AbbVie 2012 Annual Report Download - page 17

marketing of such products domestically or worldwide, and may give rise to claims for damages from
persons who believe they have been injured as a result of their use.
Access to human health care products continues to be a subject of investigation and action by
governmental agencies, legislative bodies, and private organizations in the United States and other
countries. A major focus is cost containment. Efforts to reduce health care costs are also being made in
the private sector, notably by health care payors and providers, which have instituted various cost
reduction and containment measures. AbbVie expects insurers and providers to continue attempts to
reduce the cost of health care products. Outside the United States, many countries control the price of
health care products directly or indirectly, through reimbursement, payment, pricing, coverage
limitations, or compulsory licensing. Budgetary pressures in the United States and in other countries
may also heighten the scope and severity of pricing pressures on AbbVie’s products for the foreseeable
future.
United States. Specifically, U.S. federal laws require pharmaceuticals manufacturers to pay certain
statutorily-prescribed rebates to state Medicaid programs on prescription drugs reimbursed under state
Medicaid plans, and the efforts by states to seek additional rebates affect AbbVie’s business. Similarly,
the Veterans Health Care Act of 1992, as a prerequisite to participation in Medicaid and other federal
health care programs, requires that manufacturers extend additional discounts on pharmaceutical
products to various federal agencies, including the Department of Veterans Affairs, Department of
Defense, and Public Health Service entities and institutions. In addition, recent legislative changes
would require similarly discounted prices to be offered to TRICARE program beneficiaries. The Act
also established the 340B drug discount program, which requires pharmaceuticals manufacturers to
provide products at reduced prices to various designated health care entities and facilities.
In the United States, most states also have generic substitution legislation requiring or permitting a
dispensing pharmacist to substitute a different manufacturer’s generic version of a pharmaceutical
product for the one prescribed. In addition, the federal government follows a diagnosis-related group
(DRG) payment system for certain institutional services provided under Medicare or Medicaid and has
implemented a prospective payment system (PPS) for services delivered in hospital outpatient, nursing
home, and home health settings. DRG and PPS entitle a health care facility to a fixed reimbursement
based on the diagnosis and/or procedure rather than actual costs incurred in patient treatment, thereby
increasing the incentive for the facility to limit or control expenditures for many health care products.
Medicare reimburses Part B drugs based on average sales price (ASP) plus a certain percentage to
account for physician administration costs, which have recently been reduced in the hospital outpatient
setting. End stage renal disease treatment is covered through a bundled payment that likewise creates
incentives for providers to demand lower pharmaceutical prices. Medicare enters into contracts with
private plans to negotiate prices for most patient-administered medicine delivered under Part D.
In March 2010, Congress enacted the Patient Protection and Affordable Care Act and the Health
Care and Education Reconciliation Act (together, the Affordable Care Act). Under the Affordable
Care Act, AbbVie pays a fee related to its pharmaceuticals sales to government programs. Also in 2011,
AbbVie began providing a discount of 50 percent for branded prescription drugs sold to patients who
fall into the Medicare Part D coverage gap, or ‘‘donut hole.’’
The Affordable Care Act also includes provisions known as the Physician Payments Sunshine Act,
which require manufacturers of drugs and biologics covered under Medicare and Medicaid starting in
2012 to record any transfers of value to physicians and teaching hospitals and to report this data
beginning in 2013 to the Centers for Medicare and Medicaid Services for subsequent public disclosure.
Similar reporting requirements have also been enacted on the state level in the United States, and an
increasing number of countries worldwide either have adopted or are considering similar laws requiring
disclosure of interactions with health care professionals. Failure to report appropriate data may result
in civil or criminal fines and/or penalties.
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