AbbVie 2012 Annual Report Download - page 25

AbbVie is subject to cost-containment efforts and pricing pressures that could cause a reduction in future
revenues and operating income.
Cost-containment efforts by governments and private organizations are described in greater detail
in Item 1, ‘‘Business—Regulation—Commercialization, Distribution, and Manufacturing.’’ To the extent
these cost containment efforts are not offset by greater demand, increased patient access to health care,
or other factors, AbbVie’s future revenues and operating income will be reduced. In the United States,
the European Union and other countries, AbbVie’s business has experienced downward pressure on
product pricing, and this pressure could increase in the future.
In the United States, practices of managed care groups and institutional and governmental
purchasers and U.S. federal laws and regulations related to Medicare and Medicaid, including the
Medicare Prescription Drug Improvement and Modernization Act of 2003 and the Patient Protection
and Affordable Care Act, contribute to pricing pressures. Recently enacted changes to the health care
system in the United States and the increased purchasing power of entities that negotiate on behalf of
Medicare, Medicaid, and private sector beneficiaries could result in additional pricing pressures.
In numerous major markets worldwide, the government plays a significant role in funding health
care services and determining the pricing and reimbursement of pharmaceutical products.
Consequently, in those markets, AbbVie is subject to government decision-making and budgetary
actions with respect to its products. In particular, there were government-mandated price reductions for
many pharmaceutical products in many European countries in 2010, 2011, and 2012, and AbbVie
anticipates continuing pricing pressures in Europe. Differences between countries in pricing regulations
could lead to third-party cross-border trading in AbbVie’s products that results in a reduction in future
revenues and operating income.
AbbVie is subject to numerous governmental regulations, and it can be costly to comply with these regulations
and to develop compliant products and processes.
AbbVie’s products are subject to rigorous regulation by numerous international, supranational,
federal, and state authorities, as described in Item 1, ‘‘Business—Regulation—Discovery and Clinical
Development.’’ The process of obtaining regulatory approvals to market a pharmaceutical product can
be costly and time-consuming, and approvals might not be granted for future products, or additional
indications or uses of existing products, on a timely basis, if at all. Delays in the receipt of, or failure to
obtain approvals for, future products, or new indications and uses, could result in delayed realization of
product revenues, reduction in revenues, and substantial additional costs.
In addition, AbbVie cannot guarantee that it will remain compliant with applicable regulatory
requirements once approval has been obtained for a product. These requirements include, among other
things, regulations regarding manufacturing practices, product labeling, and advertising and
post-marketing reporting, including adverse event reports and field alerts due to manufacturing quality
concerns. Many of AbbVie’s facilities and procedures and those of its suppliers also are subject to
ongoing regulation, including periodic inspection by regulatory authorities. AbbVie must incur expense
and spend time and effort to ensure compliance with these complex regulations.
Possible regulatory actions in the event of non-compliance could include warning letters, fines,
damages, injunctions, civil penalties, recalls, seizures of AbbVie’s products, and criminal prosecution.
These actions could result in substantial modifications to AbbVie’s business practices and operations;
refunds, recalls, or seizures of AbbVie’s products; a total or partial shutdown of production in one or
more of AbbVie’s or its suppliers’ facilities while AbbVie or its supplier remedies the alleged violation;
the inability to obtain future approvals; and withdrawals or suspensions of current products from the
market. Any of these events could disrupt AbbVie’s business and have a material adverse effect on its
business and results of operations.
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