Amgen 2012 Annual Report Download - page 42

35
Item 1A. RISK FACTORS
This report and other documents we file with the SEC contain forward-looking statements that are based on current
expectations, estimates, forecasts and projections about us, our future performance, our business or others on our behalf, our beliefs
and our management's assumptions. These statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict. You should carefully consider the risks and uncertainties facing our
business. The risks described below are not the only ones facing us. Our business is also subject to the risks that affect many other
companies, such as employment relations, general economic conditions, geopolitical events and international operations. Further,
additional risks not currently known to us or that we currently believe are immaterial may in the future materially and adversely
affect our business, operations, liquidity and stock price.
Our sales depend on coverage and reimbursement from third-party payers.
Sales of all of our principal products are dependent on the availability and extent of coverage and reimbursement from third-
party payers, including government healthcare programs and private insurance plans. Governments and private payers may regulate
prices, reimbursement levels and/or access to our products to control costs or to affect levels of use. We rely in large part on the
reimbursement of our principal products through government programs such as Medicare and Medicaid in the United States and
similar programs in foreign countries, and a reduction in the coverage and/or reimbursement for our products could have a material
adverse effect on our product sales, business and results of operations.
In the United States, there is an increased focus by the federal government and others on analyzing the impact of various
regulatory programs on the federal deficit, which could result in increased pressure on federal programs to reduce costs. For
example, the Budget Control Act of 2011 mandated a two percent reduction in government payments for all Medicare services
(including the administration of separately-billable drugs and payment for drugs in all Medicare programs) for federal fiscal years
2013 through 2021. This payment “sequestration” is currently scheduled to begin in 2013 and continue through 2021. The
sequestration remains subject to administrative implementation of the Budget Control Act or future statutory revision by Congress,
who could block, limit or otherwise modify the automatic spending cuts. Several alternative deficit reduction proposals have been
put forth by President Obama and/or Congressional committees, including proposals designed to further limit federal healthcare
expenditures. While we cannot predict whether any deficit reduction actions will be approved by Congress and/or whether a budget
sequestration will ultimately occur for Medicare services, a reduction in the availability or extent of reimbursement for drugs and
biologics for U.S. healthcare programs as a result of changes such as those that have been proposed or from other changes designed
to achieve similar federal budget savings could have a material adverse effect on the sales of our products, our business and results
of operations.
In March 2010 the United States adopted significant healthcare reform through the enactment of the PPACA and the
Healthcare and Education Reconciliation Act (See Item 1. Business — Reimbursement — U.S. Healthcare Reform.) A major goal
of the healthcare reform law is to provide greater access to healthcare coverage for more Americans. Accordingly, the healthcare
reform law requires individual U.S. citizens and legal residents to maintain qualifying health coverage, imposes certain requirements
on employers with respect to offering health coverage to employees, amends insurance regulations regarding when coverage can
be provided and denied to individuals, and expands existing government healthcare coverage programs to more individuals in
more situations, with most of these changes going into effect by January 2014. We do not expect a significant increase in sales of
our products as a result of the 2014 expansions in healthcare coverage. While we cannot fully predict the ultimate impact the
healthcare reform law will have on us, or how the law may change due to statutory revision or judicial review, we expect that the
new law will continue to have a material adverse effect on our business and results of operations.
Public and private insurers have pursued, and continue to pursue, aggressive cost containment initiatives, including increased
focus on comparing the effectiveness, benefits and costs of similar treatments, which could result in lower reimbursement rates
for our products. A substantial portion of our U.S. business relies on reimbursement from the U.S. federal government under
Medicare Part B coverage. Any deterioration in the timeliness or certainty of payment by Medicare to physicians, including as a
result of changes in policy or regulations, or as a result of operational difficulties, could negatively impact the willingness of
physicians to prescribe our products for patients relying on Medicare for their medical coverage. Most of our products furnished
to Medicare beneficiaries in both a physician office setting and hospital outpatient setting are reimbursed under the Medicare Part
B ASP payment methodology. (See Item1. Business — Reimbursement — Reimbursement of Our Principal Products.) ASP- based
reimbursements of products under Medicare may be below or could fall below the cost that some medical providers pay for such
products, which could materially and adversely affect sales of our products. Private payers also continue to seek to reduce their
costs. Insurance plans administered by private companies frequently adopt their own payment or reimbursement reductions.
Consolidation among managed care organizations may increase the negotiating power of these entities, potentially resulting in
lower reimbursement rates for our products. Private third-party payers increasingly employ formularies to control costs by