AbbVie 2012 Annual Report Download - page 60

by customer and to estimate the contractual or statutory price. AbbVie’s systems and calculations have
developed over time as rebates have become more significant, and AbbVie believes they are reliable.
The following table is an analysis of the three largest rebate accruals and chargeback allowances, which
comprise approximately 85 percent of the combined rebate provisions charged against revenues in 2012.
Remaining rebate provisions charged against gross sales are not significant in the determination of
operating earnings.
Medicaid Pharmacy
and Benefit
Medicare Manager Wholesaler
(in millions) Rebates Rebates Chargebacks
Balance at January 1, 2010 $ 352 $ 239 $ 160
Provisions 899 841 1,162
Payments (617) (670) (1,163)
Balance at December 31, 2010 634 410 159
Provisions 985 831 1,361
Payments (899) (735) (1,349)
Balance at December 31, 2011 720 506 171
Provisions 1,077 830 1,645
Payments (990) (840) (1,592)
Balance at December 31, 2012 $ 807 $ 496 $ 224
Historically, adjustments to prior years’ rebate accruals have not been material to net income. AbbVie
employs various techniques to verify the accuracy of claims submitted to it, and where possible, works
with the organizations submitting claims to gain insight into changes that might affect the rebate
amounts. For Medicaid, Medicare and other government agency programs, the calculation of a rebate
involves interpretations of relevant regulations, which are subject to challenge or change in
interpretation.
Cash Discounts and Returns
Cash discounts can be reliably estimated. Product returns can be reliably estimated because AbbVie’s
historical returns are low, and because sales return terms and other sales terms have remained
relatively unchanged for several periods.
Pension and Post-Employment Benefits
AbbVie employees participate in various pension and post-employment health care plans sponsored by
Abbott. In AbbVie’s financial statements, these plans are accounted for as multiemployer benefit plans
and no liabilities have been reflected in AbbVie’s combined balance sheets as there were no unfunded
contributions due at the end of any reporting period. Effective January 1, 2013, in connection with the
separation of AbbVie from Abbott, AbbVie will record the net benefit plan obligations transferred
from Abbott. AbbVie’s combined statements of earnings included expense allocations for these benefits.
These expenses were funded through intercompany transactions with Abbott which are reflected within
net parent company investment in AbbVie.
Certain pension plans in Germany, Puerto Rico, Canada, Ireland, United Kingdom and the United
States are direct obligations of AbbVie and are recorded in the combined financial statements as of
December 31, 2012. AbbVie engages outside actuaries to assist in the determination of the obligations
and costs under these plans. The valuation of the funded status and the net periodic benefit cost for
the plans are calculated using actuarial assumptions. The significant assumptions, which are reviewed
annually, include the discount rate, the expected long-term rate of return on plan assets and the health
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