How Merck Approaches Corporate Social Responsibility

By Rob Wright, Chief Editor, Life Science Leader
Follow Me On Twitter @RfwrightLSL

Corporate Social Responsibility (i.e., being a good corporate citizen) has been a best business practice since the 1950s. For the biopharmaceutical industry, recent events, such as the drug pricing scandal involving Martin Shkreli, have once again brought CSR into the spotlight. But one of our industry’s biggest and most well respected pharmaceutical companies, Merck — founded on the notion that if you put the patient first the profits will follow — has been practicing CSR long before it was considered “hip” to do so. (For additional insight, check out Life Science Leader magazine’s January 2016 cover feature with Julie Gerberding). I recently sat down with Brenda Colatrella, executive director of Merck’s Office of Corporate Responsibility (CR) and President of the Merck Foundation, to better understand how her company approaches the successful execution of CSR from both a philanthropic and business perspective.

Life Science Leader (LSL): How does Merck define CSR?

Colatrella: “At Merck, we are defining corporate [social] responsibility as a commitment to developing creative and innovative solutions to global health challenges while at the same time building our business in a sustainable way. While philanthropy is an important demonstration of our commitment to being a responsible corporate citizen, our commitment to corporate responsibility actually goes beyond that and is reflected in our business practices as well. About every five years we conduct a corporate responsibility materiality assessment to determine if we are focusing on the issues that matter most to our stakeholders from a CR perspective. From the most recent assessment, we affirmed our four CR priority areas for Merck: (1) Access to healthcare; (2) Environmental sustainability; (3) Employee health and wellbeing; and (4) Ethics and transparency. This is not to say that we don’t address corporate responsibility issues outside of those four areas, but as a company, this is where we are focused. Our approach to CSR is to do so in a way that embeds it as a philosophy within our organization.”

LSL: Can you walk us through Merck’s approach to executing CSR?

Colatrella: “First let me give you a little background. The office of CR is a group of eight people that acts as a central coordinating unit. I like to describe us as the eyes and ears of the organization so that Merck understands what issues matter most to our stakeholders, both internally and externally. Our role is not only to bring those issues into the organization, but to the right functional areas. We want to see if there are the opportunities for leadership and assess if there are gaps in what we are doing or issues that we need to address more fully. The Office of CR helps to guide these types of conversations with our business units. On an annual basis we report on our CR progress and performance, looking at the entire organization in terms of how we are reflecting our commitment to corporate responsibility across our business. Within Merck, CR is part of the policy, communications and population health organization overseen by EVP, Julie Gerberding, M.D. We also receive strategic guidance from an internal advisory council that is made up of cross-functional senior leadership [14 senior managers] of the company. In addition, we have a subcommittee of the Merck Board of Directors consisting of five directors who provide strategic guidance on governance, policy and CR at Merck. The Office of Corporate Responsibility is also accountable for our major philanthropic efforts, both cash giving and product donations, with the majority of our cash giving done under the governance of the Merck Foundation. While the activities of the Merck Foundation fall under my area of responsibility, the Foundation has a board of trustees —five very senior Merck folks -- who help guide our cash grant making as well as the strategic direction of the foundation. However, when it comes to our involvement with commercial activities, these are funded directly by the individual business units, although the Office of CR sometimes helps to identify opportunities or provide feedback and input. The members of the CR group are fully dedicated employees, not members from other departments on loan via full-time equivalency units. We have a couple of folks who focus primarily on philanthropy, and we have a few that focus more on corporate responsibility issues. We have one person who is responsible for all of our reporting. We do have some people who straddle both philanthropy and corporate responsibility. The council, chaired by Julie Gerberding, meets about two to three times per year. For these meetings, we do bring staff from my team, from the business units, or from regional offices who are involved with a particular issue that is on the agenda or that we feel requires strategic counsel on how best to proceed.”

LSL: How is the Merck CSR budget determined?

Colatrella: “The Merck Foundation is our primary source of cash grant making. The annual foundation budget is an allocation of the endowment, which is fully funded by Merck, and from this we allocate a certain amount of dollars per year. The product donations budget — and we’re still talking about philanthropy, mind you — is determined based on the programs we have in place (e.g., the Merck Mectizan Donation Program for River Blindness). For these programs, we estimate budgets based on a forecast of what is needed to support those programs and those dollars are part of a separate corporate product donations budget. When you talk about an overall CSR budget, that’s a little bit harder to pinpoint, because outside of the above mentioned two main philanthropy budgets, commercially oriented CSR programs are often funded by individual department’ business units that are responsible for those initiatives. As this allocation could come from something like a research or franchise budget, it might not be a set amount from year to year. The CR group’s operational budget is treated like any other department at Merck. We have a departmental budget that funds the salaries and benefits of CR employees, as well as travel, supplies, basically anything that is required to maintain the employees in their roles. The foundation and product donation budgets support the activities we manage from a philanthropic perspective, rather than general staff support.”

LSL: What are some of the tools used by the CR group in executing CSR at Merck?

Colatrella: “In the philanthropy space, it’s very important to have giving priorities. Because there are so many good organizations out there and so many good causes, unless you have a list of priorities, you could find yourself inundated with requests. One of the tools we use to help communicate our priorities is our annual CR report /website — merckresponsibilty.com. There you will find a section entitled, ‘our giving’ where we communicate very clearly what Merck’s priorities are in terms of philanthropy. You’ll also see the four CR priorities I previously mentioned. We put that information into the public domain so that people know what we focus on from both a CR and giving perspective. We also have the Merck Gives Back website, which primarily helps employees understand the giving and employee engagement opportunities that exist at Merck. In addition, we have an online grant system, Polaris, which helps us manage requests for funding and evaluate them against our priorities to determine what will and will not be supported. While these tools are great for helping us respond to and manage requests, we still need to manage the grants we actually make, which is an important component of our work, because as you can imagine, there are a lot of compliance and documentation requirements. Through impact reports submitted by our grantees, this internal system also helps us to evaluate the impact of our giving. Everything flows through this system so that at any given time we can look up a grant or a program that we’ve agreed to fund and see all of the relevant documentation and information related to that grant.”

LSL: How do you go about assessing CSR opportunities?

Colatrella: “First, we look at our priorities and focus areas because we want to make sure that what we are doing makes sense for an organization like Merck and is aligned with our giving priorities or our CR focus areas. Next we ask questions to determine if the opportunity addresses a significant global health need. Is it aligned with our mission and business? If you are going to make the business case it needs to be aligned with the business. We assess if we have something unique to bring to the table, such as a certain expertise (e.g., research, policy, etc.). What type of expertise can we bring to the table beyond just our products and our financial resources? Are there good partners available and willing to participate? Partnerships are the center piece to everything we do, because we recognize that the big health challenges we are looking to address can’t be tackled by just one organization working alone. Finally, can we demonstrate impact? Is what we are about to do going to put us in a position to demonstrate that the resources that have been put into that initiative have yielded some significant outcomes? This is the framework we use to decide on what opportunities we are going to pursue. This framework also works well in the commercial space. However, here we also evaluate if the opportunity allows for Merck to respond to a social issue in an innovative way, while at the same time, helping to build a sustainable business (e.g., open up a new market, providing greater cost efficiencies). The additional evaluation that is undertaken from a commercial CR perspective is about making the match between the social need and value, business expertise, and potential business value.”

LSL: Do you have examples of successful CSR initiatives?

Colatrella: “One of our early ones is the Mectizan Donation Program that is ongoing today and, so far, has helped to eliminate river blindness in three Latin American countries with many countries in Africa on track for elimination. An interesting feature of this program is it was used to pilot a new delivery strategy called community directed treatment in collaboration with the WHO. Basically, this delivery strategy placed the decision-making for delivery of Mectizan into the hands of the community and allowed them to customize it to what works for them in achieving improved treatment coverage rates. That approach also allowed for the training of healthcare workers who then were able to deliver other health interventions, beyond Mectizan, through the same delivery system. We supported another significant program to address HIV in Botswana. Even though, relatively speaking, Botswana was well-positioned to address this epidemic, it did have one of the highest rates of HIV infection at the time and the need for healthcare worker training and a strengthened health care delivery system were key challenges in the early years of that program. I would say two important things we’ve learned about how to successfully execute these types of CSR programs are: buy-in, complete with local ownership and local partnerships; and the recognition that there is up-front work that often needs to be done to enable these initiatives to be successful. Another commercially-oriented CSR success is called Project Sambhav. This initiative was launched by MSD India and our Hepatitis C (Hep C) business unit. There was a need in India to treat nearly 15 million people infected with the Hepatitis C Virus (HCV), 70 percent of whom lived in rural settings. The problem was cash flow issues prohibiting patients from managing the cost of treatment. Project Sambhav provided access to Pegintron (one of Merck’s Hep C medications) for patients with limited or no insurance coverage. Through an innovative micro-financing program, patients were given zero-interest, no-collateral loans to pay for their medicine over an extended period of time. This was done in partnership with financing institutions in India. In addition, there was a disease management and education component to the program so patients could better understand their disease and learn how to manage it. The micro-financing piece enabled them to access medicine at a cost they could afford over an extended period of time. Project Sambhav addressed an important social need, while at the same time, allowed Merck to create a market in a place where it previously did not have one. This is a great example of responding to a social need with a business solution, which was expanded to 11 cities across four states in India.”

LSL: What advice do you have for execs on implementing CSR at their organizations?

Colatrella: “One thing we’ve learned which was mentioned earlier, is the importance of partnership when it comes to CSR. Until we can get to the point where we’re working together differently, rigorously, based on data, broadly, cooperatively, and collectively, we are not going to necessarily see CSR developments that are sustainable. While our individual efforts are really important, Merck recognizes that sustainable development means working together towards a common purpose. As such, we have been looking for opportunities that will allow us to do that. I think the work that Merck did with GSK to address lymphatic filariasis starting back in 1998 was probably one of the first examples of how two otherwise competing companies could work together to address a really important social need. My advice is, don’t go it alone, but look for partnerships. Put aside personal agendas. Within partnerships, make sure roles and responsibilities are well defined. Last but not least, measure and evaluate. You need to be able to demonstrate progress and achievement of outcomes because success breeds success.”