Suddenly, No Heir Is Apparent At Merck

In the end, Richard J. Markham's abrupt departure from the No.2 job at Merck & Co. shouldn't have been a surprise. The 42-year-old marketer had leapfrogged over seasoned rivals seven months ago, when Chief Executive Officer P. Roy Vagelos tapped him as president and heir apparent. A hard-charging salesman, Markham was no scientist in a company dominated by scientists. Worse, he was a maverick who seemed miscast at team-oriented Merck. "He ruffles feathers," says a colleague. "He got into a position of power and strength because he is so assertive, and that turned some people off."

Officially, nobody is saying why Markham quit, as of July 9. He refused to detail his reasons, and Merck would say only that they are "personal." But colleagues and Merck watchers say conservative senior managers, including jealous rivals, may have made it all but impossible for him to succeed.

SALES SAVVY. When Vagelos reached down the ranks to elevate Markham from senior vice-president to president, he riled executives long viewed as potential successors. As a result, "Dick was less than popular" among his colleagues, says one. Among those overlooked by Vagelos, who plans to retire at 65 in November, 1994: Edward M. Scolnick, Merck Research Laboratories Div. president, who was a likely replacement. Scolnick couldn't be reached.

Merck followers believe Vagelos tapped Markham because he wanted an innovator who excelled at sales, a skill Merck will need badly in the health-reform-minded 1990s. With Merck's labs churning out fewer big products and with cost-containment pressures limiting price hikes, the thinking went, Markham would cut deals with big buyers of drugs that would shore up Merck's margins.

Markham, however, may have tried to move too far too fast. Take West Point Pharma Div., which he set up to sell generic versions of Merck products when their patents expire. The move was heretical to Merck veterans, who regard generic drugs as too low-margin to support innovative research. Markham argued that West Point Pharma would capture sales that otherwise would have been lost to rivals.

But Markham didn't want to stop there. One well-placed executive says Markham and some colleagues--working quietly and sharing little information with other insiders--were mulling major acquisitions. Among the candidates was Rugby-Darby Group Cos., a big generics maker that Marion Merrell Dow Inc. agreed to acquire in May. A Rugby executive confirms that his company talked with Merck earlier in the year. Another potential target, analysts say, was Medco Containment Services Inc., the fast-growing, $2 billion-a-year mail-order pharmacy company. Medco officials won't talk about the subject, but Chairman Martin J. Wygod confirmed that his company had held talks with several companies. Merck officials declined to comment.

Markham also reversed other cherished Merck practices, such as sticking to one price for nearly all drug buyers. He granted discounts to the Group Health Cooperative of Puget Sound, a big health maintenance organization that refused to deal with salespeople, to protest the no-discount policy. Says Phillip M. Nudelman, CEO of Group Health: "Dick brought a new willingness to collaborate. He was far more customer oriented."

Markham's departure leaves Vagelos in a touchy spot. His successor now will unquestionably be his second choice. And whoever it is, the candidate will have to deal with the fact that the top choice bailed out in a hurry.

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