George W. Merck, our Company's modern founder, had a simple saying: "We should first see to it that what we are doing is right." This way of doing business, along with the opportunity to make dramatic improvements in the lives of millions, is why I joined Merck more than 35 years ago. Today we continue our long-standing commitment to find innovative ways to solve the many medical and scientific challenges that remain in the fight against disease worldwide. The unmet medical needs we face are changing every day, as new diseases and resistance to existing therapies emerge. To me, this is why the work we do at Merck matters.

Merck’s work affects many worldwide

Since I took over the helm as CEO at Merck in 2005, we have been listening carefully to the ideas of those concerned about the state of global health care and the success of our Company. Patient groups and health care professionals, governments and nongovernmental organizations, payors and investors, our communities and our own employees have expressed their needs, concerns and expectations. This Report is an important part of our response.

Based on what we've heard from and about patients everywhere, we have concluded that five issues are vital to Merck's future success:

• Researching and developing new medicines and vaccines that address unmet needs
  
• Improving access to medicines, vaccines and health care
  
• Ensuring confidence in the safety and quality of our products
  
• Conducting ourselves ethically and transparently
  
• Managing our environmental impacts
  

To communicate all that is happening on these important issues, in this second Corporate Responsibility Report we have gathered extensive information about our policies and performance. We have attempted to present the facts and our analyses in a clear and straightforward way.

Our primary corporate responsibility is the discovery, development and delivery of innovative medicines and vaccines for unmet medical needs.

We are delivering on this commitment. In 2006-2007, seven new products were approved, including ISENTRESS^® (raltegravir) for HIV, ROTATEQ^® (rotavirus vaccine, live, oral, pentavalent) for prevention of gastroenteritis, JANUVIA^® (sitagliptan phosphate) for diabetes and GARDASIL^® [human papillomavirus quadrivalent (types 6, 11, 16, 18) vaccine, recombinant] for prevention of cervical cancers, precancerous or dysplastic lesions, and genital warts caused by human papillomavirus. Our products currently address 60 percent of the top 20 global burdens of disease as defined by the World Health Organization (WHO). As of July 31, 2008, we have 43 compounds in our Phase I-III pipeline. This is a strong return on our annual R&D investment of $5 billion.

However, we recognize that most people worldwide still lack adequate access to medicines, vaccines and health care. We are committed to improving access to our products for all who can benefit, wherever they live. This makes good business sense. It is also the right thing to do.

Improving access to our products

We are expanding our business in emerging markets and making positive changes in product pricing and registration, public policy and partnerships. Some examples of our efforts include:

• In 2007, Merck adopted a new developing world pricing policy for our vaccines. We offer ROTATEQ and GARDASIL at significantly discounted or not-for-profit prices, based on countries' ability to pay. This complements the existing differential pricing policy for our HIV medicines.
• We collaborated with other stakeholders, under the leadership of the U.K. Department for International Development, in establishing the Medicines Transparency Alliance (MeTA), which will tackle the excessive mark-ups, corruption and mismanagement that cause good quality medicines to be either too expensive or unavailable for hundreds of millions of people in developing countries.
• Currently, we are working hard to find health care solutions for the more than 45 million Americans who are uninsured. Merck believes that all citizens, regardless of age or income, should have access to quality, affordable health insurance that includes coverage for medicines and vaccines.

We are also working through public/private partnerships to donate our products now and to help strengthen health care capacity worldwide. Merck has a rich history of such commitments.

Last year marked the 20th anniversary of our MECTIZAN Donation Program, which delivers MECTIZAN^® (ivermectin) to treat river blindness and prevent lymphatic filariasis in 35 developing countries. We have seen important successes along the way. In 2007, transmission of river blindness was halted in Colombia, the first time that the disease has been eliminated as a public health problem on a country-wide basis anywhere in the world. I have reaffirmed Merck's pledge to donate enough MECTIZAN for as long as necessary to eliminate river blindness. In addition, in December we pledged up to $25 million toward a new initiative with the World Bank and other partners to help eliminate the disease in 28 African countries.

We are building on this commitment to improve global health by systematically facilitating the widespread adoption of our new vaccines. We are creating replicable examples to demonstrate the ease of introduction and the benefits of these vaccines in resource-constrained settings. For example, we launched the ROTATEQ Access Partnership in Nicaragua in 2006 and the GARDASIL Access Program to support vaccination in the lowest-income countries the following year.

A positive environmental impact

We announced plans earlier this year to reduce greenhouse gas emissions from Merck's global operations by 12 percent by the end of 2012, from a 2004 baseline. In our global public policy position, we recognize the potential public health implications that may result from climate change and have adopted a strategy to reduce our environmental footprint, including energy, water use and renewable resources.

Promoting transparency

Yet our commitment to improving the state of global health has not spared Merck from the challenges facing the pharmaceutical industry: patent expirations and an increasingly challenging R&D environment, and questions about product safety and corporate integrity. Rapidly growing health care costs are placing great pressures on reimbursement and utilization, resulting in criticism targeting pharmaceuticals well beyond their actual contribution to those costs. There is also increasing debate about the value of the intellectual property rights system that creates incentives for innovation.

We believe that the best way to address the concerns, risks and questions facing our business and to build a foundation of trust is to be more transparent about the way we operate.

This is why, in this report, we seek to be clear not only about our opportunities, but also about the challenges we face, what we are doing to address them and why. We discuss our approach, our performance and impact, and our priorities and commitments for the future. We also report on many more performance indicators than ever before. This report presents the main highlights.

As part of our response to stakeholders, we have begun disclosing:

• Grants provided by Merck's Global Human Health Division to U.S. organizations in support of independent accredited educational programs for health care professionals. Early next year, we will begin to report other grants and payments to U.S. organizations, as well as grants in other regions.
• The portion of dues that major U.S.-based trade associations report to us as being used for advocacy and/or political activities.
• Registration status by country for our newest vaccines and all of our HIV medicines.
• Our perspective on the right to health, and our role in realizing this right.

In addition to providing greater transparency at Merck, as chairman of The Pharmaceutical Research and Manufacturers of America (PhRMA) I am working to establish greater transparency in the pharmaceutical sector more broadly.

What’s ahead?

I want to assure you that Merck is committed to reporting on our progress and challenges, including questions about our marketing practices and the safety of our medicines. We will continue to listen and engage with our stakeholders globally to benefit from broader perspectives and to share our own. And we will continue to respond in ways that help bring our new products to more people and sustain our business.

By doing this, I am confident that we will continue to succeed in our most fundamental responsibility — discovering and developing medicines and vaccines that make a difference in people's lives and create a healthier future.

Richard T. Clark
Chairman, President and Chief Executive Officer
October 2008