Recommendation of Merck with the health management business in thefuture

The health management business is very competitive and in order forMerck to be a going concern, that is continue operating even in thefuture with no hiccups, it should consider minimizing unnecessarycosts on healthcare by joining Indemnity Health Insurance companiesespecially for the employees. Also, Health Maintenance Organizations(HMOs) should be a key consideration for Merck in order to transfertheir risks and operate on a risk-free environment. Lastly, Merckshould also join Preferred Provider Organization (PPOs) where theycontract physicians to provide healthcare at discounted rates so asto attract more customers.

Rationale for PBMs

PBMs (Pharmacy Benefit Managers) is responsible for design,implementation and administration of pharmacy benefit programs anddefining characteristics: claims processing and adjudication,pharmacy network management, formulary development and management forclients and debate negotiations with pharmaceutical manufacturers.

Does Medco fit with Merck’s strategies?

Merck’s strategy was that of creating a first class coordinatedpharmaceutical company that would optimize the delivery, discovery,development, utilization and quality prescription drugs whereas Medcodevolved to clinically driver programs such as patient profiling andoutcome research which were among Merck’s strategies.

Advantages and disadvantages of the Merger

Medco and Merck merged in 1993 and in 1994 was formedwhere Medco helped Merck achieve their growth target of 15%-20% aswell as boosting their profitability, which had seemed difficultbefore merging. had also developed and rolled out of itshealth management problems. However, their merging came with somedifficulties whereby Medco failed to adequately explain itsrelationship with Merck and other manufacturers as well as Medcogoing behind Merck’s back and signing a contract they intended tohave.

What does Medco bring to Merck and vice versa?

As mentioned earlier, Medco helped Merck Achieve its growth targetswhereas Medco gained so much familiarity after merging with Merck andgained support inform of funds.

Why is vertical integration attractive as a strategic option?

Vertical integration is attractive as a strategic option in thisindustry since, it assists in increase of the profit share, it alsoincreases the entry barriers to competition and also helps industriesgain access to downstream customers and distributors that seemsinaccessible (Rangan &amp M., 1998).


Rangan, V. &amp M., B., 1998. : Vertical Intergration in thepharmaceutical industry. Harvard School of Business Case study, pp. 9-598.