Abstract: The Beginning of Pharmaceutical R&D in the USA: The Hidden Technology Transfer from E. Merck to Merck & Co.

Andrew Godley and David Leslie-Hughes

Abstract

This paper challenges the current scholarly consensus about how the U.S. pharmaceutical industry acquired technological competences during the interwar period. First, I compare data on R&D inputs and outputs for the leading U.S. and German firms throughout the 1920s and 1930s, and conclude that German firms retained a strong technological leadership through until the 1940s. Second, I examine the significance of the industry R&D laboratories in the United States by examining the critical case study of Merck. George F. Merck opened the Merck Institute of Therapeutic Research in 1932 in New Jersey with great publicity, highlighting how this would transform the research potential of the U.S. industry. The paper, however, shows that Merck had a very different agenda, wanting to import technology developed by Merck's former parent company, E. Merck of Darmstadt. After World War I, George W. Merck was allowed to reacquire the U.S. business after it had been sequestrated by the U.S. government. A key condition of this repurchase was, however, that the U.S. Merck had to forgo any commercial relationship with the former German parent. Given that E. Merck was the source of all new technological developments, this presented a significant problem for the U.S. company. While U.S. Merck promoted its New Jersey research laboratories, in reality the company's growing technological capabilities arose from a large and systematic transfer of German products and know-how to the U.S. business during the 1930s under the terms of a treaty between the two companies. The paper outlines this transfer of technology and its implications for both the current interpretation of the origins of research capabilities in the U.S. industry and its subsequent post-1940 success.