Amgen 2011 Annual Report Download - page 40

In many countries, the influence of regional and hospital payers also contributes to whether patients have
access to certain products. For example, a product may be successfully listed on a national formulary, but may
also be subject to further evaluations or competitive bidding by payers at a regional or hospital level. The impact
of multiple layers of assessment can result in delay or failure to secure access and/or net price pressure.
Payers in some countries are using and others are beginning to experiment with alternative payment
mechanisms (e.g., payment caps, risk sharing) as a means to maintain access to innovative therapies while
increasing their budget certainty. Requirements for such payment mechanisms can impact Amgen’s business
through increased net price concessions and added administrative burden.
Fraud and Abuse Regulations Related to Reimbursement
As participants in government reimbursement programs, we are subject to various U.S. federal and state
laws, as well as foreign laws, pertaining to healthcare “fraud and abuse,” including anti-kickback laws and false
claims laws. (See Government Regulation — Other.) Violations of fraud and abuse laws can result in stringent
enforcement penalties up to and including complete exclusion from federal healthcare programs (including
Medicare and Medicaid).
Manufacturing, Distribution and Raw Materials
Manufacturing
Biological products, which are produced in living systems, are inherently complex due to naturally-
occurring molecular variations. Highly specialized knowledge and extensive process and product characterization
are required to transform laboratory scale processes into reproducible commercial manufacturing processes. Our
manufacturing operations consist of bulk manufacturing, formulation, fill and finish and distribution activities.
Bulk manufacturing includes fermentation and/or cell culture, processes by which our proteins are produced, and
also includes purification of the proteins to a high quality. The proteins are then formulated into a stable form.
The fill process dispenses the formulated bulk protein into vials or syringes. Finally, in the finish process, our
products are packaged for distribution.
We operate a number of commercial and/or clinical manufacturing facilities, and our primary facilities are
located in the United States, Puerto Rico and the Netherlands. (See Item 2. Properties.) We also use and expect to
continue to use third-party contract manufacturers to produce or assist in the production of certain of our large
molecule marketed products as well as a number of our clinical product candidates. Manufacturing of Sensipar®/
Mimpara®, our small molecule product, is currently performed by third-party contract manufacturers, except for
certain finish activities performed by us in Puerto Rico.
The global supply of our products depends on actively managing the inventory produced at our facilities
and by third-party contract manufacturers and the uninterrupted and efficient operation of these facilities. During
the manufacturing scale-up process, and even after achieving sustainable commercial manufacturing, we may
encounter difficulties or disruptions due to defects in raw materials or equipment, contamination or other factors
that could impact product availability. (See Item 1A. Risk Factors — Manufacturing difficulties, disruptions or
delays could limit supply of our products and limit our product sales and — We rely on third-party suppliers for
certain of our raw materials, medical devices and components.)
Commercial Bulk Manufacturing
We operate commercial bulk manufacturing facilities in Puerto Rico and in several locations throughout the
United States. (See Item 2. Properties.) We perform commercial bulk manufacturing for our proteins except
Vectibix®, which is performed by a third-party contract manufacturer. We also supplement commercial bulk
manufacturing for ENBREL, Prolia®and XGEVA®with a third-party contract manufacturer.
Commercial Formulation, Fill and Finish Manufacturing
We perform most of our commercial protein formulation, fill and finish manufacturing in our Puerto Rico
facility. Formulation, fill and finish manufacturing for Nplate®and Vectibix®is performed by third-party
24