AbbVie 2012 Annual Report Download - page 14

Abbott was identified as one of many potentially responsible parties in investigations and/or
remediations at several locations in the United States, including Puerto Rico, under the Comprehensive
Environmental Response, Compensation, and Liability Act, commonly known as Superfund. Some of
these locations were transferred to AbbVie in connection with the separation and distribution, and
AbbVie has become a party to these investigations and remediations. Abbott was also engaged in
remediation at several other sites, some of which have been transferred to AbbVie in connection with
the separation and distribution, in cooperation with the Environmental Protection Agency or similar
agencies. While it is not feasible to predict with certainty the final costs related to those investigations
and remediation activities, AbbVie believes that such costs, together with other expenditures to
maintain compliance with applicable laws and regulations concerning environmental protection, should
not have a material adverse effect on the company’s financial position, cash flows, or results of
operations.
Competition
The markets for AbbVie’s products are highly competitive. AbbVie competes with other research-
based pharmaceuticals and biotechnology companies that discover, manufacture, market, and sell
proprietary pharmaceutical products and biologics. For example, HUMIRA competes with a number of
anti-TNF and other products that are approved for a number of disease states, AbbVie’s virology
products compete with protease inhibitors and other anti-HIV treatments, and AbbVie’s dyslipidemia
products face competition from other fibrates and from statins. The search for technological
innovations in pharmaceutical products is a significant aspect of competition. The introduction of new
products by competitors and changes in medical practices and procedures can result in product
obsolescence. Price is also a competitive factor. In addition, the substitution of generic pharmaceutical
products for branded pharmaceutical products creates competitive pressures on AbbVie’s products that
do not have patent protection.
Biosimilars. Competition for AbbVie’s biologic products is affected by the approval of follow-on
biologics, also known as ‘‘biosimilars.’’ Biologics have added major therapeutic options for the
treatment of many diseases, including some for which therapies were unavailable or inadequate. The
advent of biologics has also raised complex regulatory issues and significant pharmacoeconomic
concerns because the cost of developing and producing biologic therapies is typically dramatically
higher than for conventional (small molecule) medications, and because many expensive biologic
medications are used for ongoing treatment of chronic diseases, such as rheumatoid arthritis or
inflammatory bowel disease, or for the treatment of previously untreatable cancer. Significant
investments in biologics infrastructure and manufacturing are necessary to produce biologic products, as
are significant investments in marketing, distribution, and sales organization activities, which may limit
the number of biosimilar competitors.
In the United States, the FDA regulates biologics under the Federal Food, Drug, and Cosmetic
Act, the Public Health Service Act, and implementing regulations. While the enactment of federal
health care reform legislation in March 2010 was meant to provide a pathway for approval of
biosimilars under the Public Health Service Act, recent regulatory guidance suggests that the approval
process for biosimilars will be far more extensive than the approval process for generic or other
follow-on versions of small molecule products, in order to ensure that the safety and efficacy of
biosimilars is highly similar to that of an original biologic, such as HUMIRA. Ultimate approval by the
FDA is dependent upon many factors, including a showing that the biosimilar is ‘‘highly similar’’ to the
original product and has no clinically meaningful differences from the original product in terms of
safety, purity, and potency. The types of data that could ordinarily be required in an application to
show similarity would include analytical data and studies to demonstrate chemical similarity, animal
studies (including toxicity studies), and clinical studies. Applicable regulations also require that the
biosimilar must be for the same indication as the original biologic and involve the same mechanism of
action, and that the manufacturing facility meets the standards necessary to assure that the biosimilar is
safe, pure, and potent.
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