AbbVie 2012 Annual Report Download - page 23

AbbVie’s biologic products may become subject to competition from biosimilars.
The Biologics Price Competition and Innovation Act was passed on March 23, 2010 as Title VII to
the Patient Protection and Affordable Care Act. The law created a framework for the approval of
biosimilars in the United States and could allow competitors to reference data from biologic products
already approved. In Europe, the European Commission has granted marketing authorizations for
several biosimilars pursuant to a set of general and product class-specific guidelines for biosimilar
approvals issued over the past few years. In addition, companies are developing biosimilars in other
countries that could compete with AbbVie’s biologic products. If competitors are able to obtain
marketing approval for biosimilars referencing AbbVie’s biologic products, AbbVie’s products may
become subject to competition from such biosimilars, with the attendant competitive pressure and
consequences. Expiration or successful challenge of AbbVie’s applicable patent rights could also trigger
competition from other products, assuming any relevant exclusivity period has expired. As a result,
AbbVie could face more litigation with respect to the validity and/or scope of patents relating to its
biologic products.
The manufacture of many of AbbVie’s products is a highly exacting and complex process, and if AbbVie or
one of its suppliers encounters problems manufacturing AbbVie’s products, AbbVie’s business could suffer.
The manufacture of many of AbbVie’s products is a highly exacting and complex process, due in
part to strict regulatory requirements. Problems may arise during manufacturing for a variety of
reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems
with raw materials, delays related to the construction of new facilities or the expansion of existing
facilities, including those intended to support future demand for AbbVie’s products, changes in
manufacturing production sites and limits to manufacturing capacity due to regulatory requirements,
changes in the types of products produced, physical limitations that could inhibit continuous supply,
man-made or natural disasters, and environmental factors. If problems arise during the production of a
batch of product, that batch of product may have to be discarded and AbbVie may experience product
shortages or incur added expenses. This could, among other things, lead to increased costs, lost
revenue, damage to customer relations, time and expense spent investigating the cause and, depending
on the cause, similar losses with respect to other batches or products. If problems are not discovered
before the product is released to the market, recall and product liability costs may also be incurred.
AbbVie relies on single sources of supply for certain products and services, and an interruption in the supply
of those products and services could adversely affect AbbVie’s business and results of operations.
AbbVie has a single source of supply for certain products and services. For example, the filling and
packaging of HUMIRA syringes to be sold outside of the United States and Puerto Rico is performed
by a single supplier at its two different facilities. AbbVie maintains significant inventory of HUMIRA
syringes intended to reduce the risk of supply disruption and is awaiting regulatory approval for its own
syringe-filling and packaging facility in the United States to supply syringes outside of the United States
and Puerto Rico. AbbVie also uses a number of products in the manufacturing process for HUMIRA
that are currently sourced from single suppliers. AbbVie believes alternative sources for all products
used in the manufacturing process for HUMIRA are currently available.
The failure of a single-source supplier to fulfill its contractual obligations in a timely manner or as
a result of regulatory noncompliance or physical disruption at a manufacturing site may impair
AbbVie’s ability to deliver its products to customers on a timely and competitive basis, which could
adversely affect AbbVie’s business and results of operations. Finding an alternative supplier could take
a significant amount of time and involve significant expense due to the nature of the services and the
need to obtain regulatory approvals. AbbVie cannot guarantee that it will be able to reach agreement
with alternative providers or that regulatory authorities would approve AbbVie’s use of such
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