Segment Reporting

The Company’s operations are principally managed on a products basis and are comprised of four operating segments – Pharmaceutical, Animal Health, Consumer Care and Alliances (which includes revenue and equity income from the Company’s relationship with AZLP). The Animal Health, Consumer Care and Alliances segments are not material for separate reporting and are included in all other in the table below. The Pharmaceutical segment includes human health pharmaceutical and vaccine products marketed either directly by the Company or through joint ventures. 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 vaccines is sold 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 Company also has animal health operations that discover, develop, manufacture and market animal health products, including vaccines, which the Company sells to veterinarians, distributors and animal producers. Additionally, the Company has consumer care operations that develop, manufacture and market over-the-counter, foot care and sun care products, which are sold through wholesale and retail drug, food chain and mass merchandiser outlets, as well as club stores and specialty channels.

The accounting policies for the segments described above are the same as those described in Note 2.

Sales of the Company’s products were as follows:



Years Ended December 31	2013		2012		2011
Primary Care and Women’s Health
Cardiovascular
Zetia	$	2,658	$	2,567	$	2,428
Vytorin	1,643		1,747		1,882
Diabetes and Obesity
Januvia	4,004		4,086		3,324
Janumet	1,829		1,659		1,363
Respiratory
Nasonex	1,335		1,268		1,286
Singulair	1,196		3,853		5,479
Dulera	324		207		96
Asmanex	184		185		206
Women’s Health and Endocrine
NuvaRing	686		623		623
Fosamax	560		676		855
Follistim AQ	481		468		530
Implanon	403		348		294
Cerazette	208		271		268
Other
Arcoxia	484		453		431
Avelox	140		201		322
Hospital and Specialty
Immunology
Remicade	2,271		2,076		2,667
Simponi	500		331		264
Infectious Disease
Isentress	1,643		1,515		1,359
Cancidas	660		619		640
PegIntron	496		653		657
Invanz	488		445		406
Victrelis	428		502		140
Noxafil	309		258		230
Oncology
Temodar	708		917		935
Emend	507		489		419
Other
Cosopt/Trusopt	416		444		477
Bridion	288		261		201
Integrilin	186		211		230
Diversified Brands
Cozaar/Hyzaar	1,006		1,284		1,663
Primaxin	335		384		515
Zocor	301		383		456
Propecia	283		424		447
Clarinex	235		393		621
Remeron	206		232		241
Claritin Rx	204		244		314
Proscar	183		217		223
Maxalt	149		638		639
Vaccines ⁽¹⁾
Gardasil	1,831		1,631		1,209
ProQuad/M-M-R II/Varivax	1,306		1,273		1,202
Zostavax	758		651		332
Pneumovax 23	653		580		498
RotaTeq	636		601		651
Other pharmaceutical ⁽²⁾	4,316		4,333		4,266
Total Pharmaceutical segment sales	37,437		40,601		41,289
Other segment sales ⁽³⁾	6,325		6,412		6,428
Total segment sales	43,762		47,013		47,717
Other ⁽⁴⁾	271		254		330
	$	44,033	$	47,267	$	48,047


⁽¹⁾	These amounts do not reflect sales of vaccines sold in most major European markets through the Company’s joint venture, Sanofi Pasteur MSD, the results of which are reflected in Equity income from affiliates. These amounts do, however, reflect supply sales to Sanofi Pasteur MSD.


⁽²⁾	Other pharmaceutical primarily reflects sales of other human health pharmaceutical products, including products within the franchises not listed separately.


⁽³⁾	Represents the non-reportable segments of Animal Health, Consumer Care and Alliances. The Alliances segment includes revenue from the Company’s relationship with AZLP.

⁽⁴⁾

Other revenues are primarily comprised of miscellaneous corporate revenues, third-party manufacturing sales, sales related to divested products or businesses and other supply sales not included in segment results. On October 1, 2013, the Company divested a substantial portion of its third-party manufacturing sales (see Note 3). In addition, other revenues in 2013 reflect $50 million of revenue for the out-license of a pipeline compound.

Consolidated revenues by geographic area where derived are as follows:



Years Ended December 31	2013		2012		2011
United States	$	18,246	$	20,392	$	20,495
Europe, Middle East and Africa	13,140		12,990		13,782
Japan	4,044		5,102		4,835
Asia Pacific	3,845		3,775		3,496
Latin America	3,203		3,389		3,472
Other	1,555		1,619		1,967
	$	44,033	$	47,267	$	48,047

A reconciliation of total segment profits to consolidated Income before taxes is as follows:



Years Ended December 31	2013			2012			2011
Segment profits:
Pharmaceutical segment	$	22,983		$	25,852		$	25,617
Other segments	3,094			3,163			2,995
Total segment profits	26,077			29,015			28,612
Other profits (losses)	19			26			(11		)
Unallocated:
Interest income	264			232			145
Interest expense	(801		)	(714		)	(695		)
Equity income from affiliates	(159		)	102			41
Depreciation and amortization	(2,250		)	(2,059		)	(2,412		)
Research and development	(6,381		)	(7,126		)	(7,251		)
Amortization of purchase accounting adjustments	(4,690		)	(4,872		)	(5,000		)
Restructuring costs	(1,709		)	(664		)	(1,306		)
Net charge related to settlement of ENHANCE Litigation	—			(493		)	—
Arbitration settlement charge	—			—			(500		)
Other unallocated, net	(4,825		)	(4,708		)	(4,289		)
	$	5,545		$	8,739		$	7,334

Segment profits are comprised of segment sales less standard costs and certain operating expenses directly incurred by the segments. For internal management reporting presented to the chief operating decision maker, Merck does not allocate materials and production costs, other than standard costs, the majority of research and development expenses 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 (losses) are primarily comprised of miscellaneous corporate profits (losses), as well as operating profits (losses) related to third-party manufacturing sales, divested products or businesses and other supply sales.

Other unallocated, net includes expenses from corporate and manufacturing cost centers, product intangible asset impairment charges, gain or losses on sales of businesses and other miscellaneous income or expense items.

Equity income from affiliates and depreciation and amortization included in segment profits is as follows:



	Pharmaceutical			All Other			Total
Year Ended December 31, 2013
Included in segment profits:
Equity income from affiliates	$	88		$	475		$	563
Depreciation and amortization	(27		)	(22		)	(49		)
Year Ended December 31, 2012
Included in segment profits:
Equity income from affiliates	$	36		$	504		$	540
Depreciation and amortization	(25		)	(20		)	(45		)
Year Ended December 31, 2011
Included in segment profits:
Equity income from affiliates	$	59		$	510		$	569
Depreciation and amortization	(51		)	(20		)	(71		)

Property, plant and equipment, net by geographic area where located is as follows:



Years Ended December 31	2013		2012		2011
United States	$	10,076	$	10,687	$	10,826
Europe, Middle East and Africa	3,346		3,688		3,780
Asia Pacific	1,001		1,059		1,064
Latin America	242		250		234
Japan	211		243		279
Other	97		103		114
	$	14,973	$	16,030	$	16,297

The Company does not disaggregate assets on a products and services basis for internal management reporting and, therefore, such information is not presented.