Free Drugs From Merck

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For young women in some of the poorest countries in the world, Merck's (NYSE: MRK) latest move could be a lifesaver.

The company plans to donate enough of its Gardasil vaccine to vaccinate one million women against the human papilloma virus. The virus causes 250,000 deaths each year from cervical cancer, with most of the deaths occurring in poorer nations where regular tests aren't given to detect the cancer early.

Of course, Merck's not making the donation completely out of the goodness of its heart. The papilloma virus vaccination wars are heating up, with GlaxoSmithKline's (NYSE: GSK) Cervarix getting European marketing approval on Monday and an FDA approval expected early next year. Merck, which made the announcement at the Clinton Global Initiative conference, can use all the free advertising it can get.

At a cost of about $360 for the three-dose regimen, the value of the donation over the next five years is pretty large. But with the large gross margins that the drug likely fetches and a tax break to boot, the financial effect of the donation on the company's bottom line is probably minimal and should be made up for by all the free publicity.

Merck sold $723 million worth of Gardasil in the first half of this year, which made up over a third of its total vaccine sales. With plans to get the drug approved for use in older women and possibly men -- since it also provides immunity against genital warts -- Merck should be able to increase sales even in the face of added competition.