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Published by: Harvard Business Publishing
Published in: "Harvard Business Review", 1994

Abstract

On November 1, 1994, P. Roy Vagelos retired after nearly 20 years at Merck. As head of the research labs from 1975 to 1985 and then as CEO, Vagelos turned Merck into a pharmaceutical powerhouse through a series of breakthrough drugs. More recently, Vagelos shocked this once conservative corner of the medical industry with Merck''s acquisition of the prescription-benefits-management company (PBM) Medco Containment Services, which provides prescription drugs to HMOs and employees of large corporations. Merck''s acquisition of Medco represents a $6.6 billion bet on where the future of the pharmaceutical industry lies. In today''s managed-care environment, Vagelos argues, the company that best controls the information flow from doctor to patient to pharmacist to plan sponsor has the greatest chance of succeeding. Medco has information on 38 million patients, which allows Merck to learn a lot more about how its drugs are prescribed and used and, ultimately, how effective they are in fighting disease.

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Abstract

On November 1, 1994, P. Roy Vagelos retired after nearly 20 years at Merck. As head of the research labs from 1975 to 1985 and then as CEO, Vagelos turned Merck into a pharmaceutical powerhouse through a series of breakthrough drugs. More recently, Vagelos shocked this once conservative corner of the medical industry with Merck''s acquisition of the prescription-benefits-management company (PBM) Medco Containment Services, which provides prescription drugs to HMOs and employees of large corporations. Merck''s acquisition of Medco represents a $6.6 billion bet on where the future of the pharmaceutical industry lies. In today''s managed-care environment, Vagelos argues, the company that best controls the information flow from doctor to patient to pharmacist to plan sponsor has the greatest chance of succeeding. Medco has information on 38 million patients, which allows Merck to learn a lot more about how its drugs are prescribed and used and, ultimately, how effective they are in fighting disease.

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