AbbVie 2012 Annual Report Download - page 26

Laws and regulations affecting government benefit programs could impose new obligations on AbbVie, require
it to change its business practices, and restrict its operations in the future.
The health care industry is subject to various federal, state, and international laws and regulations
pertaining to government benefit programs reimbursement, rebates, price reporting and regulation, and
health care fraud and abuse. In the United States, these laws include anti-kickback and false claims
laws, the Medicaid Rebate Statute, the Veterans Health Care Act, and individual state laws relating to
pricing and sales and marketing practices. Violations of these laws may be punishable by criminal
and/or civil sanctions, including, in some instances, substantial fines, imprisonment, and exclusion from
participation in federal and state health care programs, including Medicare, Medicaid, and Veterans
Administration health programs. These laws and regulations are broad in scope and they are subject to
evolving interpretations, which could require AbbVie to incur substantial costs associated with
compliance or to alter one or more of its sales or marketing practices. In addition, violations of these
laws, or allegations of such violations, could disrupt AbbVie’s business and result in a material adverse
effect on its business and results of operations.
Changes in laws and regulations may adversely affect AbbVie’s business.
As described above, the development, manufacture, marketing, sale, promotion, and distribution of
AbbVie’s products are subject to comprehensive government regulation. Changes in these regulations
could affect AbbVie in various ways. For example, under the Patient Protection and Affordable Care
Act and the Health Care and Education Reconciliation Act of 2010, AbbVie pays a fee related to its
pharmaceuticals sales to government programs and, beginning in 2013, must record and report any
transfers of value to physicians and teaching hospitals. Similar reporting requirements have been
enacted on a state level in the United States and within the European Union and an increasing number
of countries worldwide have adopted or are considering similar laws. Future legislation and regulation
in the markets that AbbVie serves could affect access to health care products and services, increase
rebates, reduce prices or the rate of price increases for health care products and services, change health
care delivery systems, create new fees and obligations for the pharmaceuticals industry, or require
additional reporting and disclosure. Such legislation and regulation could adversely affect AbbVie’s
business, results of operations, cash flow, financial condition and prospects.
AbbVie could be subject to increased monetary penalties and/or other sanctions, including exclusion from
federal health care programs, if it fails to comply with the terms of the May 7, 2012 resolution of the
Department of Justice’s investigation into sales and marketing activities for Depakote.
On May 7, 2012, Abbott settled U.S. federal and 49 state investigations into its sales and
marketing activities for Depakote by pleading guilty to a misdemeanor violation of the Food Drug &
Cosmetic Act (FDCA) and agreeing to pay approximately $700 million in criminal fines and forfeitures
and approximately $900 million to resolve civil claims. A non-cash charge related to these investigations
was previously recorded, as discussed in Item 7, ‘‘Management’s Discussion and Analysis of Financial
Condition and Results of Operations.’’ Under the plea agreement, Abbott submitted to a term of
probation that was initially set at 5 years, but will be shortened to 3 years. The obligations of the plea
agreement have transferred to and become fully binding on AbbVie. The conditions of probation
include certain reporting requirements, maintenance of certain compliance measures, certifications of
AbbVie’s CEO and board of directors, and other conditions. If AbbVie violates the terms of its
probation, it may face additional monetary sanctions and other such remedies as the court deems
appropriate. On October 2, 2012, the court accepted the guilty plea and imposed the agreed-upon
sentence.
In addition, Abbott entered into a five-year Corporate Integrity Agreement (CIA) with the Office
of Inspector General for the U.S. Department of Health and Human Services (OIG). The effective
date of the CIA is October 11, 2012. The obligations of the CIA have transferred to and become fully
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