Merck chief executive touts corporate responsibility in Las Vegas appearance

Michelle Swafford

Wednesday, Oct. 13, 2004 | 10:36 a.m.

A big key to corporate success is looking out for your community and the world around you, an embattled pharmaceutical executive told Las Vegas Valley business leaders Tuesday.

Merck & Co. Inc. Chief Executive Ray Gilmartin visited Las Vegas to discuss the importance of global involvement and how his company's commitment to its patients nationally and worldwide is paying off for the company.

For example, Merck withdrew its entire 80-country inventory of Vioxx, which is used to treat arthritis and pain, on Sept. 30 because of a company-sponsored study that showed an increased risk of heart attacks and stroke after 18 months of use.

When Gilmartin agreed to speak to members of the Nevada Committee on Foreign Relations in Reno and Las Vegas he said he did not know that he would be in the middle of a voluntary withdraw of Merck's blockbuster drug that generated $2.5 billion in revenue last year.

In an interview with the Sun, he used the Vioxx situation and Merck's involvement with treating and educating HIV and AIDS patients in Africa as examples of how businesses should respond to their community.

"There was a case to be made for keeping the drug on the market because a number of people do benefit from this. It's been very effective against pain," he said. "But, once you have a known risk factor and there are alternative treatments available, the most responsible course is to actually withdraw the drug, which we did."

The decision was made based solely on patient safety, which follows the company's philosophy, Gilmartin said.

"Medicines are for the people, not for the profits and if we remember that, the profits will follow," Gilmartin said. "The more we've remembered that, the more they've followed."

The company also assists uninsured patients who cannot afford their medications, Gilmartin said. Last year Merck provided free or discounted drugs to 600,000 low-income people through its assistance program, he said.

In addition to pulling potentially dangerous drugs from the market, Merck has been establishing itself through philanthropic efforts to fight the HIV and AIDS epidemic affecting developing countries. Merck and the Bill and Melinda Gates Foundation are providing $50 million for physician and nurse training, diagnostic centers and counseling for about 30,000 AIDS and HIV patients. Merck also provides the medications at cost to the patients.

Botswana has 1.7 million people and close to 40 percent of the population is infected with HIV, Gilmartin said.

"There's a new role for corporate America to play in global health and development," Gilmartin told the business leaders. "While you may not be directly impacted by the battle, you are affected by its outcome. Global health care challenges and their impact on the world's economy affect our communities, our companies and our country."

He said AIDS and HIV are also destroying lives in India, Russia and China and other large corporations such as Coca-Cola, Daimler-Chrysler and General Motors are helping with training and education because it affects their workforce.

Those companies operate in countries where the governments cannot handle the number of HIV and AIDS cases and without intervention those companies' employees, customers and the national economies that support them will be devastated, Gilmartin said.

While Merck is saving lives in Africa, it also is trying to forge ahead with other drugs to keep the company on the leading edge of drug development in the face of many upcoming challenges.

Merck will face another revenue blow in 2006 when its blockbuster cholesterol-lowering drug Zocor's patent expires and sales are expected to plummet as patients turn to generic alternatives.

Also in 2006, Gilmartin will be required to retire, which is when he turns 65. Some analysts say Merck should replace the CEO sooner. Since Vioxx was withdrawn, there has been speculation that a successor would be named sooner.

Gilmartin reiterated Tuesday that there are no plans for him to retire early and the company does not plan to merge with another pharmaceutical company.

"The question is, 'If you do a large-scale merger, does it add to your pipeline and therefore your long-term growth?' " he asked. "There's no large-scale merger out there that would meet that requirement."

Barbara Ryan, an analyst with Deutsche Bank, said in a Sept. 30 report that the company should consider a merger to increase Merck's pulse. She also said although it is not personal, Gilmartin "can no longer sit on his hands and wait out the remainder of his tenure."

"(Merck) has had a run of bad luck, but it can't stand up and say it ain't broke anymore. It is, and it needs to be fixed," she said in her report.

Other analysts say Merck's financial outlook was hurt when Vioxx was removed and Merck is likely to face its share of litigation. In fact, a New York lawyer filed product liability lawsuits against Merck a few days after Merck's withdrawal announcement and is collecting names of Vioxx patients.

While Merck is putting out fires related to Vioxx, it also is ramping up its drug pipeline and has plans to apply for new drug applications with the Food and Drug Administration on several of its products in the next few years, Gilmartin said.

"Investors, being forward looking, are interested in how fast the company is going to grow in the future," Gilmartin said, adding that investors know the next few years will be tough for Merck.