court’s judgment in favor of Merck. The next Femur Fracture trial in California that was scheduled to begin in April 2016 was stayed at plaintiffs’ request and a new trial date has not been set. Additionally, there are four Femur Fracture cases pending in other state courts. Discovery is ongoing in the Femur Fracture MDL and in state courts where Femur Fracture cases are pending and the Company intends to defend against these lawsuits. Januvia/Janumet As previously disclosed, Merck is a defendant in product liability lawsuits in the United States involving Januvia and/or Janumet . As of September 30, 2018 , Merck is aware of approximately 1,285 product users alleging that Januvia and/or Janumet caused the development of pancreatic cancer and other injuries. Most claims have been filed in multidistrict litigation before the U.S. District Court for the Southern District of California (MDL). Outside of the MDL, the majority of claims have been filed in coordinated proceedings before the Superior Court of California, County of Los Angeles (California State Court). In November 2015, the MDL and California State Court–in separate opinions–granted summary judgment to defendants on grounds of federal preemption. Plaintiffs appealed, and in November 2017, the U.S. Court of Appeals for the Ninth Circuit reversed and remanded for further discovery, which is ongoing. The appeal in California State Court was argued on October 4, 2018. As of September 30, 2018 , eight product users have claims pending against Merck in state courts other than California, including Illinois. In June 2017, the Illinois trial court denied Merck’s motion for summary judgment based on federal preemption. Merck has appealed, and oral argument is scheduled for November 14, 2018. In addition to the claims noted above, the Company has agreed to toll the statute of limitations for approximately 50 additional claims. The Company intends to continue defending against these lawsuits. Propecia/Proscar As previously disclosed, Merck is a defendant in product liability lawsuits in the United States involving Propecia and/or Proscar . The lawsuits were filed in various federal courts and in state court in New Jersey. The federal lawsuits were then consolidated for pretrial purposes in a federal multidistrict litigation before Judge Brian Cogan of the Eastern District of New York. The matters pending in state court in New Jersey were consolidated before Judge Hyland in Middlesex County (NJ Coordinated Proceedings). There is one matter pending in state court in California and one matter pending in state court in Massachusetts. As previously disclosed, on April 9, 2018, Merck and the Plaintiffs’ Executive Committee in the MDL and the Plaintiffs’ Liaison Counsel in the NJ Coordinated Proceedings entered into an agreement to resolve the above mentioned Propecia/Proscar lawsuits for an aggregate amount of $4.3 million . The settlement was subject to certain contingencies, including 95% plaintiff participation and a per plaintiff clawback if the participation rate was less than 100% . The contingencies were satisfied and the settlement agreement has been finalized. After the settlement, fewer than 40 cases will remain pending in the United States. The Company intends to defend against any remaining unsettled lawsuits. Governmental Proceedings As previously disclosed, the Company’s subsidiaries in China have received and may continue to receive inquiries regarding their operations from various Chinese governmental agencies. Some of these inquiries may be related to matters involving other multinational pharmaceutical companies, as well as Chinese entities doing business with such companies. The Company’s policy is to cooperate with these authorities and to provide responses as appropriate. As previously disclosed, from time to time, the Company receives inquiries and is the subject of preliminary investigation activities from competition and other governmental authorities in markets outside the United States. These authorities may include regulators, administrative authorities, and law enforcement and other similar officials, and these preliminary investigation activities may include site visits, formal or informal requests or demands for documents or materials, inquiries or interviews and similar matters. Certain of these preliminary inquiries or activities may lead to the commencement of formal proceedings. Should those proceedings be determined adversely to the Company, monetary fines and/or remedial undertakings may be required. Patent Litigation From time to time, generic manufacturers of pharmaceutical products file abbreviated New Drug Applications with the U.S. Food and Drug Administration (FDA) seeking to market generic forms of the Company’s products prior to the expiration of relevant patents owned by the Company. To protect its patent rights, the Company may file patent infringement lawsuits against such generic companies. Similar lawsuits defending the Company’s patent rights may exist in other countries. The Company intends to vigorously defend its patents, which it believes are valid, against infringement by companies attempting to market products prior to the expiration of such patents. As with any litigation, there can be no assurance of the outcomes, which, if adverse, could result in significantly shortened periods of exclusivity for these products and, with respect to products acquired through acquisitions, potentially significant intangible asset impairment charges. Inegy — The patents protecting Inegy in Europe have expired but supplemental protection certificates (SPCs) have been granted to the Company in many European countries that will expire in April 2019. There are multiple challenges to the SPCs related to Inegy throughout Europe and generic products have been launched in France, Italy, Ireland, Spain, Portugal, and the Netherlands and may launch in Germany. The Company has filed for preliminary injunctions in many countries that are still pending decision. Preliminary injunctions have been granted in Belgium, the Czech Republic, Germany, Greece, Portugal, Norway and Slovakia. Preliminary injunctions have been denied or revoked in France, Germany, Belgium, Ireland, the Netherlands and Spain. The Company is appealing those decisions. The Company has filed and will continue to file actions for patent infringement seeking damages against those companies that launch generic products before April 2019. Noxafil — In August 2015, the Company filed a lawsuit against Actavis Laboratories Fl, Inc. (Actavis) in the United States in respect of that company’s application to the FDA seeking pre-patent expiry approval to sell a generic version of Noxafil . In October 2017, the district court held the patent valid and infringed. Actavis appealed this decision. While the appeal was pending, the parties reached a settlement, subject to certain terms of the agreement being met, whereby Actavis can launch its generic version prior to expiry of the patent and pediatric exclusivity under certain conditions. In March 2016, the Company filed a lawsuit against Roxane Laboratories, Inc. (Roxane) in the United States in respect of that company’s application to the FDA seeking pre-patent expiry approval to sell a generic version of Noxafil . In November 2017, the parties reached a settlement whereby Roxane can launch its generic version prior to expiry of the patent under certain conditions. In February 2016, the Company filed a lawsuit against Par Sterile Products LLC, Par Pharmaceutical, Inc., Par Pharmaceutical Companies, Inc. and Par Pharmaceutical Holdings, Inc. (collectively, Par) in the United States in respect of that company’s application to the FDA seeking pre-patent expiry approval to sell a generic version of Noxafil injection. In October 2016, the parties reached a settlement whereby Par can launch its generic version in January 2023, or earlier under certain conditions. In February 2018, the Company filed a lawsuit against Fresenius Kabi USA, LLC., in the United States in respect of that company’s application to the FDA seeking pre-patent expiry approval to sell a generic version of Noxafil. In March 2018, the Company filed a lawsuit against Mylan Laboratories Limited in the United States in respect of that company’s application to the FDA seeking pre-patent expiry approval to sell a generic version of Noxafil . Nasonex — Nasonex lost market exclusivity in the United States in 2016. Prior to that, in April 2015, the Company filed a patent infringement lawsuit against Apotex Inc. and Apotex Corp. (Apotex) in respect of Apotex’s marketed product that the Company believed was infringing. In January 2018, the Company and Apotex settled this matter with Apotex agreeing to pay the Company $115 million plus certain other consideration. Gilead Patent Litigation and Opposition In August 2013, Gilead Sciences, Inc. (Gilead) filed a lawsuit in the U.S. District Court for the Northern District of California seeking a declaration that two Company patents were invalid and not infringed by the sale of their two sofosbuvir containing products, Sovaldi and Harvoni. The Company filed a counterclaim that the sale of these products did infringe these two patents and sought a reasonable royalty for the past, present and future sales of these products. In March 2016, at the conclusion of a jury trial, the patents were found to be not invalid and infringed. The jury awarded the Company $200 million as a royalty for sales of these products up to December 2015. After the conclusion of the jury trial, the court held a bench trial on the equitable defenses raised by Gilead. In June 2016, the court found for Gilead and determined that Merck could not collect the jury award and that the patents were unenforceable with respect to Gilead. The Company appealed the court’s decision. Gilead also asked the court to overturn the jury’s decision on validity. The court held a hearing on Gilead’s motion in August 2016, and the court subsequently rejected Gilead’s request, which Gilead appealed. In April 2018, the appeals court affirmed the decisions that both patents were unenforceable against Gilead. In September 2018, Merck filed a petition for a writ of certiorari to the U.S. Supreme Court seeking review of the appellate decision. The Company, through its Idenix Pharmaceuticals, Inc. subsidiary, has pending litigation against Gilead in the United States, Germany and France based on different patent estates that would also be infringed by Gilead’s sales of these two products. Gilead opposed the European patent at the European Patent Office (EPO). Trial in the United States was held in December 2016 and the jury returned a verdict for the Company, awarding damages of $2.54 billion . The Company submitted post-trial motions, including on the issues of enhanced damages and future royalties. Gilead submitted post-trial motions for judgment as a matter of law. A hearing on the motions was held in September 2017. Also, in September 2017, the court denied the Company’s motion on enhanced damages, granted its motion on prejudgment interest and deferred its motion on future royalties. In February 2018, the court granted Gilead’s motion for judgment as a matter of law and found the patent was invalid for a lack of enablement. The Company appealed this decision. The EPO opposition division revoked the European patent, and the Company appealed this decision. The cases in France and Germany have been stayed pending the final decision of the EPO. Other Litigation There are various other pending legal proceedings involving the Company, principally product liability and intellectual property lawsuits. While it is not feasible to predict the outcome of such proceedings, in the opinion of the Company, either the likelihood of loss is remote or any reasonably possible loss associated with the resolution of such proceedings is not expected to be material to the Company’s financial position, results of operations or cash flows either individually or in the aggregate. Legal Defense Reserves Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. Some of the significant factors considered in the review of these legal defense reserves are as follows: the actual costs incurred by the Company; the development of the Company’s legal defense strategy and structure in light of the scope of its litigation; the number of cases being brought against the Company; the costs and outcomes of completed trials and the most current information regarding anticipated timing, progression, and related costs of pre-trial activities and trials in the associated litigation. The amount of legal defense reserves as of September 30, 2018 and December 31, 2017 of approximately $150 million and $160 million , respectively, represents the Company’s best estimate of the minimum amount of defense costs to be incurred in connection with its outstanding litigation; however, events such as additional trials and other events that could arise in the course of its litigation could affect the ultimate amount of legal defense costs to be incurred by the Company. The Company will continue to monitor its legal defense costs and review the adequacy of the associated reserves and may determine to increase the reserves at any time in the future if, based upon the factors set forth, it believes it would be appropriate to do so. |
Equity
Equity | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Equity | Equity Three Months Ended September 30, Common Stock Other Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Non- Controlling Interests Total ($ and shares in millions) Shares Par Value Shares Cost Balance at July 1, 2017 3,577 $ 1,788 $ 39,776 $ 45,046 $ (5,094 ) 850 $ (42,053 ) $ 249 $ 39,712 Net loss attributable to Merck & Co., Inc. — — — (56 ) — — — — (56 ) Other comprehensive income, net of taxes — — — — 149 — — — 149 Cash dividends declared on common stock ($0.47 per share) — — — (1,289 ) — — — — (1,289 ) Treasury stock shares purchased — — — — — 2 (159 ) — (159 ) Share-based compensation plans and other — — 47 — — (1 ) 93 — 140 Net income attributable to noncontrolling interests — — — — — — — 5 5 Distributions attributable to noncontrolling interests — — — — — — — (3 ) (3 ) Balance at September 30, 2017 3,577 $ 1,788 $ 39,823 $ 43,701 $ (4,945 ) 851 $ (42,119 ) $ 251 $ 38,499 Balance at July 1, 2018 3,577 $ 1,788 $ 39,741 $ 41,523 $ (5,122 ) 907 $ (45,401 ) $ 237 $ 32,766 Net income attributable to Merck & Co., Inc. — — — 1,950 — — — — 1,950 Other comprehensive loss, net of taxes — — — — (29 ) — — — (29 ) Cash dividends declared on common stock ($0.48 per share) — — — (1,284 ) — — — — (1,284 ) Treasury stock shares purchased — — — — — 16 (996 ) — (996 ) Share-based compensation plans and other — — 21 — — (5 ) 231 — 252 Net income attributable to noncontrolling interests — — — — — — — 8 8 Distributions attributable to noncontrolling interests — — — — — — — (11 ) (11 ) Balance at September 30, 2018 3,577 $ 1,788 $ 39,762 $ 42,189 $ (5,151 ) 918 $ (46,166 ) $ 234 $ 32,656 Nine Months Ended September 30, Common Stock Other Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Non- Controlling Interests Total ($ and shares in millions) Shares Par Value Shares Cost Balance at January 1, 2017 3,577 $ 1,788 $ 39,939 $ 44,133 $ (5,226 ) 828 $ (40,546 ) $ 220 $ 40,308 Net income attributable to Merck & Co., Inc. — — — 3,440 — — — — 3,440 Other comprehensive income, net of taxes — — — — 281 — — — 281 Cash dividends declared on common stock ($1.41 per share) — — — (3,872 ) — — — — (3,872 ) Treasury stock shares purchased — — — — — 36 (2,312 ) — (2,312 ) Share-based compensation plans and other — — (116 ) — — (13 ) 739 — 623 Acquisition of Vallée — — — — — — — 25 25 Net income attributable to noncontrolling interests — — — — — — — 16 16 Distributions attributable to noncontrolling interests — — — — — — — (10 ) (10 ) Balance at September 30, 2017 3,577 $ 1,788 $ 39,823 $ 43,701 $ (4,945 ) 851 $ (42,119 ) $ 251 $ 38,499 Balance at January 1, 2018 3,577 $ 1,788 $ 39,902 $ 41,350 $ (4,910 ) 880 $ (43,794 ) $ 233 $ 34,569 Adoption of new accounting standards (see Note 1) — — — 322 (274 ) — — — 48 Net income attributable to Merck & Co., Inc. — — — 4,393 — — — — 4,393 Other comprehensive income, net of taxes — — — — 33 — — — 33 Cash dividends declared on common stock ($1.44 per share) — — — (3,876 ) — — — — (3,876 ) Treasury stock shares purchased — — — — — 53 (3,158 ) — (3,158 ) Share-based compensation plans and other — — (140 ) — — (15 ) 786 — 646 Net income attributable to noncontrolling interests — — — — — — — 22 22 Distributions attributable to noncontrolling interests — — — — — — — (21 ) (21 ) Balance at September 30, 2018 3,577 $ 1,788 $ 39,762 $ 42,189 $ (5,151 ) 918 $ (46,166 ) $ 234 $ 32,656 |
Share-Based Compensation Plans
Share-Based Compensation Plans | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation Plans | Share-Based Compensation Plans The Company has share-based compensation plans under which the Company grants restricted stock units (RSUs) and performance share units (PSUs) to certain management level employees. In addition, employees and non-employee directors may be granted options to purchase shares of Company common stock at the fair market value at the time of grant. The following table provides the amounts of share-based compensation cost recorded in the Condensed Consolidated Statement of Income: Three Months Ended Nine Months Ended ($ in millions) 2018 2017 2018 2017 Pretax share-based compensation expense $ 91 $ 76 $ 261 $ 232 Income tax benefit (14 ) (23 ) (42 ) (70 ) Total share-based compensation expense, net of taxes $ 77 $ 53 $ 219 $ 162 During the first nine months of 2018 and 2017 , the Company granted 7 million RSUs with a weighted-average grant date fair value of $58.19 per RSU and 5 million RSUs with a weighted-average grant date fair value of $63.96 per RSU, respectively. During the first nine months of 2018 and 2017 , the Company granted 855 thousand PSUs with a weighted-average grant date fair value of $56.70 per PSU and 1 million PSUs with a weighted-average grant date fair value of $63.62 per PSU, respectively. During the first nine months of 2018 and 2017 , the Company granted 3 million stock options with a weighted-average exercise price of $57.72 per option and 4 million stock options with a weighted-average exercise price of $63.96 per option, respectively. The weighted-average fair value of options granted for the first nine months of 2018 and 2017 was $8.19 and $7.04 per option, respectively, and was determined using the following assumptions: Nine Months Ended 2018 2017 Expected dividend yield 3.4 % 3.6 % Risk-free interest rate 2.8 % 2.0 % Expected volatility 19.1 % 17.8 % Expected life (years) 6.1 6.1 At September 30, 2018 , there was $654 million of total pretax unrecognized compensation expense related to nonvested stock options, RSU and PSU awards which will be recognized over a weighted-average period of 2.1 years . For segment reporting, share-based compensation costs are unallocated expenses. |
Pension and Other Postretiremen
Pension and Other Postretirement Benefit Plans | 9 Months Ended |
Sep. 30, 2018 | |
Retirement Benefits [Abstract] | |
Pension and Other Postretirement Benefit Plans | Pension and Other Postretirement Benefit Plans The Company has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. The net periodic benefit cost of such plans consisted of the following components: Three Months Ended Nine Months Ended 2018 2017 2018 2017 ($ in millions) U.S. International U.S. International U.S. International U.S. International Service cost $ 77 $ 56 $ 80 $ 66 $ 245 $ 181 $ 234 $ 189 Interest cost 109 43 114 44 324 134 341 127 Expected return on plan assets (209 ) (106 ) (210 ) (101 ) (634 ) (326 ) (646 ) (292 ) Amortization of unrecognized prior service credit (12 ) (3 ) (13 ) (3 ) (37 ) (10 ) (40 ) (8 ) Net loss amortization 63 21 46 25 174 64 135 72 Termination benefits 1 — 3 1 18 — 11 2 Curtailments 3 — 4 (1 ) 7 (1 ) 8 (1 ) Settlements — — — — 1 3 — — $ 32 $ 11 $ 24 $ 31 $ 98 $ 45 $ 43 $ 89 The Company now anticipates contributing approximately $375 million to its U.S. pension plans in 2018, of which $325 million was contributed in the third quarter. The Company provides medical benefits, principally to its eligible U.S. retirees and similar benefits to their dependents, through its other postretirement benefit plans. The net credit of such plans consisted of the following components: Three Months Ended Nine Months Ended ($ in millions) 2018 2017 2018 2017 Service cost $ 15 $ 15 $ 43 $ 43 Interest cost 17 20 52 61 Expected return on plan assets (21 ) (20 ) (63 ) (59 ) Amortization of unrecognized prior service credit (21 ) (24 ) (63 ) (74 ) Net loss amortization — — 1 1 Termination benefits — — 2 1 Curtailments (1 ) (1 ) (7 ) (6 ) $ (11 ) $ (10 ) $ (35 ) $ (33 ) In connection with restructuring actions (see Note 5), termination charges were recorded on pension and other postretirement benefit plans related to expanded eligibility for certain employees exiting Merck. Also, in connection with these restructuring actions, curtailments and settlements were recorded on pension and other postretirement benefit plans as reflected in the tables above. The components of net periodic benefit cost (credit) other than the service cost component are included in Other (income) expense, net (see Note 13), with the exception of certain amounts for termination benefits, curtailments and settlements, which are recorded in Restructuring costs if the event giving rise to the termination benefits, curtailment or settlement is related to restructuring actions as noted above. |
Other (Income) Expense, Net
Other (Income) Expense, Net | 9 Months Ended |
Sep. 30, 2018 | |
Other Income and Expenses [Abstract] | |
Other (Income) Expense, Net | Other (Income) Expense, Net Other (income) expense, net, consisted of: Three Months Ended Nine Months Ended ($ in millions) 2018 2017 2018 2017 Interest income $ (92 ) $ (90 ) $ (257 ) $ (284 ) Interest expense 190 189 569 564 Exchange losses (gains) 42 (6 ) 119 5 Equity income from affiliates (81 ) (18 ) (93 ) (11 ) Net periodic defined benefit plan (credit) cost other than service cost (119 ) (121 ) (384 ) (381 ) Other, net (112 ) (161 ) (466 ) (244 ) $ (172 ) $ (207 ) $ (512 ) $ (351 ) The increases in equity income from affiliates in the third quarter and first nine months of 2018 compared with the same periods of 2017 were driven primarily by higher equity income from certain research investment funds. Other, net (as reflected in the table above) includes net gains on securities of $80 million and $202 million in the third quarter and first nine months of 2018, respectively, compared with $25 million and $74 million for the third quarter and first nine months of 2017, respectively. The increase in net gains on securities is attributable to the recognition of unrealized gains on equity securities pursuant to the prospective adoption of ASU 2016-01 on January 1, 2018 (see Note 1). Other, net in the first nine months of 2018 also includes a $115 million gain on the settlement of certain patent litigation (see Note 9). These gains were partially offset by lower income related to AstraZeneca’s option exercise in 2014. Interest paid for the nine months ended September 30, 2018 and 2017 was $535 million and $505 million , respectively. |
Taxes on Income
Taxes on Income | 9 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Taxes on Income | Taxes on Income The effective income tax rates of 26.5% and 125.5% for the third quarter of 2018 and 2017 , respectively, and 27.6% and 25.5% for the first nine months of 2018 and 2017, respectively, reflect the impacts of acquisition and divestiture-related costs and restructuring costs, partially offset by the beneficial impact of foreign earnings. In addition, the effective income tax rates for the third quarter and first nine months of 2018 reflect the unfavorable impact of a $420 million aggregate pretax charge related to the termination of a collaboration agreement with Samsung for which no tax benefit was recognized. The effective income tax rate for the first nine months of 2018 also reflects the unfavorable impact of a $1.4 billion aggregate pretax charge recorded in connection with the formation of an oncology collaboration with Eisai for which no tax benefit was recognized. In addition, the effective income tax rates for the third quarter and first nine months of 2017 reflect the unfavorable impact of a $2.35 billion aggregate pretax charge recorded in connection with the formation of an oncology collaboration with AstraZeneca for which no tax benefit was recognized, partially offset by the favorable impact of a net tax benefit of $234 million related to the settlement of certain federal income tax issues (discussed below). The effective income tax rate for the first nine months of 2017 also reflects a benefit of $88 million related to the settlement of a state income tax issue. In the third quarter of 2017, the Internal Revenue Service (IRS) concluded its examinations of Merck’s 2006-2011 U.S. federal income tax returns. As a result, the Company was required to make a payment of approximately $2.8 billion . The Company’s reserves for unrecognized tax benefits for the years under examination exceeded the adjustments relating to this examination period and therefore the Company recorded a net $234 million tax benefit in the third quarter of 2017. This net benefit reflects reductions in reserves for unrecognized tax benefits for tax positions relating to the years that were under examination, partially offset by additional reserves for tax positions not previously reserved for, as well as adjustments to reserves for unrecognized tax benefits relating to years which remain open to examination that are affected by this settlement. On December 22, 2017, new U.S. tax legislation known as the Tax Cuts and Jobs Act of 2017 (TCJA) was enacted. Among other provisions, the TCJA reduced the U.S. federal corporate statutory tax rate from 35% to 21% effective January 1, 2018, requires companies to pay a one-time transition tax on undistributed earnings of certain foreign subsidiaries, and creates new taxes on certain foreign sourced earnings. The Company reflected the impact of the TCJA in its 2017 financial statements as described below. However, application of certain provisions of the TCJA was and remains subject to further interpretation and in these instances the Company made a reasonable estimate of the effects of the TCJA. Changes to these amounts in the first nine months of 2018 were immaterial. The one-time transition tax is based on the Company’s post-1986 undistributed earnings and profits (E&P). For a substantial portion of these undistributed E&P, the Company had not previously provided deferred taxes as these earnings were deemed by Merck to be retained indefinitely by subsidiary companies for reinvestment. The Company recorded a provisional amount for its one-time transition tax liability of $5.3 billion in 2017. Merck has not yet finalized its calculation of the total post-1986 undistributed E&P for these foreign subsidiaries. The transition tax is based in part on the amount of undistributed E&P held in cash and other specified assets; therefore, this amount may change when the Company finalizes its calculation of post-1986 undistributed foreign E&P and finalizes the amounts held in cash or other specified assets. This provisional amount was reduced by the reversal of $2.0 billion of deferred taxes that were previously recorded in connection with the merger of Schering-Plough Corporation in 2009 for certain undistributed foreign E&P. The Company anticipates that it will be able to utilize certain foreign tax credits to partially reduce the transition tax payment, resulting in a net transition tax payment of $5.1 billion . The Company remeasured its deferred tax assets and liabilities at the new federal statutory tax rate of 21%, which resulted in a provisional deferred tax benefit of $779 million in 2017. The deferred tax benefit calculation remains subject to certain clarifications, particularly related to executive compensation and benefits. Beginning in 2018, the TCJA includes a tax on “global intangible low-taxed income” (GILTI) as defined in the TCJA. The Company is allowed to make an accounting policy election to account for the tax effects of the GILTI tax either in the income tax provision in future periods as the tax arises, or as a component of deferred taxes on the related investments in foreign subsidiaries. The Company is currently evaluating the GILTI provisions of the TCJA and the implications on its tax provision and has not finalized the accounting policy election; therefore, the Company has not recorded deferred taxes for GILTI. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share The calculations of earnings per share are as follows: Three Months Ended Nine Months Ended ($ and shares in millions except per share amounts) 2018 2017 2018 2017 Net income (loss) attributable to Merck & Co., Inc. $ 1,950 $ (56 ) $ 4,393 $ 3,440 Average common shares outstanding 2,662 2,727 2,680 2,735 Common shares issuable (1) 16 — 14 19 Average common shares outstanding assuming dilution 2,678 2,727 2,694 2,754 Basic earnings (loss) per common share attributable to Merck & Co., Inc. common shareholders $ 0.73 $ (0.02 ) $ 1.64 $ 1.26 Earnings (loss) per common share assuming dilution attributable to Merck & Co., Inc. common shareholders $ 0.73 $ (0.02 ) $ 1.63 $ 1.25 (1) Issuable primarily under share-based compensation plans. For the three months ended September 30, 2018 , 2 million , and for the first nine months of 2018 and 2017, 7 million and 4 million , respectively, of common shares issuable under share-based compensation plans were excluded from the computation of earnings per common share assuming dilution because the effect would have been antidilutive. The Company recorded a net loss for the three months ended September 30, 2017; therefore, no potential dilutive common shares were used in the computation of loss per common share assuming dilution because the effect would have been antidilutive. |
Other Comprehensive Income (Los
Other Comprehensive Income (Loss) | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Other Comprehensive Income (Loss) | Other Comprehensive Income (Loss) Changes in AOCI by component are as follows: Three Months Ended September 30, ($ in millions) Derivatives Investments Employee Benefit Plans Cumulative Translation Adjustment Accumulated Other Comprehensive Income (Loss) Balance July 1, 2017, net of taxes $ (37 ) $ 75 $ (3,133 ) $ (1,999 ) $ (5,094 ) Other comprehensive income (loss) before reclassification adjustments, pretax (88 ) 170 2 23 107 Tax 31 (19 ) (13 ) 44 43 Other comprehensive income (loss) before reclassification adjustments, net of taxes (57 ) 151 (11 ) 67 150 Reclassification adjustments, pretax (14 ) (1) (24 ) (2) 31 (3) — (7 ) Tax 5 8 (7 ) — 6 Reclassification adjustments, net of taxes (9 ) (16 ) 24 — (1 ) Other comprehensive income (loss), net of taxes (66 ) 135 13 67 149 Balance September 30, 2017, net of taxes $ (103 ) $ 210 $ (3,120 ) $ (1,932 ) $ (4,945 ) Balance July 1, 2018, net of taxes $ 65 $ (164 ) $ (3,065 ) $ (1,958 ) $ (5,122 ) Other comprehensive income (loss) before reclassification adjustments, pretax 29 8 — (147 ) (110 ) Tax (6 ) — — 11 5 Other comprehensive income (loss) before reclassification adjustments, net of taxes 23 8 — (136 ) (105 ) Reclassification adjustments, pretax 5 (1) 32 (2) 47 (3) — 84 Tax (1 ) — (7 ) — (8 ) Reclassification adjustments, net of taxes 4 32 40 — 76 Other comprehensive income (loss), net of taxes 27 40 40 (136 ) (29 ) Balance September 30, 2018, net of taxes $ 92 $ (124 ) $ (3,025 ) $ (2,094 ) $ (5,151 ) Nine Months Ended September 30, ($ in millions) Derivatives Investments Employee Benefit Plans Cumulative Translation Adjustment Accumulated Other Comprehensive Income (Loss) Balance January 1, 2017, net of taxes $ 338 $ (3 ) $ (3,206 ) $ (2,355 ) $ (5,226 ) Other comprehensive income (loss) before reclassification adjustments, pretax (520 ) 283 27 261 51 Tax 182 (23 ) (7 ) 162 314 Other comprehensive income (loss) before reclassification adjustments, net of taxes (338 ) 260 20 423 365 Reclassification adjustments, pretax (159 ) (1) (73 ) (2) 86 (3) — (146 ) Tax 56 26 (20 ) — 62 Reclassification adjustments, net of taxes (103 ) (47 ) 66 — (84 ) Other comprehensive income (loss), net of taxes (441 ) 213 86 423 281 Balance September 30, 2017, net of taxes $ (103 ) $ 210 $ (3,120 ) $ (1,932 ) $ (4,945 ) Balance January 1, 2018, net of taxes $ (108 ) $ (61 ) $ (2,787 ) $ (1,954 ) $ (4,910 ) Other comprehensive income (loss) before reclassification adjustments, pretax 113 (125 ) (2 ) (129 ) (143 ) Tax (24 ) 1 4 (111 ) (130 ) Other comprehensive income (loss) before reclassification adjustments, net of taxes 89 (124 ) 2 (240 ) (273 ) Reclassification adjustments, pretax 169 (1) 68 (2) 128 (3) — 365 Tax (35 ) — (24 ) — (59 ) Reclassification adjustments, net of taxes 134 68 104 — 306 Other comprehensive income (loss), net of taxes 223 (56 ) 106 (240 ) 33 Adoption of ASU 2018-02 (see Note 1) (23 ) 1 (344 ) 100 (266 ) Adoption of ASU 2016-01 (see Note 1) — (8 ) — — (8 ) Balance September 30, 2018, net of taxes $ 92 $ (124 ) $ (3,025 ) $ (2,094 ) $ (5,151 ) (1) Relates to foreign currency cash flow hedges that were reclassified from AOCI to Sales. (2) Represents net realized (gains) losses on the sales of available-for-sale investments that were reclassified from AOCI to Other (income) expense, net . In 2017, these amounts included both debt and equity investments; however, upon adoption of ASU 2016-01 in 2018 (see Note 1), these amounts relate only to available-for-sale debt investments. (3) Includes net amortization of prior service cost and actuarial gains and losses included in net periodic benefit cost (see Note 12). |
Segment Reporting
Segment Reporting | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
Segment Reporting | Segment Reporting The Company’s operations are principally managed on a products basis and include four operating segments, which are the Pharmaceutical, Animal Health, Healthcare Services and Alliances segments. The Pharmaceutical and Animal Health segments are the only reportable segments. The Animal Health segment met the criteria for separate reporting and became a reportable segment in the first quarter of 2018. The Pharmaceutical segment includes human health pharmaceutical and vaccine products. Human health pharmaceutical products consist of therapeutic and preventive agents, generally sold by prescription, for the treatment of human disorders. The Company sells these human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. Vaccine products consist of preventive pediatric, adolescent and adult vaccines, primarily administered at physician offices. The Company sells these human health vaccines primarily to physicians, wholesalers, physician distributors and government entities. A large component of pediatric and adolescent vaccine sales are made to the U.S. Centers for Disease Control and Prevention Vaccines for Children program, which is funded by the U.S. government. Additionally, the Company sells vaccines to the Federal government for placement into vaccine stockpiles. The Animal Health segment discovers, develops, manufactures and markets animal health products, including vaccines, which the Company sells to veterinarians, distributors and animal producers. The Healthcare Services segment provides services and solutions that focus on engagement, health analytics and clinical services to improve the value of care delivered to patients. Sales of the Company’s products were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 ($ in millions) U.S. Int’l Total U.S. Int’l Total U.S. Int’l Total U.S. Int’l Total Pharmaceutical: Oncology Keytruda $ 1,109 $ 780 $ 1,889 $ 604 $ 442 $ 1,047 $ 2,906 $ 2,114 $ 5,020 $ 1,522 $ 990 $ 2,512 Emend 71 52 123 88 49 137 239 157 396 257 156 413 Temodar — 46 46 — 68 68 3 156 159 4 194 198 Alliance revenue - Lynparza 33 15 49 — 5 5 88 37 125 — 5 5 Alliance revenue - Lenvima 30 13 43 — — — 49 29 78 — — — Vaccines Gardasil/Gardasil 9 740 308 1,048 484 191 675 1,422 894 2,317 1,195 481 1,675 ProQuad/M-M-R II /Varivax 429 96 525 419 100 519 1,097 246 1,343 1,058 215 1,273 Pneumovax 23 160 54 214 174 56 229 394 192 586 392 166 558 RotaTeq 134 57 191 127 52 179 384 156 540 377 148 525 Zostavax (1 ) 56 54 139 94 234 16 147 163 356 191 547 Hospital Acute Care Bridion 96 120 217 63 122 185 272 389 661 162 333 495 Noxafil 89 99 188 78 83 162 257 294 551 220 237 458 Invanz 74 62 137 93 66 159 252 185 437 268 177 445 Cubicin 55 40 95 41 50 91 150 137 287 148 141 290 Cancidas 2 77 79 6 88 94 10 247 257 17 310 327 Primaxin 1 71 72 5 68 73 6 206 212 7 199 206 Immunology Simponi — 210 210 — 219 219 — 673 673 — 602 602 Remicade — 135 135 — 214 214 — 459 459 — 651 651 Neuroscience Belsomra 23 43 66 27 30 56 76 115 191 72 78 150 Virology Isentress/Isentress HD 123 151 275 143 167 310 383 477 860 422 474 896 Zepatier 18 86 104 228 241 468 8 339 347 683 680 1,363 Cardiovascular Zetia 9 157 165 65 255 320 34 662 696 298 723 1,021 Vytorin — 92 92 (6 ) 148 142 11 402 414 114 451 565 Atozet — 84 84 — 59 59 — 258 258 — 171 171 Adempas — 94 94 — 70 70 — 238 238 — 221 221 Diabetes Januvia 498 429 927 598 414 1,012 1,466 1,291 2,756 1,646 1,153 2,799 Janumet 225 339 563 197 316 513 625 1,067 1,693 640 933 1,572 Women’s Health NuvaRing 193 41 234 160 54 214 550 135 686 425 148 573 Implanon/Nexplanon 133 53 186 110 45 155 375 160 535 367 137 503 Diversified Brands Singulair 5 156 161 16 145 161 16 505 521 28 522 550 Cozaar/Hyzaar 4 99 103 9 119 128 18 330 348 15 345 360 Nasonex 7 64 71 (23 ) 65 42 8 266 274 16 250 266 Arcoxia — 83 83 — 80 80 — 249 249 — 272 272 Follistim AQ 26 34 60 30 41 72 83 115 198 104 128 232 Fosamax 2 42 45 4 48 53 3 155 159 7 173 180 Dulera 44 6 50 52 7 59 128 21 149 191 19 210 Other pharmaceutical (1) 317 666 980 266 688 952 877 2,150 3,023 876 2,140 3,017 Total Pharmaceutical segment sales 4,649 5,010 9,658 4,197 4,959 9,156 12,206 15,653 27,859 11,887 14,214 26,101 Animal Health: Livestock 153 508 660 137 518 655 383 1,563 1,946 359 1,457 1,816 Companion Animals 153 207 361 153 192 345 541 689 1,230 483 595 1,078 Total Animal Health segment sales 306 715 1,021 290 710 1,000 924 2,252 3,176 842 2,052 2,894 Other segment sales (2) 55 — 55 100 — 100 194 1 195 294 — 294 Total segment sales 5,010 5,725 10,734 4,587 5,669 10,256 13,324 17,906 31,230 13,023 16,266 29,289 Other (3) 20 39 60 7 63 69 101 (35 ) 66 73 327 400 $ 5,030 $ 5,764 $ 10,794 $ 4,594 $ 5,732 $ 10,325 $ 13,425 $ 17,871 $ 31,296 $ 13,096 $ 16,593 $ 29,689 U.S. plus international may not equal total due to rounding. (1) Other pharmaceutical primarily reflects sales of other human health pharmaceutical products, including products within the franchises not listed separately. (2) Represents the non-reportable segments of Healthcare Services and Alliances. (3) Other is primarily comprised of miscellaneous corporate revenues, including revenue hedging activities, as well as third-party manufacturing sales. Other in the first nine months of 2018 and 2017 also includes $81 million and $60 million , respectively, related to the sale of the marketing rights to certain products. Consolidated revenues by geographic area where derived are as follows: Three Months Ended Nine Months Ended ($ in millions) 2018 2017 2018 2017 United States $ 5,030 $ 4,594 $ 13,425 $ 13,096 Europe, Middle East and Africa 2,884 2,941 9,218 8,374 Asia Pacific 1,178 1,112 3,766 3,164 Japan 761 775 2,353 2,320 Latin America 622 585 1,748 1,654 Other 319 318 786 1,081 $ 10,794 $ 10,325 $ 31,296 $ 29,689 A reconciliation of segment profits to Income before taxes is as follows: Three Months Ended Nine Months Ended ($ in millions) 2018 2017 2018 2017 Segment profits: Pharmaceutical segment $ 6,479 $ 5,906 $ 18,109 $ 16,657 Animal Health segment 409 389 1,273 1,202 Other segments 5 93 94 234 Total segment profits 6,893 6,388 19,476 18,093 Other profits (losses) 55 (78 ) (35 ) 107 Unallocated: Interest income 92 90 257 284 Interest expense (190 ) (189 ) (569 ) (564 ) Equity income from affiliates 85 23 101 16 Depreciation and amortization (324 ) (334 ) (1,006 ) (1,036 ) Research and development (1,855 ) (4,208 ) (6,878 ) (7,399 ) Amortization of purchase accounting adjustments (679 ) (765 ) (2,144 ) (2,322 ) Restructuring costs (171 ) (153 ) (494 ) (470 ) Aggregate charge related to termination of collaboration agreement with Samsung (420 ) — (420 ) — Other unallocated, net (821 ) (574 ) (2,191 ) (2,067 ) $ 2,665 $ 200 $ 6,097 $ 4,642 Pharmaceutical segment profits are comprised of segment sales less standard costs, as well as marketing and administrative expenses and research and development costs directly incurred by the segment. Animal Health segment profits are comprised of segment sales, less all materials and production costs, as well as marketing and administrative expenses and research and development costs directly incurred by the segment. For internal management reporting presented to the chief operating decision maker, Merck does not allocate the remaining materials and production costs not included in segment profits as described above, research and development expenses incurred in Merck Research Laboratories, the Company’s research and development division that focuses on human health-related activities, or general and administrative expenses, nor the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits. In addition, costs related to restructuring activities, as well as the amortization of purchase accounting adjustments are not allocated to segments. Other profits are primarily comprised of miscellaneous corporate profits, as well as operating profits related to third-party manufacturing sales. Other unallocated, net includes expenses from corporate and manufacturing cost centers, goodwill and other intangible asset impairment charges, gains or losses on sales of businesses, expense or income related to changes in the estimated fair value of contingent consideration, and other miscellaneous income or expense items. In the first quarter of 2018, the Company adopted a new accounting standard related to the classification of certain defined benefit plan costs (see Note 1), which resulted in a change to the measurement of segment profits. Net periodic benefit cost (credit) other than service cost is no longer included as a component of segment profits. Prior period amounts have been recast to conform to the new presentation. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Merck & Co., Inc. (Merck or the Company) have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements are not included herein. These interim statements should be read in conjunction with the audited financial statements and notes thereto included in Merck’s Form 10-K filed on February 27, 2018. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. In the Company’s opinion, all adjustments necessary for a fair statement of these interim statements have been included and are of a normal and recurring nature. Certain reclassifications have been made to prior year amounts to conform to the current presentation. |
Recently Adopted and Issued Accounting Standards | Recently Adopted Accounting Standards In May 2014, the Financial Accounting Standards Board (FASB) issued amended accounting guidance on revenue recognition (ASU 2014-09) that applies to all contracts with customers. The objective of the new guidance is to improve comparability of revenue recognition practices across entities and to provide more useful information to users of financial statements through improved disclosure requirements. The new standard permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of adopting the guidance being recognized at the date of initial application (modified retrospective method). The new standard was effective as of January 1, 2018 and was adopted using the modified retrospective method. The Company recorded a cumulative-effect adjustment upon adoption increasing Retained earnings by $5 million . See Note 2 for additional information related to the adoption of this standard. In January 2016, the FASB issued revised guidance for the accounting and reporting of financial instruments (ASU 2016-01) and in 2018 issued related technical corrections (ASU 2018-03). The new guidance requires that equity investments with readily determinable fair values currently classified as available for sale be measured at fair value with changes in fair value recognized in net income. The Company has elected to measure equity investments without readily determinable fair values at cost, less impairment, adjusted for subsequent observable price changes, which will be recognized in net income. The new guidance also changed certain disclosure requirements. ASU 2016-01 was effective as of January 1, 2018 and was adopted using a modified retrospective approach. The Company recorded a cumulative-effect adjustment upon adoption increasing Retained earnings by $8 million . ASU 2018-03 was also adopted as of January 1, 2018 on a prospective basis and did not result in any additional impacts upon adoption. In October 2016, the FASB issued guidance on the accounting for the income tax consequences of intra-entity transfers of assets other than inventory (ASU 2016-16). The new guidance requires the recognition of the income tax consequences of an intra-entity transfer of an asset (with the exception of inventory) when the intra-entity transfer occurs, replacing the prohibition against doing so. The current exception to defer the recognition of any tax impact on the transfer of inventory within the consolidated entity until it is sold to a third party remains unaffected. The new standard was effective as of January 1, 2018 and was adopted using a modified retrospective approach. The Company recorded a cumulative-effect adjustment upon adoption increasing Retained earnings by $54 million with a corresponding decrease to Deferred Income Taxes . In August 2017, the FASB issued new guidance on hedge accounting (ASU 2017-12) that is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. The new guidance makes more financial and nonfinancial hedging strategies eligible for hedge accounting, amends the presentation and disclosure requirements, and changes how companies assess effectiveness. The Company elected to early adopt this guidance as of January 1, 2018 on a modified retrospective basis. The new guidance was applied to all existing hedges as of the adoption date. For fair value hedges of interest rate risk outstanding as of the date of adoption, the Company recorded a cumulative-effect adjustment upon adoption to the basis adjustment on the hedged item resulting from applying the benchmark component of the coupon guidance. This adjustment decreased Retained earnings by $11 million . Also, in accordance with the transition provisions of ASU 2017-12, the Company was required to eliminate the separate measurement of ineffectiveness for its cash flow hedging instruments existing as of the adoption date through a cumulative-effect adjustment to retained earnings; however, all such amounts were de minimis . In February 2018, the FASB issued new guidance to address a narrow-scope financial reporting issue that arose as a consequence of the Tax Cuts and Jobs Act of 2017 (TCJA) (ASU 2018-02). Existing guidance requires that deferred tax liabilities and assets be adjusted for a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date. That guidance is applicable even in situations in which the related income tax effects of items in accumulated other comprehensive income were originally recognized in other comprehensive income (rather than in net income), such as amounts related to benefit plans and hedging activity. As a result, the tax effects of items within accumulated other comprehensive income do not reflect the appropriate tax rate (the difference is referred to as stranded tax effects). The new guidance allows for a reclassification of these amounts to retained earnings thereby eliminating these stranded tax effects. The Company elected to early adopt the new guidance in the first quarter of 2018 and reclassified the stranded income tax effects of the TCJA increasing Accumulated other comprehensive loss in the provisional amount of $266 million with a corresponding increase to Retained earnings (see Note 16). The Company’s policy for releasing disproportionate income tax effects from Accumulated other comprehensive loss is to utilize the item-by-item approach. The impact of adopting the above standards is as follows: ($ in millions) ASU 2014-09 (Revenue) ASU 2016-01 (Financial Instruments) ASU 2016-16 (Intra-Entity Transfers of Assets Other than Inventory) ASU 2017-12 (Derivatives and Hedging) ASU 2018-02 (Reclassification of Certain Tax Effects) Total Assets - Increase (Decrease) Accounts receivable $ 5 $ 5 Liabilities - Increase (Decrease) Income Taxes Payable (3 ) (3 ) Debt 14 14 Deferred Income Taxes (54 ) (54 ) Equity - Increase (Decrease) Retained earnings 5 8 54 (11 ) 266 322 Accumulated other comprehensive loss (8 ) (266 ) (274 ) In March 2017, the FASB amended the guidance related to net periodic benefit cost for defined benefit plans that requires entities to (1) disaggregate the current service cost component from the other components of net benefit cost and present it with other employee compensation costs in the income statement within operations if such a subtotal is presented; (2) present the other components of net benefit cost separately in the income statement and outside of income from operations; and (3) only capitalize the service cost component when applicable. The Company adopted the new standard as of January 1, 2018 using a retrospective transition method as to the requirement for separate presentation in the income statement of service costs and other components and a prospective transition method as to the requirement to limit the capitalization of benefit costs to the service cost component. The Company utilized a practical expedient that permits it to use the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. Upon adoption, net periodic benefit cost (credit) other than service cost was reclassified to Other (income) expense, net from the previous classification within Materials and production costs, Marketing and administrative expenses and Research and development costs (see Note 13). In August 2016, the FASB issued guidance on the classification of certain cash receipts and payments in the statement of cash flows intended to reduce diversity in practice. The Company adopted the new standard effective as of January 1, 2018 using a retrospective application. There were no changes to the presentation of the Consolidated Statement of Cash Flows in the prior year period as a result of adopting the new standard. In November 2016, the FASB issued guidance requiring that amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new standard was effective as of January 1, 2018 and was adopted using a retrospective application. The adoption of the new guidance did not have a material effect on the Company’s Consolidated Statement of Cash Flows. In May 2017, the FASB issued guidance clarifying when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The Company adopted the new standard effective as of January 1, 2018 and will apply the new guidance to future share-based payment award modifications should they occur. Recently Issued Accounting Standards Not Yet Adopted In February 2016, the FASB issued new accounting guidance for the accounting and reporting of leases and subsequently issued several updates to the new guidance. The new guidance requires that lessees recognize a right-of-use asset and a lease liability recorded on the balance sheet for each of its leases (other than leases that meet the definition of a short-term lease). Leases will be classified as either operating or finance. Operating leases will result in straight-line expense in the income statement (similar to current operating leases) while finance leases will result in more expense being recognized in the earlier years of the lease term (similar to current capital leases). The Company will adopt the new standard on January 1, 2019 using a modified retrospective approach. Merck will elect the transition method that allows for application of the standard at the adoption date rather than at the beginning of the earliest comparative period presented in the financial statements. The Company intends to elect available practical expedients. The Company is currently evaluating the impact of adoption on its consolidated financial statements. Merck has selected a lease accounting tool and made significant progress regarding lease data validation for contracts that are in the Company’s current lease portfolio. Merck continues to assess the potential impact of embedded leases in certain agreements. In June 2016, the FASB issued amended guidance on the accounting for credit losses on financial instruments. The guidance introduces an expected loss model for estimating credit losses, replacing the incurred loss model. The new guidance also changes the impairment model for available-for-sale debt securities, requiring the use of an allowance to record estimated credit losses (and subsequent recoveries). The new guidance is effective for interim and annual periods beginning in 2020, with earlier application permitted in 2019. The new guidance is to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings in the beginning of the period of adoption. The Company is currently evaluating the impact of adoption on its consolidated financial statements. In January 2017, the FASB issued guidance that provides for the elimination of Step 2 from the goodwill impairment test. Under the new guidance, impairment charges are recognized to the extent the carrying amount of a reporting unit exceeds its fair value with certain limitations. The new guidance is effective for interim and annual periods in 2020. Early adoption is permitted. The Company does not anticipate that the adoption of the new guidance will have a material effect on its consolidated financial statements. In April 2018, the FASB issued new guidance on the accounting for costs incurred to implement a cloud computing arrangement that is considered a service arrangement. The new guidance requires the capitalization of such costs, aligning it with the accounting for costs associated with developing or obtaining internal-use software. The new guidance is effective for interim and annual periods in 2020. Early adoption is permitted, including adoption in any interim period. Prospective adoption for eligible costs incurred on or after the date of adoption or retrospective adoption is permitted. The Company is currently evaluating the impact of adoption on its consolidated financial statements and may elect to early adopt this guidance. |
Revenue Recognition | On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers , and subsequent amendments (ASC 606 or new guidance), using the modified retrospective method. Merck applied the new guidance to all contracts with customers within the scope of the standard that were in effect on January 1, 2018 and recognized the cumulative effect of initially applying the new guidance as an adjustment to the opening balance of retained earnings (see Note 1). Comparative information for prior periods has not been restated and continues to be reported under the accounting standards in effect for those periods. The new guidance provides principles that an entity applies to report useful information about the amount, timing, and uncertainty of revenue and cash flows arising from its contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to in exchange for those goods or services. The new guidance introduces a 5-step model to recognize revenue when or as control is transferred: identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when or as the performance obligations are satisfied. The Company’s significant accounting policies are detailed in Note 2 to the consolidated financial statements included in Merck’s Annual Report on Form 10-K for the year ended December 31, 2017. Changes to the Company’s revenue recognition policy as a result of adopting ASC 606 are described below. See Note 17 for disaggregated revenue disclosures. Revenue Recognition — Recognition of revenue requires evidence of a contract, probable collection of sales proceeds and completion of substantially all performance obligations. Merck acts as the principal in substantially all of its customer arrangements and therefore records revenue on a gross basis. The majority of the Company’s contracts related to the Pharmaceutical and Animal Health segments have a single performance obligation - the promise to transfer goods. Shipping is considered immaterial in the context of the overall customer arrangement and damages or loss of goods in transit are rare. Therefore, shipping is not deemed a separately recognized performance obligation. The vast majority of revenues from sales of products are recognized at a point in time when control of the goods is transferred to the customer, which the Company has determined is when title and risks and rewards of ownership transfer to the customer and the Company is entitled to payment. Certain Merck entities, including U.S. entities, have contract terms under which control of the goods passes to the customer upon shipment; however, either pursuant to the terms of the contract or as a business practice, Merck retains responsibility for goods lost or damaged in transit. Prior to the adoption of the new standard, Merck would recognize revenue for these entities upon delivery of the goods. Under the new guidance, the Company is now recognizing revenue at time of shipment for these entities. For businesses within the Company’s Healthcare Services segment and certain services in the Animal Health segment, revenue is recognized over time, generally ratably over the contract term as services are provided. Merck’s payment terms for U.S. pharmaceutical customers are typically net 36 days from receipt of invoice and for U.S. animal health customers are typically net 30 days from receipt of invoice; however, certain products, including Keytruda , have longer payment terms up to 90 days. Outside of the United States, payment terms are typically 30 days to 90 days although certain markets have longer payment terms. The nature of the Company’s business gives rise to several types of variable consideration including discounts and returns, which are estimated at the time of sale generally using the expected value method, although the most likely amount method is also used for certain types of variable consideration. In the United States, sales discounts are issued to customers at the point-of-sale, through an intermediary wholesaler (known as chargebacks), or in the form of rebates. Additionally, sales are generally made with a limited right of return under certain conditions. Revenues are recorded net of provisions for sales discounts and returns, which are established at the time of sale. In addition, revenues are recorded net of time value of money discounts if collection of accounts receivable is expected to be in excess of one year. The provision for aggregate customer discounts covers chargebacks and rebates. Chargebacks are discounts that occur when a contracted customer purchases through an intermediary wholesaler. The contracted customer generally purchases product from the wholesaler at its contracted price plus a mark-up. The wholesaler, in turn, charges the Company back for the difference between the price initially paid by the wholesaler and the contract price paid to the wholesaler by the customer. The provision for chargebacks is based on expected sell-through levels by the Company’s wholesale customers to contracted customers, as well as estimated wholesaler inventory levels. Rebates are amounts owed based upon definitive contractual agreements or legal requirements with private sector and public sector (Medicaid and Medicare Part D) benefit providers, after the final dispensing of the product by a pharmacy to a benefit plan participant. The provision for rebates is based on expected patient usage, as well as inventory levels in the distribution channel to determine the contractual obligation to the benefit providers. The Company uses historical customer segment utilization mix, sales forecasts, changes to product mix and price, inventory levels in the distribution channel, government pricing calculations and prior payment history in order to estimate the expected provision. Amounts accrued for aggregate customer discounts are evaluated on a quarterly basis through comparison of information provided by the wholesalers, health maintenance organizations, pharmacy benefit managers, federal and state agencies, and other customers to the amounts accrued. These discounts, in the aggregate, reduced U.S. sales by $2.6 billion and $2.9 billion in the third quarter of 2018 and 2017 , respectively, and by $7.7 billion and $8.2 billion for the first nine months of 2018 and 2017 , respectively. Outside of the United States, variable consideration in the form of discounts and rebates are a combination of commercially-driven discounts in highly competitive product classes, discounts required to gain or maintain reimbursement, or legislatively mandated rebates. In certain European countries, legislatively mandated rebates are calculated based on an estimate of the government’s total unbudgeted spending and the Company’s specific payback obligation. Rebates may also be required based on specific product sales thresholds. The Company applies an estimated factor against its actual invoiced sales to represent the expected level of future discount or rebate obligations associated with the sale. The Company maintains a returns policy that allows its U.S. pharmaceutical customers to return product within a specified period prior to and subsequent to the expiration date (generally, three to six months before and 12 months after product expiration). The estimate of the provision for returns is based upon historical experience with actual returns. Additionally, the Company considers factors such as levels of inventory in the distribution channel, product dating and expiration period, whether products have been discontinued, entrance in the market of generic competition, changes in formularies or launch of over-the-counter products, among others. Outside of the United States, returns are only allowed on a limited basis in certain countries. |
Legal defense costs | Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. |
Basis of Presentation (Tables)
Basis of Presentation (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Impact of Adopting Standard | The impact of adopting the above standards is as follows: ($ in millions) ASU 2014-09 (Revenue) ASU 2016-01 (Financial Instruments) ASU 2016-16 (Intra-Entity Transfers of Assets Other than Inventory) ASU 2017-12 (Derivatives and Hedging) ASU 2018-02 (Reclassification of Certain Tax Effects) Total Assets - Increase (Decrease) Accounts receivable $ 5 $ 5 Liabilities - Increase (Decrease) Income Taxes Payable (3 ) (3 ) Debt 14 14 Deferred Income Taxes (54 ) (54 ) Equity - Increase (Decrease) Retained earnings 5 8 54 (11 ) 266 322 Accumulated other comprehensive loss (8 ) (266 ) (274 ) The following table provides the effects of adopting ASC 606 on the Consolidated Statement of Income: Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 ($ in millions) As Reported Effects of Adopting ASC 606 Amounts Without Adoption of ASC 606 As Reported Effects of Adopting ASC 606 Amounts Without Adoption of ASC 606 Sales $ 10,794 $ (1 ) $ 10,793 $ 31,296 $ (30 ) $ 31,266 Materials and production 3,619 (1 ) 3,618 10,220 (18 ) 10,202 Income before taxes 2,665 — 2,665 6,097 (12 ) 6,085 Taxes on income 707 — 707 1,682 (3 ) 1,679 Net income attributable to Merck & Co., Inc. 1,950 — 1,950 4,393 (9 ) 4,384 The following table provides the effects of adopting ASC 606 on the Consolidated Balance Sheet: September 30, 2018 ($ in millions) As Reported Effects of Adopting ASC 606 Amounts Without Adoption of ASC 606 Assets Accounts receivable $ 7,374 $ (45 ) $ 7,329 Inventories 5,416 19 5,435 Liabilities Accrued and other current liabilities 9,776 (6 ) 9,770 Income taxes payable 759 (5 ) 754 Equity Retained earnings 42,189 (15 ) 42,174 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Effects of Adopting ASC 606 | The impact of adopting the above standards is as follows: ($ in millions) ASU 2014-09 (Revenue) ASU 2016-01 (Financial Instruments) ASU 2016-16 (Intra-Entity Transfers of Assets Other than Inventory) ASU 2017-12 (Derivatives and Hedging) ASU 2018-02 (Reclassification of Certain Tax Effects) Total Assets - Increase (Decrease) Accounts receivable $ 5 $ 5 Liabilities - Increase (Decrease) Income Taxes Payable (3 ) (3 ) Debt 14 14 Deferred Income Taxes (54 ) (54 ) Equity - Increase (Decrease) Retained earnings 5 8 54 (11 ) 266 322 Accumulated other comprehensive loss (8 ) (266 ) (274 ) The following table provides the effects of adopting ASC 606 on the Consolidated Statement of Income: Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 ($ in millions) As Reported Effects of Adopting ASC 606 Amounts Without Adoption of ASC 606 As Reported Effects of Adopting ASC 606 Amounts Without Adoption of ASC 606 Sales $ 10,794 $ (1 ) $ 10,793 $ 31,296 $ (30 ) $ 31,266 Materials and production 3,619 (1 ) 3,618 10,220 (18 ) 10,202 Income before taxes 2,665 — 2,665 6,097 (12 ) 6,085 Taxes on income 707 — 707 1,682 (3 ) 1,679 Net income attributable to Merck & Co., Inc. 1,950 — 1,950 4,393 (9 ) 4,384 The following table provides the effects of adopting ASC 606 on the Consolidated Balance Sheet: September 30, 2018 ($ in millions) As Reported Effects of Adopting ASC 606 Amounts Without Adoption of ASC 606 Assets Accounts receivable $ 7,374 $ (45 ) $ 7,329 Inventories 5,416 19 5,435 Liabilities Accrued and other current liabilities 9,776 (6 ) 9,770 Income taxes payable 759 (5 ) 754 Equity Retained earnings 42,189 (15 ) 42,174 |
Collaborative Arrangements (Tab
Collaborative Arrangements (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Collaborative Arrangements [Abstract] | |
Collaboration Arrangements | Summarized information related to this collaboration is as follows: Three Months Ended Nine Months Ended ($ in millions) 2018 2017 2018 2017 Alliance revenues $ 49 $ 5 $ 125 $ 5 Materials and production (1) 12 — 48 — Marketing and administrative 12 — 28 — Research and development (2) 47 2,377 118 2,377 ($ in millions) September 30, 2018 December 31, 2017 Receivables from AstraZeneca $ 46 $ 12 Payables to AstraZeneca (3) 892 643 (1) Represents amortization of capitalized milestone payments. (2) Amounts for the third quarter and first nine months of 2017 include $2.35 billion related to the upfront payment and future license option payments. (3) Includes accrued milestone and license option payments. Summarized information related to this collaboration is as follows: Three Months Ended Nine Months Ended ($ in millions) 2018 2017 2018 2017 Net product sales recorded by Merck $ 47 $ 38 $ 138 $ 105 Merck’s profit share from sales in Bayer’s marketing territories 47 32 100 116 Total sales 94 70 238 221 Materials and production (1) 29 25 188 73 Marketing and administrative 11 6 26 18 Research and development 34 27 90 78 ($ in millions) September 30, 2018 December 31, 2017 Receivables from Bayer $ 36 $ 33 Payables to Bayer (2) 375 352 (1) Includes amortization of intangible assets. (2) Includes accrued milestone payments. Summarized information related to this collaboration is as follows: ($ in millions) Three Months Ended Nine Months Ended September 30, 2018 Alliance revenues $ 43 $ 78 Materials and production (1) 8 9 Marketing and administrative 5 7 Research and development (2) 36 1,473 ($ in millions) September 30, 2018 Receivables from Eisai $ 42 Payables to Eisai (3) 733 (1) Represents amortization of capitalized milestone payments. (2) Amount for the first nine months of 2018 includes $1.4 billion related to the upfront payment and future license option payments. (3) Includes accrued milestone and license option payments. |
Restructuring (Tables)
Restructuring (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Restructuring and Related Activities [Abstract] | |
Charges Related to Restructuring Program Activities by Type of Cost | The following tables summarize the charges related to restructuring program activities by type of cost: Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 ($ in millions) Separation Costs Accelerated Depreciation Other Total Separation Costs Accelerated Depreciation Other Total Materials and production $ — $ 1 $ 1 $ 2 $ — $ 1 $ 10 $ 11 Marketing and administrative — — — — — 1 1 2 Research and development — (9 ) 5 (4 ) — (12 ) 13 1 Restructuring costs 137 — 34 171 392 — 102 494 $ 137 $ (8 ) $ 40 $ 169 $ 392 $ (10 ) $ 126 $ 508 Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017 ($ in millions) Separation Costs Accelerated Depreciation Other Total Separation Costs Accelerated Depreciation Other Total Materials and production $ — $ 5 $ 20 $ 25 $ — $ 52 $ 69 $ 121 Marketing and administrative — — — — — 2 1 3 Research and development — 1 1 2 — 7 4 11 Restructuring costs 100 — 53 153 302 — 168 470 $ 100 $ 6 $ 74 $ 180 $ 302 $ 61 $ 242 $ 605 |
Charges and Spending Relating to Restructuring Activities by Program | The following table summarizes the charges and spending relating to restructuring program activities for the nine months ended September 30, 2018 : ($ in millions) Separation Costs Accelerated Depreciation Other Total Restructuring reserves January 1, 2018 $ 619 $ — $ 128 $ 747 Expense 392 (10 ) 126 508 (Payments) receipts, net (535 ) — (170 ) (705 ) Non-cash activity — 10 13 23 Restructuring reserves September 30, 2018 (1) $ 476 $ — $ 97 $ 573 (1) The remaining cash outlays are expected to be substantially completed by the end of 2020. |
Financial Instruments (Tables)
Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Effect of Net Investment Hedges on OCI and the Consolidated Statement of Income | The effects of the Company’s net investment hedges on OCI and the Consolidated Statement of Income are shown below: Amount of Pretax (Gain) Loss Recognized in Other Comprehensive Income (1) Amount of Pretax (Gain) Loss Recognized in Other (income) expense, net for Amounts Excluded from Effectiveness Testing Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended September 30, Nine Months Ended September 30, ($ in millions) 2018 2017 2018 2017 2018 2017 2018 2017 Net Investment Hedging Relationships Foreign exchange contracts $ (10 ) $ — $ (24 ) $ — $ (4 ) $ — $ (7 ) $ — Euro-denominated notes 38 128 (54 ) 467 — — — — (1) No amounts were reclassified from AOCI into income related to the sale of a subsidiary. |
Summary of Interest Rate Swaps Held | At September 30, 2018 , the Company was a party to 22 pay-floating, receive-fixed interest rate swap contracts designated as fair value hedges of fixed-rate notes in which the notional amounts match the amount of the hedged fixed-rate notes as detailed in the table below. September 30, 2018 ($ in millions) Par Value of Debt Number of Interest Rate Swaps Held Total Swap Notional Amount 5.00% notes due 2019 1,250 3 550 1.85% notes due 2020 1,250 5 1,250 3.875% notes due 2021 1,150 5 1,150 2.40% notes due 2022 1,000 4 1,000 2.35% notes due 2022 1,250 5 1,250 |
Amounts Recorded on Balance Sheet Related to Fair Value Hedges | The table below presents the location of amounts recorded on the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges: Carrying Amount of Hedged Liabilities Cumulative Amount of Fair Value Hedging Adjustment Increase (Decrease) Included in the Carrying Amount ($ in millions) September 30, 2018 December 31, 2017 September 30, 2018 December 31, 2017 Balance Sheet Line Item in which Hedged Item is Included Loans payable and current portion of long-term debt $ 553 $ 983 $ 3 $ (17 ) Long-Term Debt (1) 4,503 5,146 (138 ) (41 ) (1) Amounts include hedging adjustment gains related to discontinued hedging relationships of $6 million and $11 million at September 30, 2018 and December 31, 2017 , respectively. |
Fair Value of Derivatives on a Gross Basis Segregated between those Derivatives that are Designated as Hedging Instruments and those that are Not Designated as Hedging Instruments | Presented in the table below is the fair value of derivatives on a gross basis segregated between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments: September 30, 2018 December 31, 2017 Fair Value of Derivative U.S. Dollar Notional Fair Value of Derivative U.S. Dollar Notional ($ in millions) Balance Sheet Caption Asset Liability Asset Liability Derivatives Designated as Hedging Instruments Interest rate swap contracts Other assets $ — $ — $ — $ 2 $ — $ 550 Interest rate swap contracts Accrued and other current liabilities — 2 550 — 3 1,000 Interest rate swap contracts Other noncurrent liabilities — 138 4,650 — 52 4,650 Foreign exchange contracts Other current assets 175 — 6,115 51 — 4,216 Foreign exchange contracts Other assets 85 — 2,682 38 — 1,936 Foreign exchange contracts Accrued and other current liabilities — 5 657 — 71 2,014 Foreign exchange contracts Other noncurrent liabilities — 1 66 — 1 20 $ 260 $ 146 $ 14,720 $ 91 $ 127 $ 14,386 Derivatives Not Designated as Hedging Instruments Foreign exchange contracts Other current assets $ 127 $ — $ 6,531 $ 39 $ — $ 3,778 Foreign exchange contracts Accrued and other current liabilities — 58 5,298 — 90 7,431 $ 127 $ 58 $ 11,829 $ 39 $ 90 $ 11,209 $ 387 $ 204 $ 26,549 $ 130 $ 217 $ 25,595 |
Information on Derivative Positions Subject to Master Netting Arrangements as if they were Presented on a Net Basis | The following table provides information on the Company’s derivative positions subject to these master netting arrangements as if they were presented on a net basis, allowing for the right of offset by counterparty and cash collateral exchanged per the master agreements and related credit support annexes: September 30, 2018 December 31, 2017 ($ in millions) Asset Liability Asset Liability Gross amounts recognized in the consolidated balance sheet $ 387 $ 204 $ 130 $ 217 Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet (135 ) (135 ) (94 ) (94 ) Cash collateral received (54 ) — (3 ) — Net amounts $ 198 $ 69 $ 33 $ 123 |
Location and Amount of Pretax (Gains) Losses of Derivatives | The table below provides information regarding the location and amount of pretax (gains) losses of derivatives designated in fair value or cash flow hedging relationships: Sales Other (income) expense, net (1) Other comprehensive income (loss) Sales Other (income) expense, net (1) Other comprehensive income (loss) Three Months Ended September 30, Three Months Ended September 30, Three Months Ended September 30, Nine Months Ended September 30, Nine Months Ended September 30, Nine Months Ended September 30, ($ in millions) 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 Financial Statement Line Items in which Effects of Fair Value or Cash Flow Hedges are Recorded $ 10,794 $ 10,325 $ (172 ) (207 ) $ (29 ) $ 149 31,296 $ 29,689 $ (512 ) $ (351 ) $ 33 $ 281 (Gain) loss on fair value hedging relationships Interest rate swap contracts Hedged items — — (9 ) (9 ) — — — — (86 ) (5 ) — — Derivatives designated as hedging instruments — — 15 2 — — — — 100 (25 ) — — Impact of cash flow hedging relationships Foreign exchange contracts Amount of gain (loss) recognized in OCI on derivatives — — — — 29 (88 ) — — — — 113 (520 ) (Decrease) increase in Sales as a result of AOCI reclassifications (6 ) 13 — — 6 (13 ) (172 ) 157 — — 172 (157 ) (1) Interest expense is a component of Other (income) expense, net. |
Income Statement Effects of Derivatives Not Designated as Hedging Instruments | The table below provides information regarding the income statement effects of derivatives not designated as hedging instruments: Amount of Derivative Pretax (Gain) Loss Recognized in Income Three Months Ended September 30, Nine Months Ended September 30, ($ in millions) Income Statement Caption 2018 2017 2018 2017 Derivatives Not Designated as Hedging Instruments Foreign exchange contracts (1) Other (income) expense, net $ (57 ) $ 119 $ (224 ) $ 70 Foreign exchange contracts (2) Sales — — (5 ) — (1) These derivative contracts mitigate changes in the value of remeasured foreign currency denominated monetary assets and liabilities attributable to changes in foreign currency exchange rates. (2) These derivative contracts serve as economic hedges of forecasted transactions. |
Information on Investments in Debt and Equity Securities | Information on investments in debt and equity securities is as follows: September 30, 2018 December 31, 2017 Fair Value Amortized Cost Gross Unrealized Fair Value Amortized Cost Gross Unrealized ($ in millions) Gains Losses Gains Losses Corporate notes and bonds $ 6,866 $ 6,952 $ 2 $ (88 ) $ 9,806 $ 9,837 $ 9 $ (40 ) U.S. government and agency securities 1,431 1,448 — (17 ) 2,042 2,059 — (17 ) Asset-backed securities 1,288 1,300 1 (13 ) 1,542 1,548 1 (7 ) Foreign government bonds 538 546 — (8 ) 733 739 — (6 ) Mortgage-backed securities 23 24 — (1 ) 626 634 1 (9 ) Commercial paper 30 30 — — 159 159 — — Total debt securities $ 10,176 $ 10,300 $ 3 $ (127 ) $ 14,908 $ 14,976 $ 11 $ (79 ) Publicly traded equity securities (1) 378 275 265 16 (6 ) Total debt and publicly traded equity securities $ 10,554 $ 15,183 $ 15,241 $ 27 $ (85 ) (1) Pursuant to the adoption of ASU 2016-01 (see Note 1), beginning on January 1, 2018, changes in the fair value of publicly traded equity securities are recognized in net income. Unrealized net gains of $10 million and $60 million , respectively, were recognized in Other (income) expense, net during the third quarter and first nine months of 2018 on equity securities still held at September 30, 2018 . |
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis | Financial assets and liabilities measured at fair value on a recurring basis are summarized below: Fair Value Measurements Using Fair Value Measurements Using Quoted Prices In Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Quoted Prices In Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total ($ in millions) September 30, 2018 December 31, 2017 Assets Investments Corporate notes and bonds $ — $ 6,765 $ — $ 6,765 $ — $ 9,678 $ — $ 9,678 Asset-backed securities (1) — 1,271 — 1,271 — 1,476 — 1,476 U.S. government and agency securities — 1,265 — 1,265 68 1,767 — 1,835 Foreign government bonds — 538 — 538 — 732 — 732 Commercial paper — 30 — 30 — 159 — 159 Mortgage-backed securities — — — — — 547 — 547 Publicly traded equity securities 196 — — 196 104 — — 104 196 9,869 — 10,065 172 14,359 — 14,531 Other assets (2) U.S. government and agency securities 54 112 — 166 — 207 — 207 Corporate notes and bonds — 101 — 101 — 128 — 128 Mortgage-backed securities — 23 — 23 — 79 — 79 Asset-backed securities (1) — 17 — 17 — 66 — 66 Foreign government bonds — — — — — 1 — 1 Publicly traded equity securities 182 — — 182 171 — — 171 236 253 — 489 171 481 — 652 Derivative assets (3) Forward exchange contracts — 233 — 233 — 48 — 48 Purchased currency options — 154 — 154 — 80 — 80 Interest rate swaps — — — — — 2 — 2 — 387 — 387 — 130 — 130 Total assets $ 432 $ 10,509 $ — $ 10,941 $ 343 $ 14,970 $ — $ 15,313 Liabilities Other liabilities Contingent consideration $ — $ — $ 852 $ 852 $ — $ — $ 935 $ 935 Derivative liabilities (3) Interest rate swaps — 140 — 140 — 55 — 55 Forward exchange contracts — 60 — 60 — 162 — 162 Written currency options — 4 — 4 — — — — — 204 — 204 — 217 — 217 Total liabilities $ — $ 204 $ 852 $ 1,056 $ — $ 217 $ 935 $ 1,152 (1) Primarily all of the asset-backed securities are highly-rated (Standard & Poor’s rating of AAA and Moody’s Investors Service rating of Aaa), secured primarily by auto loan, credit card and student loan receivables, with weighted-average lives of primarily 5 years or less. (2) Investments included in other assets are restricted as to use, primarily for the payment of benefits under employee benefit plans. (3) The fair value determination of derivatives includes the impact of the credit risk of counterparties to the derivatives and the Company’s own credit risk, the effects of which were not significant. |
Information About the Changes in Liabilities for Contingent Consideration | Summarized information about the changes in liabilities for contingent consideration is as follows: Nine Months Ended September 30, ($ in millions) 2018 2017 Fair value January 1 $ 935 $ 891 Changes in estimated fair value (1) 144 151 Additions 8 3 Payments (235 ) (100 ) Fair value September 30 (2) $ 852 $ 945 (1) Recorded in Research and development expenses, Materials and production costs and Other (income) expense, net . Includes cumulative translation adjustments. (2) Balance at September 30, 2018 includes $95 million recorded as a current liability for amounts expected to be paid within the next 12 months. |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories consisted of: ($ in millions) September 30, 2018 December 31, 2017 Finished goods $ 1,585 $ 1,334 Raw materials and work in process 4,933 4,703 Supplies 202 201 Total (approximates current cost) 6,720 6,238 (Decrease) increase to LIFO costs (10 ) 45 $ 6,710 $ 6,283 Recognized as: Inventories $ 5,416 $ 5,096 Other assets 1,294 1,187 |
Equity (Tables)
Equity (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Equity | Three Months Ended September 30, Common Stock Other Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Non- Controlling Interests Total ($ and shares in millions) Shares Par Value Shares Cost Balance at July 1, 2017 3,577 $ 1,788 $ 39,776 $ 45,046 $ (5,094 ) 850 $ (42,053 ) $ 249 $ 39,712 Net loss attributable to Merck & Co., Inc. — — — (56 ) — — — — (56 ) Other comprehensive income, net of taxes — — — — 149 — — — 149 Cash dividends declared on common stock ($0.47 per share) — — — (1,289 ) — — — — (1,289 ) Treasury stock shares purchased — — — — — 2 (159 ) — (159 ) Share-based compensation plans and other — — 47 — — (1 ) 93 — 140 Net income attributable to noncontrolling interests — — — — — — — 5 5 Distributions attributable to noncontrolling interests — — — — — — — (3 ) (3 ) Balance at September 30, 2017 3,577 $ 1,788 $ 39,823 $ 43,701 $ (4,945 ) 851 $ (42,119 ) $ 251 $ 38,499 Balance at July 1, 2018 3,577 $ 1,788 $ 39,741 $ 41,523 $ (5,122 ) 907 $ (45,401 ) $ 237 $ 32,766 Net income attributable to Merck & Co., Inc. — — — 1,950 — — — — 1,950 Other comprehensive loss, net of taxes — — — — (29 ) — — — (29 ) Cash dividends declared on common stock ($0.48 per share) — — — (1,284 ) — — — — (1,284 ) Treasury stock shares purchased — — — — — 16 (996 ) — (996 ) Share-based compensation plans and other — — 21 — — (5 ) 231 — 252 Net income attributable to noncontrolling interests — — — — — — — 8 8 Distributions attributable to noncontrolling interests — — — — — — — (11 ) (11 ) Balance at September 30, 2018 3,577 $ 1,788 $ 39,762 $ 42,189 $ (5,151 ) 918 $ (46,166 ) $ 234 $ 32,656 Nine Months Ended September 30, Common Stock Other Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Non- Controlling Interests Total ($ and shares in millions) Shares Par Value Shares Cost Balance at January 1, 2017 3,577 $ 1,788 $ 39,939 $ 44,133 $ (5,226 ) 828 $ (40,546 ) $ 220 $ 40,308 Net income attributable to Merck & Co., Inc. — — — 3,440 — — — — 3,440 Other comprehensive income, net of taxes — — — — 281 — — — 281 Cash dividends declared on common stock ($1.41 per share) — — — (3,872 ) — — — — (3,872 ) Treasury stock shares purchased — — — — — 36 (2,312 ) — (2,312 ) Share-based compensation plans and other — — (116 ) — — (13 ) 739 — 623 Acquisition of Vallée — — — — — — — 25 25 Net income attributable to noncontrolling interests — — — — — — — 16 16 Distributions attributable to noncontrolling interests — — — — — — — (10 ) (10 ) Balance at September 30, 2017 3,577 $ 1,788 $ 39,823 $ 43,701 $ (4,945 ) 851 $ (42,119 ) $ 251 $ 38,499 Balance at January 1, 2018 3,577 $ 1,788 $ 39,902 $ 41,350 $ (4,910 ) 880 $ (43,794 ) $ 233 $ 34,569 Adoption of new accounting standards (see Note 1) — — — 322 (274 ) — — — 48 Net income attributable to Merck & Co., Inc. — — — 4,393 — — — — 4,393 Other comprehensive income, net of taxes — — — — 33 — — — 33 Cash dividends declared on common stock ($1.44 per share) — — — (3,876 ) — — — — (3,876 ) Treasury stock shares purchased — — — — — 53 (3,158 ) — (3,158 ) Share-based compensation plans and other — — (140 ) — — (15 ) 786 — 646 Net income attributable to noncontrolling interests — — — — — — — 22 22 Distributions attributable to noncontrolling interests — — — — — — — (21 ) (21 ) Balance at September 30, 2018 3,577 $ 1,788 $ 39,762 $ 42,189 $ (5,151 ) 918 $ (46,166 ) $ 234 $ 32,656 |
Share-Based Compensation Plans
Share-Based Compensation Plans (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Amounts of Share-Based Compensation Cost Recorded in Consolidated Statement of Income | The following table provides the amounts of share-based compensation cost recorded in the Condensed Consolidated Statement of Income: Three Months Ended Nine Months Ended ($ in millions) 2018 2017 2018 2017 Pretax share-based compensation expense $ 91 $ 76 $ 261 $ 232 Income tax benefit (14 ) (23 ) (42 ) (70 ) Total share-based compensation expense, net of taxes $ 77 $ 53 $ 219 $ 162 |
Assumptions Used to Determine Weighted-Average Fair Value of Options Granted | The weighted-average fair value of options granted for the first nine months of 2018 and 2017 was $8.19 and $7.04 per option, respectively, and was determined using the following assumptions: Nine Months Ended 2018 2017 Expected dividend yield 3.4 % 3.6 % Risk-free interest rate 2.8 % 2.0 % Expected volatility 19.1 % 17.8 % Expected life (years) 6.1 6.1 |
Pension and Other Postretirem_2
Pension and Other Postretirement Benefit Plans (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Pension Plans | |
Defined Benefit Plan Disclosure [Line Items] | |
Components of net cost of defined benefit plans | The Company has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. The net periodic benefit cost of such plans consisted of the following components: Three Months Ended Nine Months Ended 2018 2017 2018 2017 ($ in millions) U.S. International U.S. International U.S. International U.S. International Service cost $ 77 $ 56 $ 80 $ 66 $ 245 $ 181 $ 234 $ 189 Interest cost 109 43 114 44 324 134 341 127 Expected return on plan assets (209 ) (106 ) (210 ) (101 ) (634 ) (326 ) (646 ) (292 ) Amortization of unrecognized prior service credit (12 ) (3 ) (13 ) (3 ) (37 ) (10 ) (40 ) (8 ) Net loss amortization 63 21 46 25 174 64 135 72 Termination benefits 1 — 3 1 18 — 11 2 Curtailments 3 — 4 (1 ) 7 (1 ) 8 (1 ) Settlements — — — — 1 3 — — $ 32 $ 11 $ 24 $ 31 $ 98 $ 45 $ 43 $ 89 |
Other Postretirement Benefit Plans | |
Defined Benefit Plan Disclosure [Line Items] | |
Components of net cost of defined benefit plans | The Company provides medical benefits, principally to its eligible U.S. retirees and similar benefits to their dependents, through its other postretirement benefit plans. The net credit of such plans consisted of the following components: Three Months Ended Nine Months Ended ($ in millions) 2018 2017 2018 2017 Service cost $ 15 $ 15 $ 43 $ 43 Interest cost 17 20 52 61 Expected return on plan assets (21 ) (20 ) (63 ) (59 ) Amortization of unrecognized prior service credit (21 ) (24 ) (63 ) (74 ) Net loss amortization — — 1 1 Termination benefits — — 2 1 Curtailments (1 ) (1 ) (7 ) (6 ) $ (11 ) $ (10 ) $ (35 ) $ (33 ) |
Other (Income) Expense, Net (Ta
Other (Income) Expense, Net (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Other Income and Expenses [Abstract] | |
Other (Income) Expense, Net | Other (income) expense, net, consisted of: Three Months Ended Nine Months Ended ($ in millions) 2018 2017 2018 2017 Interest income $ (92 ) $ (90 ) $ (257 ) $ (284 ) Interest expense 190 189 569 564 Exchange losses (gains) 42 (6 ) 119 5 Equity income from affiliates (81 ) (18 ) (93 ) (11 ) Net periodic defined benefit plan (credit) cost other than service cost (119 ) (121 ) (384 ) (381 ) Other, net (112 ) (161 ) (466 ) (244 ) $ (172 ) $ (207 ) $ (512 ) $ (351 ) |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Calculations of Earnings Per Share | The calculations of earnings per share are as follows: Three Months Ended Nine Months Ended ($ and shares in millions except per share amounts) 2018 2017 2018 2017 Net income (loss) attributable to Merck & Co., Inc. $ 1,950 $ (56 ) $ 4,393 $ 3,440 Average common shares outstanding 2,662 2,727 2,680 2,735 Common shares issuable (1) 16 — 14 19 Average common shares outstanding assuming dilution 2,678 2,727 2,694 2,754 Basic earnings (loss) per common share attributable to Merck & Co., Inc. common shareholders $ 0.73 $ (0.02 ) $ 1.64 $ 1.26 Earnings (loss) per common share assuming dilution attributable to Merck & Co., Inc. common shareholders $ 0.73 $ (0.02 ) $ 1.63 $ 1.25 (1) Issuable primarily under share-based compensation plans. |
Other Comprehensive Income (L_2
Other Comprehensive Income (Loss) (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Changes in AOCI by Component | Changes in AOCI by component are as follows: Three Months Ended September 30, ($ in millions) Derivatives Investments Employee Benefit Plans Cumulative Translation Adjustment Accumulated Other Comprehensive Income (Loss) Balance July 1, 2017, net of taxes $ (37 ) $ 75 $ (3,133 ) $ (1,999 ) $ (5,094 ) Other comprehensive income (loss) before reclassification adjustments, pretax (88 ) 170 2 23 107 Tax 31 (19 ) (13 ) 44 43 Other comprehensive income (loss) before reclassification adjustments, net of taxes (57 ) 151 (11 ) 67 150 Reclassification adjustments, pretax (14 ) (1) (24 ) (2) 31 (3) — (7 ) Tax 5 8 (7 ) — 6 Reclassification adjustments, net of taxes (9 ) (16 ) 24 — (1 ) Other comprehensive income (loss), net of taxes (66 ) 135 13 67 149 Balance September 30, 2017, net of taxes $ (103 ) $ 210 $ (3,120 ) $ (1,932 ) $ (4,945 ) Balance July 1, 2018, net of taxes $ 65 $ (164 ) $ (3,065 ) $ (1,958 ) $ (5,122 ) Other comprehensive income (loss) before reclassification adjustments, pretax 29 8 — (147 ) (110 ) Tax (6 ) — — 11 5 Other comprehensive income (loss) before reclassification adjustments, net of taxes 23 8 — (136 ) (105 ) Reclassification adjustments, pretax 5 (1) 32 (2) 47 (3) — 84 Tax (1 ) — (7 ) — (8 ) Reclassification adjustments, net of taxes 4 32 40 — 76 Other comprehensive income (loss), net of taxes 27 40 40 (136 ) (29 ) Balance September 30, 2018, net of taxes $ 92 $ (124 ) $ (3,025 ) $ (2,094 ) $ (5,151 ) Nine Months Ended September 30, ($ in millions) Derivatives Investments Employee Benefit Plans Cumulative Translation Adjustment Accumulated Other Comprehensive Income (Loss) Balance January 1, 2017, net of taxes $ 338 $ (3 ) $ (3,206 ) $ (2,355 ) $ (5,226 ) Other comprehensive income (loss) before reclassification adjustments, pretax (520 ) 283 27 261 51 Tax 182 (23 ) (7 ) 162 314 Other comprehensive income (loss) before reclassification adjustments, net of taxes (338 ) 260 20 423 365 Reclassification adjustments, pretax (159 ) (1) (73 ) (2) 86 (3) — (146 ) Tax 56 26 (20 ) — 62 Reclassification adjustments, net of taxes (103 ) (47 ) 66 — (84 ) Other comprehensive income (loss), net of taxes (441 ) 213 86 423 281 Balance September 30, 2017, net of taxes $ (103 ) $ 210 $ (3,120 ) $ (1,932 ) $ (4,945 ) Balance January 1, 2018, net of taxes $ (108 ) $ (61 ) $ (2,787 ) $ (1,954 ) $ (4,910 ) Other comprehensive income (loss) before reclassification adjustments, pretax 113 (125 ) (2 ) (129 ) (143 ) Tax (24 ) 1 4 (111 ) (130 ) Other comprehensive income (loss) before reclassification adjustments, net of taxes 89 (124 ) 2 (240 ) (273 ) Reclassification adjustments, pretax 169 (1) 68 (2) 128 (3) — 365 Tax (35 ) — (24 ) — (59 ) Reclassification adjustments, net of taxes 134 68 104 — 306 Other comprehensive income (loss), net of taxes 223 (56 ) 106 (240 ) 33 Adoption of ASU 2018-02 (see Note 1) (23 ) 1 (344 ) 100 (266 ) Adoption of ASU 2016-01 (see Note 1) — (8 ) — — (8 ) Balance September 30, 2018, net of taxes $ 92 $ (124 ) $ (3,025 ) $ (2,094 ) $ (5,151 ) (1) Relates to foreign currency cash flow hedges that were reclassified from AOCI to Sales. (2) Represents net realized (gains) losses on the sales of available-for-sale investments that were reclassified from AOCI to Other (income) expense, net . In 2017, these amounts included both debt and equity investments; however, upon adoption of ASU 2016-01 in 2018 (see Note 1), these amounts relate only to available-for-sale debt investments. (3) Includes net amortization of prior service cost and actuarial gains and losses included in net periodic benefit cost (see Note 12). |
Segment Reporting (Tables)
Segment Reporting (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
Sales of Company's products | Sales of the Company’s products were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 ($ in millions) U.S. Int’l Total U.S. Int’l Total U.S. Int’l Total U.S. Int’l Total Pharmaceutical: Oncology Keytruda $ 1,109 $ 780 $ 1,889 $ 604 $ 442 $ 1,047 $ 2,906 $ 2,114 $ 5,020 $ 1,522 $ 990 $ 2,512 Emend 71 52 123 88 49 137 239 157 396 257 156 413 Temodar — 46 46 — 68 68 3 156 159 4 194 198 Alliance revenue - Lynparza 33 15 49 — 5 5 88 37 125 — 5 5 Alliance revenue - Lenvima 30 13 43 — — — 49 29 78 — — — Vaccines Gardasil/Gardasil 9 740 308 1,048 484 191 675 1,422 894 2,317 1,195 481 1,675 ProQuad/M-M-R II /Varivax 429 96 525 419 100 519 1,097 246 1,343 1,058 215 1,273 Pneumovax 23 160 54 214 174 56 229 394 192 586 392 166 558 RotaTeq 134 57 191 127 52 179 384 156 540 377 148 525 Zostavax (1 ) 56 54 139 94 234 16 147 163 356 191 547 Hospital Acute Care Bridion 96 120 217 63 122 185 272 389 661 162 333 495 Noxafil 89 99 188 78 83 162 257 294 551 220 237 458 Invanz 74 62 137 93 66 159 252 185 437 268 177 445 Cubicin 55 40 95 41 50 91 150 137 287 148 141 290 Cancidas 2 77 79 6 88 94 10 247 257 17 310 327 Primaxin 1 71 72 5 68 73 6 206 212 7 199 206 Immunology Simponi — 210 210 — 219 219 — 673 673 — 602 602 Remicade — 135 135 — 214 214 — 459 459 — 651 651 Neuroscience Belsomra 23 43 66 27 30 56 76 115 191 72 78 150 Virology Isentress/Isentress HD 123 151 275 143 167 310 383 477 860 422 474 896 Zepatier 18 86 104 228 241 468 8 339 347 683 680 1,363 Cardiovascular Zetia 9 157 165 65 255 320 34 662 696 298 723 1,021 Vytorin — 92 92 (6 ) 148 142 11 402 414 114 451 565 Atozet — 84 84 — 59 59 — 258 258 — 171 171 Adempas — 94 94 — 70 70 — 238 238 — 221 221 Diabetes Januvia 498 429 927 598 414 1,012 1,466 1,291 2,756 1,646 1,153 2,799 Janumet 225 339 563 197 316 513 625 1,067 1,693 640 933 1,572 Women’s Health NuvaRing 193 41 234 160 54 214 550 135 686 425 148 573 Implanon/Nexplanon 133 53 186 110 45 155 375 160 535 367 137 503 Diversified Brands Singulair 5 156 161 16 145 161 16 505 521 28 522 550 Cozaar/Hyzaar 4 99 103 9 119 128 18 330 348 15 345 360 Nasonex 7 64 71 (23 ) 65 42 8 266 274 16 250 266 Arcoxia — 83 83 — 80 80 — 249 249 — 272 272 Follistim AQ 26 34 60 30 41 72 83 115 198 104 128 232 Fosamax 2 42 45 4 48 53 3 155 159 7 173 180 Dulera 44 6 50 52 7 59 128 21 149 191 19 210 Other pharmaceutical (1) 317 666 980 266 688 952 877 2,150 3,023 876 2,140 3,017 Total Pharmaceutical segment sales 4,649 5,010 9,658 4,197 4,959 9,156 12,206 15,653 27,859 11,887 14,214 26,101 Animal Health: Livestock 153 508 660 137 518 655 383 1,563 1,946 359 1,457 1,816 Companion Animals 153 207 361 153 192 345 541 689 1,230 483 595 1,078 Total Animal Health segment sales 306 715 1,021 290 710 1,000 924 2,252 3,176 842 2,052 2,894 Other segment sales (2) 55 — 55 100 — 100 194 1 195 294 — 294 Total segment sales 5,010 5,725 10,734 4,587 5,669 10,256 13,324 17,906 31,230 13,023 16,266 29,289 Other (3) 20 39 60 7 63 69 101 (35 ) 66 73 327 400 $ 5,030 $ 5,764 $ 10,794 $ 4,594 $ 5,732 $ 10,325 $ 13,425 $ 17,871 $ 31,296 $ 13,096 $ 16,593 $ 29,689 U.S. plus international may not equal total due to rounding. (1) Other pharmaceutical primarily reflects sales of other human health pharmaceutical products, including products within the franchises not listed separately. (2) Represents the non-reportable segments of Healthcare Services and Alliances. (3) Other is primarily comprised of miscellaneous corporate revenues, including revenue hedging activities, as well as third-party manufacturing sales. Other in the first nine months of 2018 and 2017 also includes $81 million and $60 million , respectively, related to the sale of the marketing rights to certain products. |
Consolidated revenues by geographic area | Consolidated revenues by geographic area where derived are as follows: Three Months Ended Nine Months Ended ($ in millions) 2018 2017 2018 2017 United States $ 5,030 $ 4,594 $ 13,425 $ 13,096 Europe, Middle East and Africa 2,884 2,941 9,218 8,374 Asia Pacific 1,178 1,112 3,766 3,164 Japan 761 775 2,353 2,320 Latin America 622 585 1,748 1,654 Other 319 318 786 1,081 $ 10,794 $ 10,325 $ 31,296 $ 29,689 |
Reconciliation of segment profits to income before taxes | A reconciliation of segment profits to Income before taxes is as follows: Three Months Ended Nine Months Ended ($ in millions) 2018 2017 2018 2017 Segment profits: Pharmaceutical segment $ 6,479 $ 5,906 $ 18,109 $ 16,657 Animal Health segment 409 389 1,273 1,202 Other segments 5 93 94 234 Total segment profits 6,893 6,388 19,476 18,093 Other profits (losses) 55 (78 ) (35 ) 107 Unallocated: Interest income 92 90 257 284 Interest expense (190 ) (189 ) (569 ) (564 ) Equity income from affiliates 85 23 101 16 Depreciation and amortization (324 ) (334 ) (1,006 ) (1,036 ) Research and development (1,855 ) (4,208 ) (6,878 ) (7,399 ) Amortization of purchase accounting adjustments (679 ) (765 ) (2,144 ) (2,322 ) Restructuring costs (171 ) (153 ) (494 ) (470 ) Aggregate charge related to termination of collaboration agreement with Samsung (420 ) — (420 ) — Other unallocated, net (821 ) (574 ) (2,191 ) (2,067 ) $ 2,665 $ 200 $ 6,097 $ 4,642 |
Basis of Presentation - Adoptio
Basis of Presentation - Adoption of New Accounting Standards - Narrative (Details) $ in Millions | Jan. 01, 2018USD ($) |
Accounting Standards Update 2014-09 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Cumulative effect of new accounting principle in period of adoption | $ 5 |
Accounting Standards Update 2016-01 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Cumulative effect of new accounting principle in period of adoption | 8 |
Accounting Standards Update 2016-16 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Cumulative effect of new accounting principle in period of adoption | 54 |
Accounting Standards Update 2017-12 | New Accounting Pronouncement, Early Adoption, Effect | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Cumulative effect of new accounting principle in period of adoption | $ (11) |
Basis of Presentation - Impact
Basis of Presentation - Impact of Adopting Standards (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Jan. 01, 2018 | Dec. 31, 2017 |
Assets - Increase (Decrease) | |||
Accounts receivable | $ 7,374 | $ 6,873 | |
Liabilities - Increase (Decrease) | |||
Income taxes payable | 759 | 708 | |
Debt | 3,656 | 3,057 | |
Deferred Income Taxes | 2,065 | 2,219 | |
Equity - Increase (Decrease) | |||
Retained earnings | 42,189 | 41,350 | |
Accumulated other comprehensive loss | (5,151) | $ (4,910) | |
Adjustments for New Accounting Pronouncement | |||
Assets - Increase (Decrease) | |||
Accounts receivable | $ 5 | ||
Liabilities - Increase (Decrease) | |||
Income taxes payable | (3) | ||
Debt | 14 | ||
Deferred Income Taxes | (54) | ||
Equity - Increase (Decrease) | |||
Retained earnings | 322 | ||
Accumulated other comprehensive loss | (274) | ||
ASU 2016-01 (Financial Instruments) | |||
Equity - Increase (Decrease) | |||
Retained earnings | 8 | ||
Accumulated other comprehensive loss | (8) | ||
ASU 2016-16 (Intra-Entity Transfers of Assets Other than Inventory) | |||
Liabilities - Increase (Decrease) | |||
Deferred Income Taxes | (54) | ||
Equity - Increase (Decrease) | |||
Retained earnings | 54 | ||
ASU 2017-12 (Derivatives and Hedging) | |||
Liabilities - Increase (Decrease) | |||
Income taxes payable | (3) | ||
Debt | 14 | ||
Equity - Increase (Decrease) | |||
Retained earnings | (11) | ||
ASU 2018-02 (Reclassification of Certain Tax Effects) | |||
Equity - Increase (Decrease) | |||
Retained earnings | 266 | ||
Accumulated other comprehensive loss | (266) | ||
Effects of Adopting ASC 606 | ASU 2014-09 (Revenue) | |||
Assets - Increase (Decrease) | |||
Accounts receivable | (45) | 5 | |
Liabilities - Increase (Decrease) | |||
Income taxes payable | (5) | ||
Equity - Increase (Decrease) | |||
Retained earnings | $ (15) | $ 5 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Billions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Disaggregation of Revenue [Line Items] | ||||
Sales discounts for products | $ 2.6 | $ 2.9 | $ 7.7 | $ 8.2 |
Return period after expiration date of product | 12 months | |||
Minimum | ||||
Disaggregation of Revenue [Line Items] | ||||
Return period prior to expiration date of product | 3 months | |||
Maximum | ||||
Disaggregation of Revenue [Line Items] | ||||
Return period prior to expiration date of product | 6 months | |||
United States | Maximum | ||||
Disaggregation of Revenue [Line Items] | ||||
Payment terms | 90 days | |||
Outside of the United States | Minimum | ||||
Disaggregation of Revenue [Line Items] | ||||
Payment terms | 30 days | |||
Outside of the United States | Maximum | ||||
Disaggregation of Revenue [Line Items] | ||||
Payment terms | 90 days | |||
Pharmaceutical segment | United States | Minimum | ||||
Disaggregation of Revenue [Line Items] | ||||
Payment terms | 36 days | |||
Animal Health segment | United States | Minimum | ||||
Disaggregation of Revenue [Line Items] | ||||
Payment terms | 30 days |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Impact of Adopting New Accounting Standards (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Jan. 01, 2018 | Dec. 31, 2017 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Sales | $ 10,794 | $ 10,325 | $ 31,296 | $ 29,689 | ||
Materials and production | 3,619 | 3,307 | 10,220 | 9,472 | ||
Income before taxes | 2,665 | 200 | 6,097 | 4,642 | ||
Taxes on income | 707 | 251 | 1,682 | 1,186 | ||
Net income (loss) attributable to Merck & Co., Inc. | 1,950 | $ (56) | 4,393 | $ 3,440 | ||
Assets | ||||||
Accounts receivable | 7,374 | 7,374 | $ 6,873 | |||
Inventories | 5,416 | 5,416 | 5,096 | |||
Liabilities | ||||||
Accrued and other current liabilities | 9,776 | 9,776 | 10,427 | |||
Income taxes payable | 759 | 759 | 708 | |||
Equity | ||||||
Retained earnings | 42,189 | 42,189 | $ 41,350 | |||
Effects of Adopting ASC 606 | Accounting Standards Update 2014-09 | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Sales | (1) | (30) | ||||
Materials and production | (1) | (18) | ||||
Income before taxes | 0 | (12) | ||||
Taxes on income | 0 | (3) | ||||
Net income (loss) attributable to Merck & Co., Inc. | 0 | (9) | ||||
Assets | ||||||
Accounts receivable | (45) | (45) | $ 5 | |||
Inventories | 19 | 19 | ||||
Liabilities | ||||||
Accrued and other current liabilities | (6) | (6) | ||||
Income taxes payable | (5) | (5) | ||||
Equity | ||||||
Retained earnings | (15) | (15) | $ 5 | |||
Amounts Without Adoption of ASC 606 | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Sales | 10,793 | 31,266 | ||||
Materials and production | 3,618 | 10,202 | ||||
Income before taxes | 2,665 | 6,085 | ||||
Taxes on income | 707 | 1,679 | ||||
Net income (loss) attributable to Merck & Co., Inc. | 1,950 | 4,384 | ||||
Assets | ||||||
Accounts receivable | 7,329 | 7,329 | ||||
Inventories | 5,435 | 5,435 | ||||
Liabilities | ||||||
Accrued and other current liabilities | 9,770 | 9,770 | ||||
Income taxes payable | 754 | 754 | ||||
Equity | ||||||
Retained earnings | $ 42,174 | $ 42,174 |
Acquisitions, Divestitures, R_2
Acquisitions, Divestitures, Research Collaborations and License Agreements - Collaboration Agreements (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | |
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||
Aggregate charge related to termination of collaboration agreement with Samsung | $ 420 | $ 0 | |
Samsung | |||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||
Aggregate charge related to termination of collaboration agreement with Samsung | $ 420 | $ 420 | |
Contract termination fee | 155 | ||
Fixed asset impairment charge | 137 | ||
Inventory write-off | 122 | ||
Other related costs | $ 6 |
Acquisitions, Divestitures, R_3
Acquisitions, Divestitures, Research Collaborations and License Agreements - Acquisitions (Details) $ in Millions, $ in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||
Jun. 30, 2018AUD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2017USD ($) | Sep. 30, 2018USD ($) | Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2017USD ($) | |
Acquisitions Divestitures Research Collaborations And License Agreements Transactions [Line Items] | ||||||||
Research and development | $ 2,068 | $ 4,413 | $ 7,538 | $ 8,024 | ||||
Goodwill | 18,258 | $ 18,284 | 18,258 | |||||
Viralytics | ||||||||
Acquisitions Divestitures Research Collaborations And License Agreements Transactions [Line Items] | ||||||||
Cash paid for acquisition of business | $ 502 | $ 378 | ||||||
Other net assets | $ 34 | 34 | ||||||
Research and development | $ 344 | |||||||
Vallee SA | ||||||||
Acquisitions Divestitures Research Collaborations And License Agreements Transactions [Line Items] | ||||||||
Cash paid for acquisition of business | $ 358 | |||||||
Other net assets | $ 32 | |||||||
Percentage of business acquired (as percent) | 93.50% | 4.50% | ||||||
Escrow deposit | $ 176 | |||||||
Intangible assets | 297 | |||||||
Deferred tax liabilities | 102 | |||||||
Noncontrolling interest | 25 | |||||||
Contingent liabilities | 37 | |||||||
Indemnification assets | 37 | |||||||
Goodwill | $ 156 | |||||||
Acquired finite-lived intangible assets, weighted average useful life | 15 years | |||||||
Payments to acquire additional interest in subsidiary | $ 18 | |||||||
Vallee SA | Discount rate | ||||||||
Acquisitions Divestitures Research Collaborations And License Agreements Transactions [Line Items] | ||||||||
Intangible asset, measurement input (as percent) | 0.155 |
Acquisitions, Divestitures, R_4
Acquisitions, Divestitures, Research Collaborations and License Agreements - Divestitures (Details) - C3i Solutions $ in Millions | 1 Months Ended |
Apr. 30, 2018USD ($) | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Proceeds from sale of business | $ 65 |
Loss from sale of business | $ 11 |
Collaborative Arrangements - Na
Collaborative Arrangements - Narrative (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | 35 Months Ended | |||||||||||
Jan. 31, 2021 | Jan. 31, 2020 | Jan. 31, 2019 | Sep. 30, 2018 | Aug. 31, 2018 | Mar. 31, 2018 | Jan. 31, 2018 | Jul. 31, 2017 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Jan. 31, 2021 | |
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Research and development | $ 2,068 | $ 4,413 | $ 7,538 | $ 8,024 | ||||||||||||
Other liabilities, noncurrent | $ 11,887 | 11,887 | 11,887 | $ 11,117 | ||||||||||||
Sales | 10,794 | 10,325 | 31,296 | 29,689 | ||||||||||||
Japan | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Sales | 761 | 775 | 2,353 | 2,320 | ||||||||||||
United States | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Sales | 5,030 | 4,594 | 13,425 | 13,096 | ||||||||||||
Lynparza | Other Assets | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Finite-lived intangible assets | 468 | 468 | 468 | |||||||||||||
Lenvima | Other Assets | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Finite-lived intangible assets | 266 | 266 | 266 | |||||||||||||
Adempas | Other intangibles | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Finite-lived intangible assets | 1,100 | 1,100 | 1,100 | |||||||||||||
AstraZeneca | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Upfront and milestone payments | $ 1,600 | |||||||||||||||
Payments to acquire intangible assets | $ 750 | 250 | ||||||||||||||
Research and development | $ 2,350 | $ 2,350 | 2,350 | |||||||||||||
AstraZeneca | Lynparza | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Amortization expense | $ 17 | $ 9 | ||||||||||||||
AstraZeneca | Sales-Based Milestones | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Probable contingent payments collaborative arrangement | 200 | |||||||||||||||
Other liabilities, noncurrent | $ 150 | 200 | 150 | 100 | ||||||||||||
Contingent milestone payments collaborative arrangement | 3,650 | |||||||||||||||
AstraZeneca | Regulatory Milestones | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Upfront and milestone payments | $ 70 | |||||||||||||||
Contingent milestone payments collaborative arrangement | 1,930 | |||||||||||||||
Eisai | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Upfront and milestone payments | 750 | |||||||||||||||
Research and development | 1,400 | |||||||||||||||
Eisai | Forecast | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Payments to acquire intangible assets | $ 125 | $ 200 | $ 325 | $ 650 | ||||||||||||
Eisai | Sales-Based Milestones | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Probable contingent payments collaborative arrangement | 50 | |||||||||||||||
Other liabilities, noncurrent | 50 | $ 50 | 50 | |||||||||||||
Contingent milestone payments collaborative arrangement | 3,970 | 3,920 | ||||||||||||||
Eisai | Regulatory Milestones | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Contingent milestone payments collaborative arrangement | 385 | 160 | ||||||||||||||
Eisai | Regulatory Milestones | Japan | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Upfront and milestone payments | $ 25 | |||||||||||||||
Eisai | Regulatory Milestones | United States | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Upfront and milestone payments | $ 125 | |||||||||||||||
Eisai | Regulatory Milestones | European Union | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Upfront and milestone payments | $ 50 | |||||||||||||||
Eisai | Regulatory Milestones | China | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Upfront and milestone payments | $ 25 | |||||||||||||||
Bayer AG | Adempas | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Amortization expense | 106 | |||||||||||||||
Sales | $ 500 | |||||||||||||||
Bayer AG | Sales-Based Milestones | ||||||||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||||||||||||
Upfront and milestone payments | $ 350 | |||||||||||||||
Probable contingent payments collaborative arrangement | 375 | |||||||||||||||
Other liabilities, noncurrent | $ 375 | |||||||||||||||
Contingent milestone payments collaborative arrangement | $ 400 |
Collaborative Arrangements - Sc
Collaborative Arrangements - Schedule of Collaborative Arrangement Transactions (Details) - Collaborative Arrangement - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
AstraZeneca | |||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||
Receivables from counterparty | $ 46 | $ 46 | $ 12 | ||
Payables to counterparty | 892 | 892 | 643 | ||
AstraZeneca | Revenue | |||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||
Total sales | 49 | $ 5 | 125 | $ 5 | |
AstraZeneca | Materials and production | |||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||
Expenses | 12 | 0 | 48 | 0 | |
AstraZeneca | Marketing and administrative | |||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||
Expenses | 12 | 0 | 28 | 0 | |
AstraZeneca | Research and development | |||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||
Expenses | 47 | 2,377 | 118 | 2,377 | |
Eisai | |||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||
Receivables from counterparty | 42 | 42 | |||
Payables to counterparty | 733 | 733 | |||
Eisai | Revenue | |||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||
Total sales | 43 | 78 | |||
Eisai | Materials and production | |||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||
Expenses | 8 | 9 | |||
Eisai | Marketing and administrative | |||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||
Expenses | 5 | 7 | |||
Eisai | Research and development | |||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||
Expenses | 36 | 1,473 | |||
Bayer AG | |||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||
Receivables from counterparty | 36 | 36 | 33 | ||
Payables to counterparty | 375 | 375 | $ 352 | ||
Bayer AG | Revenue | |||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||
Net product sales recorded by Merck | 47 | 38 | 138 | 105 | |
Merck’s profit share from sales in Bayer’s marketing territories | 47 | 32 | 100 | 116 | |
Total sales | 94 | 70 | 238 | 221 | |
Bayer AG | Materials and production | |||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||
Expenses | 29 | 25 | 188 | 73 | |
Bayer AG | Marketing and administrative | |||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||
Expenses | 11 | 6 | 26 | 18 | |
Bayer AG | Research and development | |||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||
Expenses | $ 34 | $ 27 | $ 90 | $ 78 |
Restructuring - Narrative (Deta
Restructuring - Narrative (Details) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018USD ($)position | Sep. 30, 2017USD ($)position | Sep. 30, 2018USD ($)position | Sep. 30, 2017USD ($)position | Dec. 31, 2018USD ($) | |
Restructuring and Related Activities [Abstract] | |||||
Total pretax restructuring costs | $ 169 | $ 180 | $ 508 | $ 605 | |
Cumulative restructuring costs incurred to date since program inception | $ 14,000 | $ 14,000 | |||
Positions eliminated since inception of program (in positions) | position | 45,220 | 45,220 | |||
Percentage estimate of cumulative pretax costs that will result in cash outlays (primarily from employee separation expense) (as percent) | 66.67% | ||||
Percentage estimate of cumulative pretax costs that will be non-cash (primarily from accelerated depreciation of facilities) (as percent) | 33.33% | ||||
Number of positions eliminated | position | 525 | 205 | 1,870 | 1,225 | |
Forecast | |||||
Restructuring Cost and Reserve [Line Items] | |||||
Estimated costs related to restructuring program activities | $ 50 |
Restructuring - Charges Related
Restructuring - Charges Related to Restructuring Program Activities by Type of Cost (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | $ 169 | $ 180 | $ 508 | $ 605 |
Separation Costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | 137 | 100 | 392 | 302 |
Accelerated Depreciation | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | (8) | 6 | (10) | 61 |
Other | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | 40 | 74 | 126 | 242 |
Materials and production | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | 2 | 25 | 11 | 121 |
Materials and production | Separation Costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | 0 | 0 | 0 | 0 |
Materials and production | Accelerated Depreciation | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | 1 | 5 | 1 | 52 |
Materials and production | Other | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | 1 | 20 | 10 | 69 |
Marketing and administrative | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | 0 | 0 | 2 | 3 |
Marketing and administrative | Separation Costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | 0 | 0 | 0 | 0 |
Marketing and administrative | Accelerated Depreciation | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | 0 | 0 | 1 | 2 |
Marketing and administrative | Other | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | 0 | 0 | 1 | 1 |
Research and development | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | (4) | 2 | 1 | 11 |
Research and development | Separation Costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | 0 | 0 | 0 | 0 |
Research and development | Accelerated Depreciation | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | (9) | 1 | (12) | 7 |
Research and development | Other | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | 5 | 1 | 13 | 4 |
Restructuring costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | 171 | 153 | 494 | 470 |
Restructuring costs | Separation Costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | 137 | 100 | 392 | 302 |
Restructuring costs | Accelerated Depreciation | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | 0 | 0 | 0 | 0 |
Restructuring costs | Other | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total pretax restructuring costs | $ 34 | $ 53 | $ 102 | $ 168 |
Restructuring - Charges and Spe
Restructuring - Charges and Spending Relating to Restructuring Activities by Program (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Restructuring Reserve [Roll Forward] | ||||
Restructuring reserve, beginning balance | $ 747 | |||
Expense | $ 169 | $ 180 | 508 | $ 605 |
(Payments) receipts, net | (705) | |||
Non-cash activity | 23 | |||
Restructuring reserve, ending balance | 573 | 573 | ||
Separation Costs | ||||
Restructuring Reserve [Roll Forward] | ||||
Restructuring reserve, beginning balance | 619 | |||
Expense | 137 | 100 | 392 | 302 |
(Payments) receipts, net | (535) | |||
Non-cash activity | 0 | |||
Restructuring reserve, ending balance | 476 | 476 | ||
Accelerated Depreciation | ||||
Restructuring Reserve [Roll Forward] | ||||
Restructuring reserve, beginning balance | 0 | |||
Expense | (8) | 6 | (10) | 61 |
(Payments) receipts, net | 0 | |||
Non-cash activity | 10 | |||
Restructuring reserve, ending balance | 0 | 0 | ||
Other | ||||
Restructuring Reserve [Roll Forward] | ||||
Restructuring reserve, beginning balance | 128 | |||
Expense | 40 | $ 74 | 126 | $ 242 |
(Payments) receipts, net | (170) | |||
Non-cash activity | 13 | |||
Restructuring reserve, ending balance | $ 97 | $ 97 |
Financial Instruments - Narrati
Financial Instruments - Narrative (Details) | 9 Months Ended | ||
Sep. 30, 2018USD ($)interest_rate_swap | May 31, 2018USD ($)interest_rate_swap | Dec. 31, 2017USD ($) | |
Derivative [Line Items] | |||
Number of interest rate swaps held (in interest rate swaps) | interest_rate_swap | 22 | ||
Notional amount | $ 26,549,000,000 | $ 25,595,000,000 | |
Pretax net unrealized gain on derivatives maturing within next 12 months estimated to be reclassified from AOCI to sales | 75,000,000 | ||
Equity investments without readily determinable fair values | 749,000,000 | ||
Unrealized gains of equity investments | 199,000,000 | ||
Unrealized losses on investments | 25,000,000 | ||
Available-for-sale debt securities included in Short-term investments | 2,400,000,000 | ||
Available-for-sale debt securities maturing after one year through five years | 7,100,000,000 | ||
Cash and cash equivalents | 7,826,000,000 | 6,092,000,000 | |
Fair value of loans payable and long-term debt, including current portion | 24,000,000,000 | 25,600,000,000 | |
Carrying value of loans payable and long-term debt, including current portion | 23,600,000,000 | 24,400,000,000 | |
Accounts receivable outstanding for more than one year | 40,000,000 | ||
Cash collateral received from counterparties | 54,000,000 | 3,000,000 | |
Cash collateral advanced | 0 | 0 | |
Afferent Pharmaceuticals | |||
Derivative [Line Items] | |||
Payment for contingent consideration | 175,000,000 | ||
Significant Other Observable Inputs (Level 2) | |||
Derivative [Line Items] | |||
Cash and cash equivalents | 7,800,000,000 | ||
Cash equivalents | 7,100,000,000 | ||
1.30% notes due 2018 | Interest rate swap contracts | |||
Derivative [Line Items] | |||
Number of interest rate swaps held (in interest rate swaps) | interest_rate_swap | 4 | ||
Notional amount | $ 250,000,000 | ||
Face amount of debt | $ 1,000,000,000 | ||
Stated interest rate (as percent) | 1.30% | ||
Derivatives Designated as Hedging Instruments | |||
Derivative [Line Items] | |||
Notional amount | $ 14,720,000,000 | 14,386,000,000 | |
Derivatives Designated as Hedging Instruments | Maximum | |||
Derivative [Line Items] | |||
Maximum average period of maturities of contracts in years (less than) | 2 years | ||
Derivatives Not Designated as Hedging Instruments | |||
Derivative [Line Items] | |||
Notional amount | $ 11,829,000,000 | $ 11,209,000,000 | |
Derivatives Not Designated as Hedging Instruments | Maximum | |||
Derivative [Line Items] | |||
Maximum average period of maturities of contracts in years (less than) | 1 year |
Financial Instruments - Effect
Financial Instruments - Effect of Net Investment Hedges (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Foreign exchange contracts | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Pretax (Gain) Loss Recognized in Other Comprehensive Income (1) | $ (10) | $ 0 | $ (24) | $ 0 |
Foreign exchange contracts | Other (income) expense, net | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Pretax (Gain) Loss Recognized in Other (income) expense, net for Amounts Excluded from Effectiveness Testing | (4) | 0 | (7) | 0 |
Euro-denominated notes | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Pretax (Gain) Loss Recognized in Other Comprehensive Income (1) | 38 | 128 | (54) | 467 |
Euro-denominated notes | Other (income) expense, net | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Pretax (Gain) Loss Recognized in Other (income) expense, net for Amounts Excluded from Effectiveness Testing | $ 0 | $ 0 | $ 0 | $ 0 |
Financial Instruments - Summary
Financial Instruments - Summary of Interest Rate Swaps Held (Details) | Sep. 30, 2018USD ($)interest_rate_swap | Dec. 31, 2017USD ($) |
Derivative [Line Items] | ||
Number of Interest Rate Swaps Held (in interest rate swaps) | interest_rate_swap | 22 | |
Total Swap Notional Amount | $ 26,549,000,000 | $ 25,595,000,000 |
5.00% notes due 2019 | Interest rate swap contracts | ||
Derivative [Line Items] | ||
Stated interest rate (as percent) | 5.00% | |
Par Value of Debt | $ 1,250,000,000 | |
Number of Interest Rate Swaps Held (in interest rate swaps) | interest_rate_swap | 3 | |
Total Swap Notional Amount | $ 550,000,000 | |
1.85% notes due 2020 | Interest rate swap contracts | ||
Derivative [Line Items] | ||
Stated interest rate (as percent) | 1.85% | |
Par Value of Debt | $ 1,250,000,000 | |
Number of Interest Rate Swaps Held (in interest rate swaps) | interest_rate_swap | 5 | |
Total Swap Notional Amount | $ 1,250,000,000 | |
3.875% notes due 2021 | Interest rate swap contracts | ||
Derivative [Line Items] | ||
Stated interest rate (as percent) | 3.875% | |
Par Value of Debt | $ 1,150,000,000 | |
Number of Interest Rate Swaps Held (in interest rate swaps) | interest_rate_swap | 5 | |
Total Swap Notional Amount | $ 1,150,000,000 | |
2.40% notes due 2022 | Interest rate swap contracts | ||
Derivative [Line Items] | ||
Stated interest rate (as percent) | 2.40% | |
Par Value of Debt | $ 1,000,000,000 | |
Number of Interest Rate Swaps Held (in interest rate swaps) | interest_rate_swap | 4 | |
Total Swap Notional Amount | $ 1,000,000,000 | |
2.35% notes due 2022 | Interest rate swap contracts | ||
Derivative [Line Items] | ||
Stated interest rate (as percent) | 2.35% | |
Par Value of Debt | $ 1,250,000,000 | |
Number of Interest Rate Swaps Held (in interest rate swaps) | interest_rate_swap | 5 | |
Total Swap Notional Amount | $ 1,250,000,000 |
Financial Instruments - Fair Va
Financial Instruments - Fair Value Hedges (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Cumulative Amount of Fair Value Hedging Adjustment Increase (Decrease) Included in the Carrying Amount | $ 6 | $ 11 |
Loans payable and current portion of long-term debt | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Carrying Amount of Hedged Liabilities | 553 | 983 |
Hedged Liability, Fair Value Hedge, Cumulative Increase (Decrease) | 3 | (17) |
Long-Term Debt | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Carrying Amount of Hedged Liabilities | 4,503 | 5,146 |
Hedged Liability, Fair Value Hedge, Cumulative Increase (Decrease) | $ (138) | $ (41) |
Financial Instruments - Fair _2
Financial Instruments - Fair Value of Derivatives Segregated between those Derivatives that are Designated as Hedging Instruments and those that are Not Designated as Hedging Instruments (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Derivatives, Fair Value [Line Items] | ||
Fair Value of Derivative, Asset | $ 387 | $ 130 |
Fair Value of Derivative, Liability | 204 | 217 |
U.S. Dollar Notional | 26,549 | 25,595 |
Derivatives Designated as Hedging Instruments | ||
Derivatives, Fair Value [Line Items] | ||
Fair Value of Derivative, Asset | 260 | 91 |
Fair Value of Derivative, Liability | 146 | 127 |
U.S. Dollar Notional | 14,720 | 14,386 |
Derivatives Not Designated as Hedging Instruments | ||
Derivatives, Fair Value [Line Items] | ||
Fair Value of Derivative, Asset | 127 | 39 |
Fair Value of Derivative, Liability | 58 | 90 |
U.S. Dollar Notional | 11,829 | 11,209 |
Interest rate swap contracts | Derivatives Designated as Hedging Instruments | Other assets | ||
Derivatives, Fair Value [Line Items] | ||
Fair Value of Derivative, Asset | 0 | 2 |
U.S. Dollar Notional | 0 | 550 |
Interest rate swap contracts | Derivatives Designated as Hedging Instruments | Accrued and other current liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Fair Value of Derivative, Liability | 2 | 3 |
U.S. Dollar Notional | 550 | 1,000 |
Interest rate swap contracts | Derivatives Designated as Hedging Instruments | Other noncurrent liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Fair Value of Derivative, Liability | 138 | 52 |
U.S. Dollar Notional | 4,650 | 4,650 |
Foreign exchange contracts | Derivatives Designated as Hedging Instruments | Other assets | ||
Derivatives, Fair Value [Line Items] | ||
Fair Value of Derivative, Asset | 85 | 38 |
U.S. Dollar Notional | 2,682 | 1,936 |
Foreign exchange contracts | Derivatives Designated as Hedging Instruments | Other current assets | ||
Derivatives, Fair Value [Line Items] | ||
Fair Value of Derivative, Asset | 175 | 51 |
U.S. Dollar Notional | 6,115 | 4,216 |
Foreign exchange contracts | Derivatives Designated as Hedging Instruments | Accrued and other current liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Fair Value of Derivative, Liability | 5 | 71 |
U.S. Dollar Notional | 657 | 2,014 |
Foreign exchange contracts | Derivatives Designated as Hedging Instruments | Other noncurrent liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Fair Value of Derivative, Liability | 1 | 1 |
U.S. Dollar Notional | 66 | 20 |
Foreign exchange contracts | Derivatives Not Designated as Hedging Instruments | Other current assets | ||
Derivatives, Fair Value [Line Items] | ||
Fair Value of Derivative, Asset | 127 | 39 |
U.S. Dollar Notional | 6,531 | 3,778 |
Foreign exchange contracts | Derivatives Not Designated as Hedging Instruments | Accrued and other current liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Fair Value of Derivative, Liability | 58 | 90 |
U.S. Dollar Notional | $ 5,298 | $ 7,431 |
Financial Instruments - Informa
Financial Instruments - Information on Derivative Positions Subject to Master Netting Arrangements as if they were Presented on a Net Basis (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Gross amounts recognized in the consolidated balance sheet, asset | $ 387 | $ 130 |
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet, asset | (135) | (94) |
Cash collateral received, asset | (54) | (3) |
Net amounts, asset | 198 | 33 |
Gross amounts recognized in the consolidated balance sheet, liability | 204 | 217 |
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet, liability | (135) | (94) |
Cash collateral received, liability | 0 | 0 |
Net amounts, liability | $ 69 | $ 123 |
Financial Instruments - Locatio
Financial Instruments - Location and Amount of Pretax (Gains) Losses of Derivatives (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Sales | $ 10,794 | $ 10,325 | $ 31,296 | $ 29,689 |
Other (income) expense, net | (172) | (207) | (512) | (351) |
Other comprehensive income (loss) | (29) | 149 | 33 | 281 |
Interest rate swap contracts | Other (income) expense, net | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Hedged items | (9) | (9) | (86) | (5) |
Derivatives designated as hedging instruments | 15 | 2 | 100 | (25) |
Foreign exchange contracts | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of gain (loss) recognized in OCI on derivatives | 29 | (88) | 113 | (520) |
Other comprehensive income (loss), reclassifications | 6 | (13) | 172 | (157) |
Foreign exchange contracts | Reclassification out of Accumulated Other Comprehensive Income | Accumulated Gain (Loss), Cash Flow Hedge, Including Noncontrolling Interest | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Sales | $ (6) | $ 13 | $ (172) | $ 157 |
Financial Instruments - Income
Financial Instruments - Income Statement Effects on Derivatives Not Designated as Hedging Instruments (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Foreign currency | Other (income) expense, net | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Derivative Pretax (Gain) Loss Recognized in Income | $ (57) | $ 119 | $ (224) | $ 70 |
Forecasted transactions | Sales | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Derivative Pretax (Gain) Loss Recognized in Income | $ 0 | $ 0 | $ (5) | $ 0 |
Financial Instruments - Infor_2
Financial Instruments - Information on Available-for-sale Investments (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | |
Debt Securities, Available-for-sale [Line Items] | |||
Debt securities, fair value | $ 10,176 | $ 10,176 | $ 14,908 |
Publicly traded equity securities, fair value | 378 | 378 | |
Publicly traded equity securities, fair value | 275 | ||
Total debt and publicly traded equity securities, fair value | 10,554 | 10,554 | |
Total debt and publicly traded equity securities, fair value | 15,183 | ||
Debt securities, amortized cost | 10,300 | 10,300 | 14,976 |
Publicly traded equity securities, amortized cost | 265 | ||
Total debt and publicly traded equity securities, amortized cost | 15,241 | ||
Debt securities, unrealized gains | 3 | 3 | 11 |
Equity securities, unrealized gains | 16 | ||
Total debt and publicly traded equity securities, unrealized gains | 27 | ||
Debt securities, unrealized losses | (127) | (127) | (79) |
Equity securities, unrealized losses | (6) | ||
Total debt and publicly traded equity securities, unrealized losses | (85) | ||
Unrealized net gain | 10 | 60 | |
Commercial paper | |||
Debt Securities, Available-for-sale [Line Items] | |||
Debt securities, fair value | 30 | 30 | 159 |
Debt securities, amortized cost | 30 | 30 | 159 |
Debt securities, unrealized gains | 0 | 0 | 0 |
Debt securities, unrealized losses | 0 | 0 | 0 |
Corporate notes and bonds | |||
Debt Securities, Available-for-sale [Line Items] | |||
Debt securities, fair value | 6,866 | 6,866 | 9,806 |
Debt securities, amortized cost | 6,952 | 6,952 | 9,837 |
Debt securities, unrealized gains | 2 | 2 | 9 |
Debt securities, unrealized losses | (88) | (88) | (40) |
U.S. government and agency securities | |||
Debt Securities, Available-for-sale [Line Items] | |||
Debt securities, fair value | 1,431 | 1,431 | 2,042 |
Debt securities, amortized cost | 1,448 | 1,448 | 2,059 |
Debt securities, unrealized gains | 0 | 0 | 0 |
Debt securities, unrealized losses | (17) | (17) | (17) |
Asset-backed securities | |||
Debt Securities, Available-for-sale [Line Items] | |||
Debt securities, fair value | 1,288 | 1,288 | 1,542 |
Debt securities, amortized cost | 1,300 | 1,300 | 1,548 |
Debt securities, unrealized gains | 1 | 1 | 1 |
Debt securities, unrealized losses | (13) | (13) | (7) |
Foreign government bonds | |||
Debt Securities, Available-for-sale [Line Items] | |||
Debt securities, fair value | 538 | 538 | 733 |
Debt securities, amortized cost | 546 | 546 | 739 |
Debt securities, unrealized gains | 0 | 0 | 0 |
Debt securities, unrealized losses | (8) | (8) | (6) |
Mortgage-backed securities | |||
Debt Securities, Available-for-sale [Line Items] | |||
Debt securities, fair value | 23 | 23 | 626 |
Debt securities, amortized cost | 24 | 24 | 634 |
Debt securities, unrealized gains | 0 | 0 | 1 |
Debt securities, unrealized losses | $ (1) | $ (1) | $ (9) |
Financial Instruments - Financi
Financial Instruments - Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Millions | 9 Months Ended | |||
Sep. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | |
Assets | ||||
Investments | $ 10,176 | $ 14,908 | ||
Investments | 378 | |||
Derivative assets | 387 | 130 | ||
Liabilities | ||||
Contingent consideration | 852 | 935 | $ 945 | $ 891 |
Derivative liabilities | 204 | 217 | ||
Commercial paper | ||||
Assets | ||||
Investments | 30 | 159 | ||
Corporate notes and bonds | ||||
Assets | ||||
Investments | 6,866 | 9,806 | ||
Asset-backed securities | ||||
Assets | ||||
Investments | $ 1,288 | 1,542 | ||
Liabilities | ||||
Primary weighted average life of collateral | 5 years | |||
U.S. government and agency securities | ||||
Assets | ||||
Investments | $ 1,431 | 2,042 | ||
Foreign government bonds | ||||
Assets | ||||
Investments | 538 | 733 | ||
Mortgage-backed securities | ||||
Assets | ||||
Investments | 23 | 626 | ||
Fair Value, Measurements, Recurring | ||||
Assets | ||||
Investments | 10,065 | 14,531 | ||
Other assets | 489 | 652 | ||
Derivative assets | 387 | 130 | ||
Total assets | 10,941 | 15,313 | ||
Liabilities | ||||
Contingent consideration | 852 | 935 | ||
Derivative liabilities | 204 | 217 | ||
Total liabilities | 1,056 | 1,152 | ||
Fair Value, Measurements, Recurring | Foreign exchange contracts | ||||
Assets | ||||
Derivative assets | 233 | 48 | ||
Liabilities | ||||
Derivative liabilities | 60 | 162 | ||
Fair Value, Measurements, Recurring | Currency options | ||||
Assets | ||||
Derivative assets | 154 | 80 | ||
Liabilities | ||||
Derivative liabilities | 4 | 0 | ||
Fair Value, Measurements, Recurring | Interest rate swap contracts | ||||
Assets | ||||
Derivative assets | 0 | 2 | ||
Liabilities | ||||
Derivative liabilities | 140 | 55 | ||
Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Identical Assets (Level 1) | ||||
Assets | ||||
Investments | 196 | 172 | ||
Other assets | 236 | 171 | ||
Derivative assets | 0 | 0 | ||
Total assets | 432 | 343 | ||
Liabilities | ||||
Contingent consideration | 0 | 0 | ||
Derivative liabilities | 0 | 0 | ||
Total liabilities | 0 | 0 | ||
Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Identical Assets (Level 1) | Foreign exchange contracts | ||||
Assets | ||||
Derivative assets | 0 | 0 | ||
Liabilities | ||||
Derivative liabilities | 0 | 0 | ||
Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Identical Assets (Level 1) | Currency options | ||||
Assets | ||||
Derivative assets | 0 | 0 | ||
Liabilities | ||||
Derivative liabilities | 0 | 0 | ||
Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Identical Assets (Level 1) | Interest rate swap contracts | ||||
Assets | ||||
Derivative assets | 0 | 0 | ||
Liabilities | ||||
Derivative liabilities | 0 | 0 | ||
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | ||||
Assets | ||||
Investments | 9,869 | 14,359 | ||
Other assets | 253 | 481 | ||
Derivative assets | 387 | 130 | ||
Total assets | 10,509 | 14,970 | ||
Liabilities | ||||
Contingent consideration | 0 | 0 | ||
Derivative liabilities | 204 | 217 | ||
Total liabilities | 204 | 217 | ||
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Foreign exchange contracts | ||||
Assets | ||||
Derivative assets | 233 | 48 | ||
Liabilities | ||||
Derivative liabilities | 60 | 162 | ||
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Currency options | ||||
Assets | ||||
Derivative assets | 154 | 80 | ||
Liabilities | ||||
Derivative liabilities | 4 | 0 | ||
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Interest rate swap contracts | ||||
Assets | ||||
Derivative assets | 0 | 2 | ||
Liabilities | ||||
Derivative liabilities | 140 | 55 | ||
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3) | ||||
Assets | ||||
Investments | 0 | 0 | ||
Other assets | 0 | 0 | ||
Derivative assets | 0 | 0 | ||
Total assets | 0 | 0 | ||
Liabilities | ||||
Contingent consideration | 852 | 935 | ||
Derivative liabilities | 0 | 0 | ||
Total liabilities | 852 | 935 | ||
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3) | Foreign exchange contracts | ||||
Assets | ||||
Derivative assets | 0 | 0 | ||
Liabilities | ||||
Derivative liabilities | 0 | 0 | ||
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3) | Currency options | ||||
Assets | ||||
Derivative assets | 0 | 0 | ||
Liabilities | ||||
Derivative liabilities | 0 | 0 | ||
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3) | Interest rate swap contracts | ||||
Assets | ||||
Derivative assets | 0 | 0 | ||
Liabilities | ||||
Derivative liabilities | 0 | 0 | ||
Fair Value, Measurements, Recurring | Commercial paper | ||||
Assets | ||||
Investments | 30 | 159 | ||
Fair Value, Measurements, Recurring | Commercial paper | Quoted Prices In Active Markets for Identical Assets (Level 1) | ||||
Assets | ||||
Investments | 0 | 0 | ||
Fair Value, Measurements, Recurring | Commercial paper | Significant Other Observable Inputs (Level 2) | ||||
Assets | ||||
Investments | 30 | 159 | ||
Fair Value, Measurements, Recurring | Commercial paper | Significant Unobservable Inputs (Level 3) | ||||
Assets | ||||
Investments | 0 | 0 | ||
Fair Value, Measurements, Recurring | Corporate notes and bonds | ||||
Assets | ||||
Investments | 6,765 | 9,678 | ||
Other assets | 101 | 128 | ||
Fair Value, Measurements, Recurring | Corporate notes and bonds | Quoted Prices In Active Markets for Identical Assets (Level 1) | ||||
Assets | ||||
Investments | 0 | 0 | ||
Other assets | 0 | 0 | ||
Fair Value, Measurements, Recurring | Corporate notes and bonds | Significant Other Observable Inputs (Level 2) | ||||
Assets | ||||
Investments | 6,765 | 9,678 | ||
Other assets | 101 | 128 | ||
Fair Value, Measurements, Recurring | Corporate notes and bonds | Significant Unobservable Inputs (Level 3) | ||||
Assets | ||||
Investments | 0 | 0 | ||
Other assets | 0 | 0 | ||
Fair Value, Measurements, Recurring | Asset-backed securities | ||||
Assets | ||||
Investments | 1,271 | 1,476 | ||
Other assets | 17 | 66 | ||
Fair Value, Measurements, Recurring | Asset-backed securities | Quoted Prices In Active Markets for Identical Assets (Level 1) | ||||
Assets | ||||
Investments | 0 | 0 | ||
Other assets | 0 | 0 | ||
Fair Value, Measurements, Recurring | Asset-backed securities | Significant Other Observable Inputs (Level 2) | ||||
Assets | ||||
Investments | 1,271 | 1,476 | ||
Other assets | 17 | 66 | ||
Fair Value, Measurements, Recurring | Asset-backed securities | Significant Unobservable Inputs (Level 3) | ||||
Assets | ||||
Investments | 0 | 0 | ||
Other assets | 0 | 0 | ||
Fair Value, Measurements, Recurring | U.S. government and agency securities | ||||
Assets | ||||
Investments | 1,265 | 1,835 | ||
Other assets | 166 | 207 | ||
Fair Value, Measurements, Recurring | U.S. government and agency securities | Quoted Prices In Active Markets for Identical Assets (Level 1) | ||||
Assets | ||||
Investments | 0 | 68 | ||
Other assets | 54 | 0 | ||
Fair Value, Measurements, Recurring | U.S. government and agency securities | Significant Other Observable Inputs (Level 2) | ||||
Assets | ||||
Investments | 1,265 | 1,767 | ||
Other assets | 112 | 207 | ||
Fair Value, Measurements, Recurring | U.S. government and agency securities | Significant Unobservable Inputs (Level 3) | ||||
Assets | ||||
Investments | 0 | 0 | ||
Other assets | 0 | 0 | ||
Fair Value, Measurements, Recurring | Foreign government bonds | ||||
Assets | ||||
Investments | 538 | 732 | ||
Other assets | 0 | 1 | ||
Fair Value, Measurements, Recurring | Foreign government bonds | Quoted Prices In Active Markets for Identical Assets (Level 1) | ||||
Assets | ||||
Investments | 0 | 0 | ||
Other assets | 0 | 0 | ||
Fair Value, Measurements, Recurring | Foreign government bonds | Significant Other Observable Inputs (Level 2) | ||||
Assets | ||||
Investments | 538 | 732 | ||
Other assets | 0 | 1 | ||
Fair Value, Measurements, Recurring | Foreign government bonds | Significant Unobservable Inputs (Level 3) | ||||
Assets | ||||
Investments | 0 | 0 | ||
Other assets | 0 | 0 | ||
Fair Value, Measurements, Recurring | Mortgage-backed securities | ||||
Assets | ||||
Investments | 0 | 547 | ||
Other assets | 23 | 79 | ||
Fair Value, Measurements, Recurring | Mortgage-backed securities | Quoted Prices In Active Markets for Identical Assets (Level 1) | ||||
Assets | ||||
Investments | 0 | 0 | ||
Other assets | 0 | 0 | ||
Fair Value, Measurements, Recurring | Mortgage-backed securities | Significant Other Observable Inputs (Level 2) | ||||
Assets | ||||
Investments | 0 | 547 | ||
Other assets | 23 | 79 | ||
Fair Value, Measurements, Recurring | Mortgage-backed securities | Significant Unobservable Inputs (Level 3) | ||||
Assets | ||||
Investments | 0 | 0 | ||
Other assets | 0 | 0 | ||
Fair Value, Measurements, Recurring | Publicly traded equity securities | ||||
Assets | ||||
Investments | 196 | 104 | ||
Other assets | 182 | 171 | ||
Fair Value, Measurements, Recurring | Publicly traded equity securities | Quoted Prices In Active Markets for Identical Assets (Level 1) | ||||
Assets | ||||
Investments | 196 | 104 | ||
Other assets | 182 | 171 | ||
Fair Value, Measurements, Recurring | Publicly traded equity securities | Significant Other Observable Inputs (Level 2) | ||||
Assets | ||||
Investments | 0 | 0 | ||
Other assets | 0 | 0 | ||
Fair Value, Measurements, Recurring | Publicly traded equity securities | Significant Unobservable Inputs (Level 3) | ||||
Assets | ||||
Investments | 0 | 0 | ||
Other assets | $ 0 | $ 0 |
Financial Instruments - Infor_3
Financial Instruments - Information About Changes in Liabilities for Contingent Consideration (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Fair value, beginning balance | $ 935 | $ 891 |
Changes in fair value | 144 | 151 |
Additions | 8 | 3 |
Payments | (235) | (100) |
Fair value, ending balance | 852 | $ 945 |
Current liability | $ 95 |
Inventories - Inventories (Deta
Inventories - Inventories (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Finished goods | $ 1,585 | $ 1,334 |
Raw materials and work in process | 4,933 | 4,703 |
Supplies | 202 | 201 |
Total (approximates current cost) | 6,720 | 6,238 |
(Decrease) increase to LIFO costs | (10) | 45 |
Total current and noncurrent inventories | 6,710 | 6,283 |
Recognized as: | ||
Inventories | 5,416 | 5,096 |
Other Assets | $ 1,294 | $ 1,187 |
Inventories - Narrative (Detail
Inventories - Narrative (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Inventory [Line Items] | ||
Inventories classified in Other assets | $ 1,294 | $ 1,187 |
Inventories Not Expected to be Sold Within One Year | ||
Inventory [Line Items] | ||
Inventories classified in Other assets | 1,300 | 1,100 |
Inventories Produced in Preparation for Product Launches | ||
Inventory [Line Items] | ||
Inventories classified in Other assets | $ 3 | $ 80 |
Other Intangibles - Indefinite-
Other Intangibles - Indefinite-Lived Intangible Assets Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Sep. 30, 2017 | |
Indefinite-lived Intangible Assets [Line Items] | ||
IPR&D impairment charge | $ 245 | $ 253 |
uprifosbuvir | ||
Indefinite-lived Intangible Assets [Line Items] | ||
IPR&D impairment charge | $ 240 | $ 240 |
Other Intangibles - Finite-Live
Other Intangibles - Finite-Lived Intangible Assets Narrative (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Intron A | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible asset impairment charge related to marketed product | $ 47 |
Contingencies - Fosamax Litigat
Contingencies - Fosamax Litigation - Narrative (Details) - Fosamax $ in Millions | 1 Months Ended | 9 Months Ended | 12 Months Ended | ||
Mar. 31, 2014legalmatter | Sep. 30, 2018legalmatter | Dec. 31, 2014USD ($) | Jul. 31, 2015legalmatter | Nov. 30, 2013legalmatter | |
Loss Contingencies [Line Items] | |||||
Loss contingency, pending claims, number (in legal matters) | 3,955 | ||||
ONJ Litigation | |||||
Loss Contingencies [Line Items] | |||||
Loss contingency, pending claims, number (in legal matters) | 4 | ||||
Percentage of participation in litigation settlement (as percent) | 95.00% | ||||
Litigation settlement amount to other party | $ | $ 27.3 | ||||
Femur Fracture Litigation | |||||
Loss Contingencies [Line Items] | |||||
Loss contingency, pending claims, number (in legal matters) | 3,950 | ||||
Femur Fracture Litigation | Federal | |||||
Loss Contingencies [Line Items] | |||||
Loss contingency, pending claims, number (in legal matters) | 3 | ||||
Loss contingency, claims dismissed, number (in legal matters) | 650 | 1,055 | |||
Loss contingency, claims on appeal, number (in legal matters) | 515 | ||||
Femur Fracture Litigation | New Jersey state court | |||||
Loss Contingencies [Line Items] | |||||
Loss contingency, pending claims, number (in legal matters) | 2,610 | ||||
Loss contingency, initial cases selected for review, number (in legal matters) | 30 | ||||
Loss contingency, subsequent cases selected for review, number (in legal matters) | 50 | 25 | 50 | ||
Femur Fracture Litigation | California state court | |||||
Loss Contingencies [Line Items] | |||||
Loss contingency, pending claims, number (in legal matters) | 275 | ||||
Loss contingency, initial cases selected for review, number (in legal matters) | 10 | ||||
Femur Fracture Litigation | Other state courts | |||||
Loss Contingencies [Line Items] | |||||
Loss contingency, pending claims, number (in legal matters) | 4 |
Contingencies - Januvia_Janumet
Contingencies - Januvia/Janumet Litigation - Narrative (Details) - Januvia | Sep. 30, 2018legalmatter |
Loss Contingencies [Line Items] | |
Loss contingency, pending claims, number (in legal matters) | 1,285 |
Cases Company Agreed To Toll Statute Of Limitations | |
Loss Contingencies [Line Items] | |
Loss contingency, pending claims, number (in legal matters) | 50 |
Other state courts | |
Loss Contingencies [Line Items] | |
Loss contingency, pending claims, number (in legal matters) | 8 |
Contingencies - Propecia_Prosca
Contingencies - Propecia/Proscar Litigation - Narrative (Details) - Propecia/Proscar $ in Millions | Apr. 09, 2018USD ($) | Sep. 30, 2018legalmatter |
Loss Contingencies [Line Items] | ||
Loss contingency, pending claims, number (in legal matters) | 40 | |
Litigation settlement amount to other party | $ | $ 4.3 | |
Percentage of participation in litigation settlement (as percent) | 95.00% | |
Other state courts | California state court | ||
Loss Contingencies [Line Items] | ||
Loss contingency, pending claims, number (in legal matters) | 1 | |
Other state courts | Massachusetts state court | ||
Loss Contingencies [Line Items] | ||
Loss contingency, pending claims, number (in legal matters) | 1 |
Contingencies - Patent Litigati
Contingencies - Patent Litigation - Narrative (Details) - USD ($) $ in Millions | 1 Months Ended | ||
Jan. 31, 2018 | Dec. 31, 2016 | Mar. 31, 2016 | |
Loss Contingencies [Line Items] | |||
Gain on settlement | $ 115 | ||
Gilead Patent Case | |||
Loss Contingencies [Line Items] | |||
Amount awarded to company | $ 2,540 | $ 200 |
Contingencies - Legal Defense R
Contingencies - Legal Defense Reserves - Narrative (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Legal Defense Costs | ||
Loss Contingencies [Line Items] | ||
Legal defense costs reserve | $ 150 | $ 160 |
Equity (Details)
Equity (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Jan. 01, 2018 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Shares, beginning balance (in shares) | 3,577,103,522 | ||||
Equity, beginning balance | $ 32,766 | $ 39,712 | $ 34,569 | $ 40,308 | |
Adoption of new accounting standards (see Note 1) | $ 48 | ||||
Net income (loss) attributable to Merck & Co., Inc. | 1,950 | (56) | 4,393 | 3,440 | |
Other comprehensive income (loss), net of taxes | (29) | 149 | 33 | 281 | |
Cash dividends declared on common stock | (1,284) | (1,289) | (3,876) | (3,872) | |
Treasury stock shares purchased | (996) | (159) | (3,158) | (2,312) | |
Share-based compensation plans and other | 252 | 140 | 646 | 623 | |
Acquisition of Vallée | 25 | ||||
Net income attributable to noncontrolling interests | 8 | 5 | 22 | 16 | |
Distributions attributable to noncontrolling interests | $ (11) | (3) | $ (21) | (10) | |
Shares, ending balance (in shares) | 3,577,103,522 | 3,577,103,522 | |||
Equity, ending balance | $ 32,656 | $ 38,499 | $ 32,656 | $ 38,499 | |
Common Stock | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Shares, beginning balance (in shares) | 3,577,000,000 | 3,577,000,000 | 3,577,000,000 | 3,577,000,000 | |
Equity, beginning balance | $ 1,788 | $ 1,788 | $ 1,788 | $ 1,788 | |
Shares, ending balance (in shares) | 3,577,000,000 | 3,577,000,000 | 3,577,000,000 | 3,577,000,000 | |
Equity, ending balance | $ 1,788 | $ 1,788 | $ 1,788 | $ 1,788 | |
Other Paid-In Capital | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Equity, beginning balance | 39,741 | 39,776 | 39,902 | 39,939 | |
Share-based compensation plans and other | 21 | 47 | (140) | (116) | |
Equity, ending balance | 39,762 | 39,823 | 39,762 | 39,823 | |
Retained Earnings | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Equity, beginning balance | 41,523 | 45,046 | 41,350 | 44,133 | |
Adoption of new accounting standards (see Note 1) | 322 | ||||
Net income (loss) attributable to Merck & Co., Inc. | 1,950 | (56) | 4,393 | 3,440 | |
Cash dividends declared on common stock | (1,284) | (1,289) | (3,876) | (3,872) | |
Equity, ending balance | 42,189 | 43,701 | 42,189 | 43,701 | |
Accumulated Other Comprehensive Loss | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Equity, beginning balance | (5,122) | (5,094) | (4,910) | (5,226) | |
Adoption of new accounting standards (see Note 1) | $ (274) | ||||
Other comprehensive income (loss), net of taxes | (29) | 149 | 33 | 281 | |
Equity, ending balance | $ (5,151) | $ (4,945) | $ (5,151) | $ (4,945) | |
Treasury Stock | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Shares, beginning balance (in shares) | 907,000,000 | 850,000,000 | 880,000,000 | 828,000,000 | |
Equity, beginning balance | $ (45,401) | $ (42,053) | $ (43,794) | $ (40,546) | |
Treasury stock shares purchased (in shares) | 16,000,000 | 2,000,000 | 53,000,000 | 36,000,000 | |
Treasury stock shares purchased | $ (996) | $ (159) | $ (3,158) | $ (2,312) | |
Share-based compensation plans and other (in shares) | (5,000,000) | (1,000,000) | (15,000,000) | (13,000,000) | |
Share-based compensation plans and other | $ 231 | $ 93 | $ 786 | $ 739 | |
Shares, ending balance (in shares) | 918,000,000 | 851,000,000 | 918,000,000 | 851,000,000 | |
Equity, ending balance | $ (46,166) | $ (42,119) | $ (46,166) | $ (42,119) | |
Non- Controlling Interests | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Equity, beginning balance | 237 | 249 | 233 | 220 | |
Acquisition of Vallée | 25 | ||||
Net income attributable to noncontrolling interests | 8 | 5 | 22 | 16 | |
Distributions attributable to noncontrolling interests | (11) | (3) | (21) | (10) | |
Equity, ending balance | $ 234 | $ 251 | $ 234 | $ 251 |
Equity - Additional Information
Equity - Additional Information (Details) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Statement of Stockholders' Equity [Abstract] | ||||
Cash dividends declared on common stock (in dollars per share) | $ 0.48 | $ 0.47 | $ 1.44 | $ 1.41 |
Share-Based Compensation Plan_2
Share-Based Compensation Plans - Amounts of Share-Based Compensation Cost Recorded in Consolidated Statement of Income (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||
Pretax share-based compensation expense | $ 91 | $ 76 | $ 261 | $ 232 |
Income tax benefit | (14) | (23) | (42) | (70) |
Total share-based compensation expense, net of taxes | $ 77 | $ 53 | $ 219 | $ 162 |
Share-Based Compensation Plan_3
Share-Based Compensation Plans - Narrative (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options granted (in shares) | 3,000 | 4,000 |
Weighted- average exercise price of options granted in period (in dollars per share) | $ 57.72 | $ 63.96 |
Weighted- average fair value per option granted (in dollars per share) | $ 8.19 | $ 7.04 |
Total pretax unrecognized compensation expense related to nonvested stock options | $ 654 | |
Weighted average period in years of recognition for nonvested stock options | 2 years 1 month 6 days | |
Restricted Stock Units (RSUs) | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares granted (in shares) | 7,000 | 5,000 |
Weighted-average fair value per share granted (in dollars per share) | $ 58.19 | $ 63.96 |
Performance Share Units (PSUs) | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares granted (in shares) | 855 | 1,000 |
Weighted-average fair value per share granted (in dollars per share) | $ 56.70 | $ 63.62 |
Share-Based Compensation Plan_4
Share-Based Compensation Plans - Assumptions Used to Determine Weighted-Average Fair Value of Options Granted (Details) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Expected dividend yield | 3.40% | 3.60% |
Risk-free interest rate | 2.80% | 2.00% |
Expected volatility | 19.10% | 17.80% |
Expected life (years) | 6 years 1 month 6 days | 6 years 1 month 6 days |
Pension and Other Postretirem_3
Pension and Other Postretirement Benefit Plans - Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Other Postretirement Benefit Plans | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | $ 15 | $ 15 | $ 43 | $ 43 |
Interest cost | 17 | 20 | 52 | 61 |
Expected return on plan assets | (21) | (20) | (63) | (59) |
Amortization of unrecognized prior service credit | (21) | (24) | (63) | (74) |
Net loss amortization | 0 | 0 | 1 | 1 |
Termination benefits | 0 | 0 | 2 | 1 |
Curtailments | (1) | (1) | (7) | (6) |
Net periodic benefit cost | (11) | (10) | (35) | (33) |
U.S. | Pension Plans | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | 77 | 80 | 245 | 234 |
Interest cost | 109 | 114 | 324 | 341 |
Expected return on plan assets | (209) | (210) | (634) | (646) |
Amortization of unrecognized prior service credit | (12) | (13) | (37) | (40) |
Net loss amortization | 63 | 46 | 174 | 135 |
Termination benefits | 1 | 3 | 18 | 11 |
Curtailments | 3 | 4 | 7 | 8 |
Settlements | 0 | 0 | 1 | 0 |
Net periodic benefit cost | 32 | 24 | 98 | 43 |
International | Pension Plans | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | 56 | 66 | 181 | 189 |
Interest cost | 43 | 44 | 134 | 127 |
Expected return on plan assets | (106) | (101) | (326) | (292) |
Amortization of unrecognized prior service credit | (3) | (3) | (10) | (8) |
Net loss amortization | 21 | 25 | 64 | 72 |
Termination benefits | 0 | 1 | 0 | 2 |
Curtailments | 0 | (1) | (1) | (1) |
Settlements | 0 | 0 | 3 | 0 |
Net periodic benefit cost | $ 11 | $ 31 | $ 45 | $ 89 |
Pension and Other Postretirem_4
Pension and Other Postretirement Benefit Plans - Narrative (Details) - Pension Plans - U.S. $ in Millions | 3 Months Ended |
Sep. 30, 2018USD ($) | |
Defined Benefit Plan Disclosure [Line Items] | |
Anticipated contribution to pension plan current year | $ 375 |
Contributions by employer | $ 325 |
Other (Income) Expense, Net (De
Other (Income) Expense, Net (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Other Income and Expenses [Abstract] | ||||
Interest income | $ (92) | $ (90) | $ (257) | $ (284) |
Interest expense | 190 | 189 | 569 | 564 |
Exchange losses (gains) | 42 | (6) | 119 | 5 |
Equity income from affiliates | (81) | (18) | (93) | (11) |
Net periodic defined benefit plan (credit) cost other than service cost | (119) | (121) | (384) | (381) |
Other, net | (112) | (161) | (466) | (244) |
Other (income) expense, net | $ (172) | $ (207) | $ (512) | $ (351) |
Other (Income) Expense, Net - N
Other (Income) Expense, Net - Narrative (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Jan. 31, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Other Income and Expenses [Abstract] | |||||
Net gains on securities | $ 80 | $ 25 | $ 202 | $ 74 | |
Gain on settlement | $ 115 | ||||
Interest paid | $ 535 | $ 505 |
Taxes on Income - Narrative (De
Taxes on Income - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Income Tax Examination [Line Items] | |||||
Effective income tax rate (as percent) | 26.50% | 125.50% | 27.60% | 25.50% | |
Aggregate charge related to termination of collaboration agreement with Samsung | $ 420 | $ 0 | |||
Materials and production | $ 3,619 | $ 3,307 | 10,220 | 9,472 | |
Research and development | 2,068 | 4,413 | 7,538 | 8,024 | |
Tax benefit related to settlement of state income tax issue | (88) | ||||
Provisional transition tax liability | $ 5,300 | ||||
Provisional net transition tax payment | 5,100 | ||||
Provisional deferred tax benefit | 779 | ||||
2017 Tax Cuts and Jobs Act (TCJA) | |||||
Income Tax Examination [Line Items] | |||||
Deferred taxes | 2,000 | ||||
Internal Revenue Service (IRS) | |||||
Income Tax Examination [Line Items] | |||||
Net tax benefit related to settlement of certain federal income tax issues | 234 | 234 | |||
Income taxes paid | 2,800 | 2,800 | |||
Samsung | |||||
Income Tax Examination [Line Items] | |||||
Aggregate charge related to termination of collaboration agreement with Samsung | $ 420 | 420 | |||
Eisai | |||||
Income Tax Examination [Line Items] | |||||
Research and development | $ 1,400 | ||||
AstraZeneca | |||||
Income Tax Examination [Line Items] | |||||
Research and development | $ 2,350 | $ 2,350 | $ 2,350 |
Earnings Per Share - Calculatio
Earnings Per Share - Calculations of Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Earnings Per Share [Abstract] | ||||
Net income (loss) attributable to Merck & Co., Inc. | $ 1,950 | $ (56) | $ 4,393 | $ 3,440 |
Average common shares outstanding (in shares) | 2,662 | 2,727 | 2,680 | 2,735 |
Common shares issuable (in shares) | 16 | 0 | 14 | 19 |
Average common shares outstanding assuming dilution (in shares) | 2,678 | 2,727 | 2,694 | 2,754 |
Basic earnings (loss) per common share attributable to Merck & Co., Inc. common shareholders (in dollars per share) | $ 0.73 | $ (0.02) | $ 1.64 | $ 1.26 |
Earnings (loss) per common share assuming dilution attributable to Merck & Co., Inc. common shareholders (in dollars per share) | $ 0.73 | $ (0.02) | $ 1.63 | $ 1.25 |
Earnings Per Share - Narrative
Earnings Per Share - Narrative (Details) - shares shares in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |||
Common shares issuable under share-based compensation plans excluded from diluted earnings per common share because the effect would have been antidilutive (in shares) | 2 | 7 | 4 |
Other Comprehensive Income (L_3
Other Comprehensive Income (Loss) - Changes in AOCI by Component (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Jan. 01, 2018 | |
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | |||||
Equity, beginning balance | $ 32,766 | $ 39,712 | $ 34,569 | $ 40,308 | |
Other comprehensive income (loss) before reclassification adjustments, pretax | (110) | 107 | (143) | 51 | |
Tax | 5 | 43 | (130) | 314 | |
Other comprehensive income (loss) before reclassification adjustments, net of taxes | (105) | 150 | (273) | 365 | |
Reclassification adjustments, pretax | 84 | (7) | 365 | (146) | |
Tax | (8) | 6 | (59) | 62 | |
Reclassification adjustments, net of taxes | 76 | (1) | 306 | (84) | |
Other comprehensive income (loss), net of taxes | (29) | 149 | 33 | 281 | |
Adoption of ASU 2018-02 (see Note 1) | (266) | ||||
Equity, ending balance | 32,656 | 38,499 | 32,656 | 38,499 | |
Derivatives | |||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | |||||
Equity, beginning balance | 65 | (37) | (108) | 338 | |
Other comprehensive income (loss) before reclassification adjustments, pretax | 29 | (88) | 113 | (520) | |
Tax | (6) | 31 | (24) | 182 | |
Other comprehensive income (loss) before reclassification adjustments, net of taxes | 23 | (57) | 89 | (338) | |
Reclassification adjustments, pretax | 5 | (14) | 169 | (159) | |
Tax | (1) | 5 | (35) | 56 | |
Reclassification adjustments, net of taxes | 4 | (9) | 134 | (103) | |
Other comprehensive income (loss), net of taxes | 27 | (66) | 223 | (441) | |
Adoption of ASU 2018-02 (see Note 1) | (23) | ||||
Adoption of ASU 2016-01 (see Note 1) | $ 0 | ||||
Equity, ending balance | 92 | (103) | 92 | (103) | |
Investments | |||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | |||||
Equity, beginning balance | (164) | 75 | (61) | (3) | |
Other comprehensive income (loss) before reclassification adjustments, pretax | 8 | 170 | (125) | 283 | |
Tax | 0 | (19) | 1 | (23) | |
Other comprehensive income (loss) before reclassification adjustments, net of taxes | 8 | 151 | (124) | 260 | |
Reclassification adjustments, pretax | 32 | (24) | 68 | (73) | |
Tax | 0 | 8 | 0 | 26 | |
Reclassification adjustments, net of taxes | 32 | (16) | 68 | (47) | |
Other comprehensive income (loss), net of taxes | 40 | 135 | (56) | 213 | |
Adoption of ASU 2018-02 (see Note 1) | 1 | ||||
Adoption of ASU 2016-01 (see Note 1) | (8) | ||||
Equity, ending balance | (124) | 210 | (124) | 210 | |
Employee Benefit Plans | |||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | |||||
Equity, beginning balance | (3,065) | (3,133) | (2,787) | (3,206) | |
Other comprehensive income (loss) before reclassification adjustments, pretax | 0 | 2 | (2) | 27 | |
Tax | 0 | (13) | 4 | (7) | |
Other comprehensive income (loss) before reclassification adjustments, net of taxes | 0 | (11) | 2 | 20 | |
Reclassification adjustments, pretax | 47 | 31 | 128 | 86 | |
Tax | (7) | (7) | (24) | (20) | |
Reclassification adjustments, net of taxes | 40 | 24 | 104 | 66 | |
Other comprehensive income (loss), net of taxes | 40 | 13 | 106 | 86 | |
Adoption of ASU 2018-02 (see Note 1) | (344) | ||||
Adoption of ASU 2016-01 (see Note 1) | 0 | ||||
Equity, ending balance | (3,025) | (3,120) | (3,025) | (3,120) | |
Cumulative Translation Adjustment | |||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | |||||
Equity, beginning balance | (1,958) | (1,999) | (1,954) | (2,355) | |
Other comprehensive income (loss) before reclassification adjustments, pretax | (147) | 23 | (129) | 261 | |
Tax | 11 | 44 | (111) | 162 | |
Other comprehensive income (loss) before reclassification adjustments, net of taxes | (136) | 67 | (240) | 423 | |
Reclassification adjustments, pretax | 0 | 0 | 0 | 0 | |
Tax | 0 | 0 | 0 | 0 | |
Reclassification adjustments, net of taxes | 0 | 0 | 0 | 0 | |
Other comprehensive income (loss), net of taxes | (136) | 67 | (240) | 423 | |
Adoption of ASU 2018-02 (see Note 1) | 100 | ||||
Adoption of ASU 2016-01 (see Note 1) | 0 | ||||
Equity, ending balance | (2,094) | (1,932) | (2,094) | (1,932) | |
Accumulated Other Comprehensive Income (Loss) | |||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | |||||
Equity, beginning balance | (5,122) | (5,094) | (4,910) | (5,226) | |
Adoption of ASU 2016-01 (see Note 1) | $ (8) | ||||
Equity, ending balance | $ (5,151) | $ (4,945) | $ (5,151) | $ (4,945) |
Segment Reporting - Narrative (
Segment Reporting - Narrative (Details) | 9 Months Ended |
Sep. 30, 2018segment | |
Segment Reporting [Abstract] | |
Number of operating segments | 4 |
Segment Reporting - Sales of Co
Segment Reporting - Sales of Company's Products (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Segment Reporting Information [Line Items] | ||||
Sales | $ 10,794 | $ 10,325 | $ 31,296 | $ 29,689 |
Proceeds from sale of marketing rights | 81 | 60 | ||
Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 10,734 | 10,256 | 31,230 | 29,289 |
Other | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 60 | 69 | 66 | 400 |
United States | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 5,030 | 4,594 | 13,425 | 13,096 |
United States | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 5,010 | 4,587 | 13,324 | 13,023 |
United States | Other | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 20 | 7 | 101 | 73 |
International | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 5,764 | 5,732 | 17,871 | 16,593 |
International | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 5,725 | 5,669 | 17,906 | 16,266 |
International | Other | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 39 | 63 | (35) | 327 |
Total Pharmaceutical segment sales | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 9,658 | 9,156 | 27,859 | 26,101 |
Total Pharmaceutical segment sales | Operating Segments | Keytruda | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 1,889 | 1,047 | 5,020 | 2,512 |
Total Pharmaceutical segment sales | Operating Segments | Emend | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 123 | 137 | 396 | 413 |
Total Pharmaceutical segment sales | Operating Segments | Temodar | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 46 | 68 | 159 | 198 |
Total Pharmaceutical segment sales | Operating Segments | Alliance revenue - Lynparza | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 49 | 5 | 125 | 5 |
Total Pharmaceutical segment sales | Operating Segments | Alliance revenue - Lenvima | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 43 | 0 | 78 | 0 |
Total Pharmaceutical segment sales | Operating Segments | Gardasil/Gardasil 9 | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 1,048 | 675 | 2,317 | 1,675 |
Total Pharmaceutical segment sales | Operating Segments | ProQuad/M-M-R II/Varivax | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 525 | 519 | 1,343 | 1,273 |
Total Pharmaceutical segment sales | Operating Segments | Pneumovax 23 | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 214 | 229 | 586 | 558 |
Total Pharmaceutical segment sales | Operating Segments | RotaTeq | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 191 | 179 | 540 | 525 |
Total Pharmaceutical segment sales | Operating Segments | Zostavax | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 54 | 234 | 163 | 547 |
Total Pharmaceutical segment sales | Operating Segments | Bridion | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 217 | 185 | 661 | 495 |
Total Pharmaceutical segment sales | Operating Segments | Noxafil | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 188 | 162 | 551 | 458 |
Total Pharmaceutical segment sales | Operating Segments | Invanz | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 137 | 159 | 437 | 445 |
Total Pharmaceutical segment sales | Operating Segments | Cubicin | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 95 | 91 | 287 | 290 |
Total Pharmaceutical segment sales | Operating Segments | Cancidas | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 79 | 94 | 257 | 327 |
Total Pharmaceutical segment sales | Operating Segments | Primaxin | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 72 | 73 | 212 | 206 |
Total Pharmaceutical segment sales | Operating Segments | Simponi | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 210 | 219 | 673 | 602 |
Total Pharmaceutical segment sales | Operating Segments | Remicade | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 135 | 214 | 459 | 651 |
Total Pharmaceutical segment sales | Operating Segments | Belsomra | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 66 | 56 | 191 | 150 |
Total Pharmaceutical segment sales | Operating Segments | Isentress/Isentress HD | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 275 | 310 | 860 | 896 |
Total Pharmaceutical segment sales | Operating Segments | Zepatier | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 104 | 468 | 347 | 1,363 |
Total Pharmaceutical segment sales | Operating Segments | Zetia | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 165 | 320 | 696 | 1,021 |
Total Pharmaceutical segment sales | Operating Segments | Vytorin | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 92 | 142 | 414 | 565 |
Total Pharmaceutical segment sales | Operating Segments | Atozet | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 84 | 59 | 258 | 171 |
Total Pharmaceutical segment sales | Operating Segments | Adempas | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 94 | 70 | 238 | 221 |
Total Pharmaceutical segment sales | Operating Segments | Januvia | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 927 | 1,012 | 2,756 | 2,799 |
Total Pharmaceutical segment sales | Operating Segments | Janumet | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 563 | 513 | 1,693 | 1,572 |
Total Pharmaceutical segment sales | Operating Segments | NuvaRing | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 234 | 214 | 686 | 573 |
Total Pharmaceutical segment sales | Operating Segments | Implanon/Nexplanon | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 186 | 155 | 535 | 503 |
Total Pharmaceutical segment sales | Operating Segments | Singulair | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 161 | 161 | 521 | 550 |
Total Pharmaceutical segment sales | Operating Segments | Cozaar/Hyzaar | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 103 | 128 | 348 | 360 |
Total Pharmaceutical segment sales | Operating Segments | Nasonex | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 71 | 42 | 274 | 266 |
Total Pharmaceutical segment sales | Operating Segments | Arcoxia | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 83 | 80 | 249 | 272 |
Total Pharmaceutical segment sales | Operating Segments | Follistim AQ | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 60 | 72 | 198 | 232 |
Total Pharmaceutical segment sales | Operating Segments | Fosamax | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 45 | 53 | 159 | 180 |
Total Pharmaceutical segment sales | Operating Segments | Dulera | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 50 | 59 | 149 | 210 |
Total Pharmaceutical segment sales | Operating Segments | Other Pharmaceutical | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 980 | 952 | 3,023 | 3,017 |
Total Pharmaceutical segment sales | United States | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 4,649 | 4,197 | 12,206 | 11,887 |
Total Pharmaceutical segment sales | United States | Operating Segments | Keytruda | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 1,109 | 604 | 2,906 | 1,522 |
Total Pharmaceutical segment sales | United States | Operating Segments | Emend | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 71 | 88 | 239 | 257 |
Total Pharmaceutical segment sales | United States | Operating Segments | Temodar | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 0 | 0 | 3 | 4 |
Total Pharmaceutical segment sales | United States | Operating Segments | Alliance revenue - Lynparza | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 33 | 0 | 88 | 0 |
Total Pharmaceutical segment sales | United States | Operating Segments | Alliance revenue - Lenvima | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 30 | 0 | 49 | 0 |
Total Pharmaceutical segment sales | United States | Operating Segments | Gardasil/Gardasil 9 | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 740 | 484 | 1,422 | 1,195 |
Total Pharmaceutical segment sales | United States | Operating Segments | ProQuad/M-M-R II/Varivax | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 429 | 419 | 1,097 | 1,058 |
Total Pharmaceutical segment sales | United States | Operating Segments | Pneumovax 23 | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 160 | 174 | 394 | 392 |
Total Pharmaceutical segment sales | United States | Operating Segments | RotaTeq | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 134 | 127 | 384 | 377 |
Total Pharmaceutical segment sales | United States | Operating Segments | Zostavax | ||||
Segment Reporting Information [Line Items] | ||||
Sales | (1) | 139 | 16 | 356 |
Total Pharmaceutical segment sales | United States | Operating Segments | Bridion | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 96 | 63 | 272 | 162 |
Total Pharmaceutical segment sales | United States | Operating Segments | Noxafil | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 89 | 78 | 257 | 220 |
Total Pharmaceutical segment sales | United States | Operating Segments | Invanz | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 74 | 93 | 252 | 268 |
Total Pharmaceutical segment sales | United States | Operating Segments | Cubicin | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 55 | 41 | 150 | 148 |
Total Pharmaceutical segment sales | United States | Operating Segments | Cancidas | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 2 | 6 | 10 | 17 |
Total Pharmaceutical segment sales | United States | Operating Segments | Primaxin | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 1 | 5 | 6 | 7 |
Total Pharmaceutical segment sales | United States | Operating Segments | Simponi | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 0 | 0 | 0 | 0 |
Total Pharmaceutical segment sales | United States | Operating Segments | Remicade | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 0 | 0 | 0 | 0 |
Total Pharmaceutical segment sales | United States | Operating Segments | Belsomra | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 23 | 27 | 76 | 72 |
Total Pharmaceutical segment sales | United States | Operating Segments | Isentress/Isentress HD | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 123 | 143 | 383 | 422 |
Total Pharmaceutical segment sales | United States | Operating Segments | Zepatier | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 18 | 228 | 8 | 683 |
Total Pharmaceutical segment sales | United States | Operating Segments | Zetia | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 9 | 65 | 34 | 298 |
Total Pharmaceutical segment sales | United States | Operating Segments | Vytorin | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 0 | (6) | 11 | 114 |
Total Pharmaceutical segment sales | United States | Operating Segments | Atozet | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 0 | 0 | 0 | 0 |
Total Pharmaceutical segment sales | United States | Operating Segments | Adempas | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 0 | 0 | 0 | 0 |
Total Pharmaceutical segment sales | United States | Operating Segments | Januvia | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 498 | 598 | 1,466 | 1,646 |
Total Pharmaceutical segment sales | United States | Operating Segments | Janumet | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 225 | 197 | 625 | 640 |
Total Pharmaceutical segment sales | United States | Operating Segments | NuvaRing | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 193 | 160 | 550 | 425 |
Total Pharmaceutical segment sales | United States | Operating Segments | Implanon/Nexplanon | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 133 | 110 | 375 | 367 |
Total Pharmaceutical segment sales | United States | Operating Segments | Singulair | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 5 | 16 | 16 | 28 |
Total Pharmaceutical segment sales | United States | Operating Segments | Cozaar/Hyzaar | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 4 | 9 | 18 | 15 |
Total Pharmaceutical segment sales | United States | Operating Segments | Nasonex | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 7 | (23) | 8 | 16 |
Total Pharmaceutical segment sales | United States | Operating Segments | Arcoxia | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 0 | 0 | 0 | 0 |
Total Pharmaceutical segment sales | United States | Operating Segments | Follistim AQ | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 26 | 30 | 83 | 104 |
Total Pharmaceutical segment sales | United States | Operating Segments | Fosamax | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 2 | 4 | 3 | 7 |
Total Pharmaceutical segment sales | United States | Operating Segments | Dulera | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 44 | 52 | 128 | 191 |
Total Pharmaceutical segment sales | United States | Operating Segments | Other Pharmaceutical | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 317 | 266 | 877 | 876 |
Total Pharmaceutical segment sales | International | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 5,010 | 4,959 | 15,653 | 14,214 |
Total Pharmaceutical segment sales | International | Operating Segments | Keytruda | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 780 | 442 | 2,114 | 990 |
Total Pharmaceutical segment sales | International | Operating Segments | Emend | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 52 | 49 | 157 | 156 |
Total Pharmaceutical segment sales | International | Operating Segments | Temodar | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 46 | 68 | 156 | 194 |
Total Pharmaceutical segment sales | International | Operating Segments | Alliance revenue - Lynparza | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 15 | 5 | 37 | 5 |
Total Pharmaceutical segment sales | International | Operating Segments | Alliance revenue - Lenvima | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 13 | 0 | 29 | 0 |
Total Pharmaceutical segment sales | International | Operating Segments | Gardasil/Gardasil 9 | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 308 | 191 | 894 | 481 |
Total Pharmaceutical segment sales | International | Operating Segments | ProQuad/M-M-R II/Varivax | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 96 | 100 | 246 | 215 |
Total Pharmaceutical segment sales | International | Operating Segments | Pneumovax 23 | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 54 | 56 | 192 | 166 |
Total Pharmaceutical segment sales | International | Operating Segments | RotaTeq | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 57 | 52 | 156 | 148 |
Total Pharmaceutical segment sales | International | Operating Segments | Zostavax | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 56 | 94 | 147 | 191 |
Total Pharmaceutical segment sales | International | Operating Segments | Bridion | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 120 | 122 | 389 | 333 |
Total Pharmaceutical segment sales | International | Operating Segments | Noxafil | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 99 | 83 | 294 | 237 |
Total Pharmaceutical segment sales | International | Operating Segments | Invanz | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 62 | 66 | 185 | 177 |
Total Pharmaceutical segment sales | International | Operating Segments | Cubicin | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 40 | 50 | 137 | 141 |
Total Pharmaceutical segment sales | International | Operating Segments | Cancidas | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 77 | 88 | 247 | 310 |
Total Pharmaceutical segment sales | International | Operating Segments | Primaxin | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 71 | 68 | 206 | 199 |
Total Pharmaceutical segment sales | International | Operating Segments | Simponi | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 210 | 219 | 673 | 602 |
Total Pharmaceutical segment sales | International | Operating Segments | Remicade | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 135 | 214 | 459 | 651 |
Total Pharmaceutical segment sales | International | Operating Segments | Belsomra | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 43 | 30 | 115 | 78 |
Total Pharmaceutical segment sales | International | Operating Segments | Isentress/Isentress HD | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 151 | 167 | 477 | 474 |
Total Pharmaceutical segment sales | International | Operating Segments | Zepatier | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 86 | 241 | 339 | 680 |
Total Pharmaceutical segment sales | International | Operating Segments | Zetia | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 157 | 255 | 662 | 723 |
Total Pharmaceutical segment sales | International | Operating Segments | Vytorin | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 92 | 148 | 402 | 451 |
Total Pharmaceutical segment sales | International | Operating Segments | Atozet | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 84 | 59 | 258 | 171 |
Total Pharmaceutical segment sales | International | Operating Segments | Adempas | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 94 | 70 | 238 | 221 |
Total Pharmaceutical segment sales | International | Operating Segments | Januvia | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 429 | 414 | 1,291 | 1,153 |
Total Pharmaceutical segment sales | International | Operating Segments | Janumet | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 339 | 316 | 1,067 | 933 |
Total Pharmaceutical segment sales | International | Operating Segments | NuvaRing | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 41 | 54 | 135 | 148 |
Total Pharmaceutical segment sales | International | Operating Segments | Implanon/Nexplanon | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 53 | 45 | 160 | 137 |
Total Pharmaceutical segment sales | International | Operating Segments | Singulair | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 156 | 145 | 505 | 522 |
Total Pharmaceutical segment sales | International | Operating Segments | Cozaar/Hyzaar | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 99 | 119 | 330 | 345 |
Total Pharmaceutical segment sales | International | Operating Segments | Nasonex | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 64 | 65 | 266 | 250 |
Total Pharmaceutical segment sales | International | Operating Segments | Arcoxia | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 83 | 80 | 249 | 272 |
Total Pharmaceutical segment sales | International | Operating Segments | Follistim AQ | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 34 | 41 | 115 | 128 |
Total Pharmaceutical segment sales | International | Operating Segments | Fosamax | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 42 | 48 | 155 | 173 |
Total Pharmaceutical segment sales | International | Operating Segments | Dulera | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 6 | 7 | 21 | 19 |
Total Pharmaceutical segment sales | International | Operating Segments | Other Pharmaceutical | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 666 | 688 | 2,150 | 2,140 |
Total Animal Health segment sales | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 1,021 | 1,000 | 3,176 | 2,894 |
Total Animal Health segment sales | Operating Segments | Livestock | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 660 | 655 | 1,946 | 1,816 |
Total Animal Health segment sales | Operating Segments | Companion Animals | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 361 | 345 | 1,230 | 1,078 |
Total Animal Health segment sales | United States | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 306 | 290 | 924 | 842 |
Total Animal Health segment sales | United States | Operating Segments | Livestock | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 153 | 137 | 383 | 359 |
Total Animal Health segment sales | United States | Operating Segments | Companion Animals | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 153 | 153 | 541 | 483 |
Total Animal Health segment sales | International | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 715 | 710 | 2,252 | 2,052 |
Total Animal Health segment sales | International | Operating Segments | Livestock | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 508 | 518 | 1,563 | 1,457 |
Total Animal Health segment sales | International | Operating Segments | Companion Animals | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 207 | 192 | 689 | 595 |
Other segment sales | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 55 | 100 | 195 | 294 |
Other segment sales | United States | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 55 | 100 | 194 | 294 |
Other segment sales | International | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Sales | $ 0 | $ 0 | $ 1 | $ 0 |
Segment Reporting - Consolidate
Segment Reporting - Consolidated Revenues by Geographic Area (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenue from External Customer [Line Items] | ||||
Sales | $ 10,794 | $ 10,325 | $ 31,296 | $ 29,689 |
United States | ||||
Revenue from External Customer [Line Items] | ||||
Sales | 5,030 | 4,594 | 13,425 | 13,096 |
Europe, Middle East and Africa | ||||
Revenue from External Customer [Line Items] | ||||
Sales | 2,884 | 2,941 | 9,218 | 8,374 |
Asia Pacific | ||||
Revenue from External Customer [Line Items] | ||||
Sales | 1,178 | 1,112 | 3,766 | 3,164 |
Japan | ||||
Revenue from External Customer [Line Items] | ||||
Sales | 761 | 775 | 2,353 | 2,320 |
Latin America | ||||
Revenue from External Customer [Line Items] | ||||
Sales | 622 | 585 | 1,748 | 1,654 |
Other | ||||
Revenue from External Customer [Line Items] | ||||
Sales | $ 319 | $ 318 | $ 786 | $ 1,081 |
Segment Reporting - Reconciliat
Segment Reporting - Reconciliation of Segment Profits to Income Before Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Segment Reporting Information [Line Items] | ||||
Profits | $ 2,665 | $ 200 | $ 6,097 | $ 4,642 |
Interest income | 92 | 90 | 257 | 284 |
Interest expense | (190) | (189) | (569) | (564) |
Equity income from affiliates | 81 | 18 | 93 | 11 |
Depreciation and amortization | (3,424) | (3,509) | ||
Research and development | (2,068) | (4,413) | (7,538) | (8,024) |
Restructuring costs | (171) | (153) | (494) | (470) |
Aggregate charge related to termination of collaboration agreement with Samsung | 420 | 0 | ||
Total segment profits | ||||
Segment Reporting Information [Line Items] | ||||
Profits | 6,893 | 6,388 | 19,476 | 18,093 |
Total segment profits | Pharmaceutical segment | ||||
Segment Reporting Information [Line Items] | ||||
Profits | 6,479 | 5,906 | 18,109 | 16,657 |
Total segment profits | Animal Health segment | ||||
Segment Reporting Information [Line Items] | ||||
Profits | 409 | 389 | 1,273 | 1,202 |
Total segment profits | Other segments | ||||
Segment Reporting Information [Line Items] | ||||
Profits | 5 | 93 | 94 | 234 |
Other profits (losses) | ||||
Segment Reporting Information [Line Items] | ||||
Profits | 55 | (78) | (35) | 107 |
Unallocated | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 92 | 90 | 257 | 284 |
Interest expense | (190) | (189) | (569) | (564) |
Equity income from affiliates | 85 | 23 | 101 | 16 |
Depreciation and amortization | (324) | (334) | (1,006) | (1,036) |
Research and development | (1,855) | (4,208) | (6,878) | (7,399) |
Amortization of purchase accounting adjustments | (679) | (765) | (2,144) | (2,322) |
Restructuring costs | (171) | (153) | (494) | (470) |
Aggregate charge related to termination of collaboration agreement with Samsung | (420) | 0 | (420) | 0 |
Other unallocated, net | $ (821) | $ (574) | $ (2,191) | $ (2,067) |