Merck & Co. Animal Health (MSD)

A.1.1. MSD does not currently recognise antimicrobial resistance (AMR) or exposure to antibiotics as a material risk to its business. The company does acknowledge the material risk of increased product regulation in certain markets, ESG matters that could affect its reputation, and any issue or events that could potentially impact the revenue of its top-selling products. These may include antibiotics and AMR, but these are not explicitly stated. For its animal health business specifically, the company recognises outbreaks of animal diseases such as African Swine Fever (ASF) as a material risk. This could inherently include the risk posed by the presence of an antibiotic-resistant disease or bacteria in animals, but it is also not specifically disclosed. A.1.2. MSD is the only company in the engagement that is a signatory of the AMRIA Industry Roadmap for Progress on Combatting AMR. Signatories commit to reducing the development of antimicrobial resistance, investing in R&D and improving access to high-quality antibiotics and vaccines. It is unclear if this commitment applies to its animal health business. In line with this, in its 2020 Global Antimicrobial Resistance Action Plan, MSD stated that it is working to develop vaccines that can reduce antibiotic use in animals and in 2021, the company specified that it was developing or commercializing vaccines for 15 animal diseases prioritized by World Organization for Animal Health. MSD has not provided an update regarding this. However, in 2023, MSD restated that it is currently supplying over 102 billion doses of animal health vaccines a year. This number has not increased from its reporting in 2020. MSD does not stipulate what percentage of these vaccine doses could be considered as alternatives to antibiotics. It is, therefore, difficult for investors to assess how MSD has progressed from 2020 with its offering of vaccines that reduce the need for antibiotics. Outside of increasing its offering of vaccines, the company has not disclosed information publicly to suggest it is looking to reduce its own exposure to the sale of antibiotics within its animal health segment. A.1.3. MSD does not disclose its revenue from the sale of antibiotics. It is worth noting that MSD remains the only company in the engagement with both a human and animal health business. The livestock segment of its animal health business accounted for only 5.6% of its total segment revenue in 2023. Therefore, its exposure to antibiotics for use in livestock remains proportionally smaller compared to peers.

A.2.1. MSD’s animal health business does not disclose details of a strategy specific to the responsible sale and marketing of antimicrobial products for its livestock segment. Although its code of conduct states that product promotion must be supported by scientific evidence and consistent with the product label, the company does not publicly provide details of any guidance or training for its sales team related to the sale of antimicrobials in its animal health segment. In its 2020 document, ‘Delivering on our Commitments’, MSD references its ‘Star of Stewardship’ framework, which guides the company’s promotional materials for antibiotic products within the human health business to ensure responsible marketing. This is based on guidelines from the World Health Organisation (WHO) and the European Centre for Disease Prevention and Control and is as follows: ‘the right drug is given at an appropriate dose for an adequate duration in the ideal setting of care based on an accurate diagnosis, and therapy is narrowed when possible.’ This is in line with best practice, but it remains unclear whether this framework applies to MSD’s animal health business. MSD also has an ‘antimicrobial stewardship curriculum’ to educate employees on responsible antibiotic prescribing and use. However, it is unclear whether this also applies to the animal health business. Contradictorily, MSD’s Veterinary Manuals cover topics including ‘antimicrobial feed additives for animals’. Under this topic, MSD lists antimicrobials that are currently banned by the EU and states that ‘these are not medically important to humans and pose little risk to AMR development.’ This list includes virginiamycin, categorised as a highly important antimicrobial by the WHO. A.2.2. Unlike other companies in the engagement, MSD has not disclosed whether it has voluntarily removed indications for growth promotion globally from any of its antibiotic products. MSD has not removed indications of prophylaxis from its shared class antibiotics including tulathromycin and florfenicol. These are respectively classified by the WHO as a critically important antimicrobial (CIA) and highly important antimicrobial (HIA).1 The WHO advises against the use of CIA for ’clinically diagnosed infectious disease identified within a group of food-producing animals.’ A.2.3. Sales and marketing practices are governed by MSD’s Code of Conduct, corporate policies, ethics and compliance program, which is overseen by the company's Office of Ethics. A.2.4. In 2020, MSD disclosed that for the human pharmaceutical business it is looking into new approaches for compensation that align with antibiotic stewardship. MSD has not subsequently disclosed what the outcomes of this pilot were and if new incentives have since been implemented. It, therefore, remains unclear if the sales of antibiotics in MSD's animal health sector are coupled with volume-based sales incentives.

B.1.1. MSD’s Environment, Health and Safety (EHS) strategy lays out expectations for the manufacturing and production of its products. It is unclear if the EHS includes guidance on addressing antibiotic residues for manufacturing effluent. Manufacturing must meet current Good Manufacturing Practice (cGMP) standards laid out by WHO, and all local and applicable regulations. MSD has compound-specific environmental quality criteria (EQC) for wastewater discharged at its own manufacturing sites. This is to ensure residues in wastewater do not pose a threat to human health or the environment. MSD does not disclose if the EQC specifically addresses antimicrobial compounds in its wastewater discharge. MSD remains the only company in the engagement that is a member of the AMR Industry Alliance (AMRIA) and is a leader in its approach to antibiotic residues in manufacturing and production within its human health segment. Members of the alliance follow the Common Antibiotic Manufacturing Framework (CAMF), a methodology outlining the minimum requirements needed to conduct a site risk evaluation and ensure appropriate antibiotic discharge management. The Common Antibiotic Manufacturing Framework does not appear to apply to the animal health business, and MSD does not provide an explanation for this. It, therefore, remains unclear if MSD has a strategy for addressing levels of antibiotic discharge from the manufacture of products for its animal health segment to ensure these remain within safe limits. B.1.2. MSD states that both its human and animal health manufacturing facilities ‘strive to ensure their operations are protective of human health and the environment.’ As in previous reporting, the company’s own manufacturing sites are still required to use Environmental Quality Controls and other risk assessment frameworks to establish procedures for effectively managing waste and to ensure wastewater does not contain levels of residual products that present a risk to the environment. External suppliers are provided with wastewater discharge criteria as part of MSDs ‘Business Partner Code of Conduct.’ It remains unclear if levels of antibiotic effluent are included in these assessment frameworks or discharge criteria. In its 2021/2022 ESG Report, MSD states that it has internally mapped which suppliers operate in countries that are known to present significant risks. It would be useful if MSD could disclose the geographies that it considers at risk, how it determines whether a country is at risk and whether this includes countries demonstrating high levels of AMR. Regarding antibiotics effluent specifically, as a member of the AMRIA, MSD states that it has assessed the wastewater treatment controls of its human antibiotic manufacturing facilities and human third-party antibiotic suppliers. This is a requirement of AMRIA members every 5 years. Specifying that this applies to its human segment suggests that MSD has not yet assessed antibiotic effluent levels from its own or its supplier's animal antibiotic manufacturing facilities. It, therefore, remains unclear if MSD has an environmental health and safety strategy or conducts risk assessments that specifically address antibiotic effluent produced from the manufacture of antibiotics for its animal health segment. B.1.3. MSD continues to review environmental data for its global manufacturing and research sites quarterly. However, it does not disclose what type of data is included in this review. To ensure compliance with its own standards, MSD audits all of its own operations at least every three years with the most complex sites audited every year. MSD’s external manufacturers are still managed by the Global Supplier Management Group (GSMG), which is responsible for sustainable sourcing programs and maintaining standards. External manufacturers are screened for EHS compliance and assessed on-site. MSD has not disclosed if the release of antibiotic effluent into the environment is included in these assessments. MSD states that it periodically reassesses external manufacturers. The company also has a third-party risk management program that monitors the performance of third parties to ensure they are aligned with MSD’s environmentally sustainable practices. For both its own and external manufacturing sites, Corrective And Preventative Action Plans are developed and monitored to completion where required. It is unclear if antibiotic effluent is monitored through this program. B.1.4. As before the company has not provided any details on where its largest third-party manufacturers and API suppliers are located for its animal health business. It has disclosed that it recently acquired the Aqua business of Elanco, including two manufacturing facilities in Canada and Vietnam.

C.1.1. In 2020, MSD stated that vaccines can be used to reduce the need for antibiotics. MSD has not provided a broader definition for alternatives to antibiotics. C.1.2. MSD continues to offer a number of products that could reduce the need for antibiotics. In particular, the company highlights vaccines as a means of reducing antibiotic use and continues to manufacture over 102 billion vaccines a year. Additionally, MSD offers solutions that improve vaccine efficiency such as its IDAL Intradermal injections, but MSD has not recently described any additional product offerings that could be considered as alternatives to antibiotics. MSD does not assess the effectiveness of its vaccines in reducing antibiotic use nor does it provide a breakdown of alternatives to antibiotics as a percentage of its product portfolio. C.1.2. & C.1.3. It remains difficult to estimate the size of MSD’s alternatives portfolio as the company does not provide a revenue breakdown or disclose the number of products in its portfolio that can be considered as alternatives.

C.2.1. MSD is clearly investing in R&D for alternatives to antibiotics, but the company does not disclose the proportion of its overall R&D spend on this. In 2023, MSD confirmed that it continues to carry out research on vaccines for animal health and is investing in predictive monitoring and diagnostic technologies to help animal caretakers use data to evaluate and optimise animal health. Although MSD does not directly link these with antibiotic stewardship, improved animal health could help reduce the need for antibiotics. The company has previously disclosed that it is developing vaccines in line with 15 diseases prioritised by WOAH for which vaccines may reduce antibiotic use, but it remains unclear how much of its R&D spending is going towards this. MSD stated that it planned to invest $20 billion in capital projects from 2021-2025, with a portion dedicated to vaccines. However, it does not provide any further breakdown. In 2023, MSD invested 30.5 billion in research and development. However, it does not disclose what percentage of this was within its Animal Health segment or how much of this was directed towards alternatives to antibiotics. It is, therefore, unclear if MSD is strategically approaching the development of its alternatives product range or if it intends to increase spending in this area in the coming years. C.2.2. In 2024, Merck acquired the Aqua Business of Elanco Animal Health. This acquisition will increase the portfolio of products offered by MSD and will include additional vaccines an antiparasitic sea lice treatment and a DNA vaccine-based technology that could help develop novel vaccines. C.2.3. MSD provides no visibility over the marketing spend for its animal health business. Thus, investors have no oversight of marketing spend for antibiotics or alternatives to antibiotics.

D.1.1. MSD has engaged in stewardship activities globally focused on reducing antibiotic use in farming. Some of the initiatives to support antibiotic stewardship in animals include: • In 2019 and 2020 MSD funded scholarships through the Association of American Veterinary Medical Colleges (AAVMC) designed to help mitigate AMR. • In 2021 it released ‘Addressing a Global Public Threat’ public document advocating for increasing vaccination, diagnostic use, evidence-led policies on AMR and supporting global AMR surveillance systems. • 'Time to Vaccinate’ campaign, promoting vaccination for food animals in Europe. MSD has also disclosed that it has supported the development of several AMS Centres of Excellence and provided grants for AMS research projects. However, it is unclear if these will support research to improve antibiotic stewardship in food-producing animals. D.1.2. MSD runs the Study for Monitoring Antimicrobial Resistance Trends (SMART), started in 2002, with an online database launched in 2020. SMART is a surveillance programme that determines pathogen prevalence and antibiotic susceptibility in 220 sites across 60 countries. MSD also participates in the AMR Register, however, both of these programs appear to be for monitoring pathogens in humans. For animal health specifically, MSD sponsors the European Animal Health Study Centre (CEESA) and its 4 pan-European AMR monitoring programs, alongside the US government’s National AMR Monitoring System (NARMS) that tracks changes in antimicrobial susceptibility of bacteria in people, retail meats, and food animals.

D.2.1. MSD discloses political and lobbying spend in countries where this is required by law. Lobbying is overseen by the Governance Committee of the Board of Directors. Political contributions are disclosed for the US, Canada and Australia. MSD is the only company to disclose this spend in its annual reporting. In the company’s 2022 ESG report, MSD disclosed that it lobbied in Europe for strengthened access to animal health products on a number of issues related to antibiotics and AMR. MSD lobbied on the New Veterinary Regulation introduced in January 2022, which restricted the use of shared-class antibiotics for prophylaxis, pharmaceuticals in the environment, AMR, and the One Health strategy. MSD does not disclose what position it has taken when lobbying on these issues. MSD also discloses all trade association dues greater than $25,000 where trade association is used for lobbying in the US. Notably, the Animal Health Institute, a lobbying organisation and an association member of HealthforAnimals, is listed as receiving $68,708 in 2022 and $49,481 in 2021. HealthforAnimals is a global industry association for animal health.

E.1. MSD did not provide a written response to the questions in the engagement letter sent in July 2023. The company also declined to participate in a FAIRR-facilitated dialogue with investors.