Merck's Gardasil Challenge

To understand why Merck & Co. lobbies hard to expand use of its controversial vaccine Gardasil, just take a look at today's earnings report from the company.

Sales of Gardasil, Merck's fourth-largest product, took a 22 percent dive in the third quarter to $311 million. Initially approved for girls and young women to prevent the sexually transmitted disease that can lead to cervical cancer, Merck was running out of customers.

That's until the Food and Drug Administration last week approved use of the drug in boys. But a federal panel that advises docs on use of vaccines stopped short of recommending widespread vaccinations for all boys (a practice advised for girls). So it's a split win for the drugmaker.

Gardasil is still on track to do more than $1 billion in sales this year, Merck says. In the world of big pharma, that makes it a blockbuster. And blockbusters are going to be harder to come by in the next few years as Merck and its rivals lose patent protection on major products. (Merck's biggest product, allergy and asthma medicine Singulair, loses patent protection in 2012.)

But there's a finite number of potential customers for Gardasil. If a girl gets a vaccine, that's it for her business. There are no repeat customers.

Merck has realized this for years and took heat for its aggressive measures to encourage vaccinations. Two years ago, the company pledged it would stop pushing states to mandate vaccinations for girls. Pushing sales of Gardasil for boys is tricky. The fed panel, the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention, only recommends the vaccine for boys to protect against genital warts. Merck wanted the panel to advise all boys receive Gardasil as part of their routine vaccinations.