On Jan. 29, Standard & Poor's affirmed its triple-'A' long-term corporate credit and senior debt ratings, as well as its 'A-1'-plus short-term corporate credit and commercial paper ratings on Merck & Co. Inc. ( MRK ). The action is in response to Merck's announcement of its planned divestiture of its pharmacy benefit manager (PBM) subsidiary, Merck-Medco. The outlook is stable. Merck-Medco accounts for over half of Merck's current revenue base, but represents only a minimal portion of the combined company's earnings and cash flows, due to the fact that Merck-Medco, like its rival PBMs, includes the drug costs for prescriptions processed in its revenue number. Following the planned divestiture, which will be executed through a partial initial public offering of Merck-Medco in mid-2002 and a spin-off of the rest of the company within a year after the IPO, Merck will be more focused on its much higher margin pharmaceutical operations.