Amgen 2012 Annual Report Download - page 48

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Global economic conditions may negatively affect us and may magnify certain risks that affect our business.
Our operations and performance have been, and may continue to be, affected by economic conditions in the United States
and throughout the world. Sales of our principal products are dependent, in part, on the availability and extent of reimbursement
from third-party payers, including government programs such as Medicare and Medicaid and private payer healthcare and insurance
programs. (See Our sales depend on coverage and reimbursement from third-party payers.) As more fully explained below, financial
pressures may cause government or other third-party payers to more aggressively seek cost containment through mandatory
discounts on our products, policies requiring the automatic substitution of generic or biosimilars, higher hurdles for initial
reimbursement approval for new products or other similar measures. (See We expect to face increasing competition from
biosimilars.) Additionally, as a result of the current or a future global economic downturn, our third-party payers may delay or be
unable to satisfy their reimbursement obligations. A reduction in the availability or extent of reimbursement from government
and/or private payer healthcare programs or increased competition from lower cost biosimilars could have a material adverse effect
on the sales of our products, our business and results of operations. In addition, as a result of the economic conditions and/or
employer decisions regarding the insurance coverage mandate that goes into effect in the United States in 2014, some employers
may seek to reduce costs by reducing or eliminating employer group healthcare plans or transferring a greater portion of healthcare
costs to their employees. Job losses or other economic hardships may also result in reduced levels of coverage for some individuals,
potentially resulting in lower levels of healthcare coverage for themselves or their families. These economic conditions may affect
patients' ability to afford healthcare as a result of increased co-pay or deductible obligations, greater cost sensitivity to existing
co-pay or deductible obligations, lost healthcare insurance coverage or for other reasons. We believe such conditions have led and
could continue to lead to changes in patient behavior and spending patterns that negatively affect usage of certain of our products,
including delaying treatment, rationing prescription medications, leaving prescriptions unfilled, reducing the frequency of visits
to healthcare facilities, utilizing alternative therapies and/or foregoing healthcare insurance coverage. In addition to its effects on
consumers, the economic downturn may have also increased cost sensitivities among medical providers in the United States, such
as oncology clinics, particularly in circumstances where providers may experience challenges in the collection of patient co-pays
or be forced to absorb treatment costs as a result of coverage decisions or reimbursement terms. Collectively, we believe these
changes have resulted and may continue to result in reduced demand for our products, which could materially and adversely affect
the sales of our products, our business and results of operations. Any resulting decrease in demand for our products could also
cause us to experience excess inventory write-offs and/or excess capacity or impairment charges at certain of our manufacturing
facilities.
In Europe, economic conditions across the region could potentially be impacted by countries of key concern, particularly
countries in Southern Europe. Economic conditions continue to affect our operations and performance outside the United States
as well, particularly in countries where government-sponsored healthcare systems are the primary payers for healthcare
expenditures, including drugs and biologics. In Southern Europe, credit and economic conditions have adversely impacted the
timing of collections of our trade receivables in this region. Global economic conditions may continue to impact the average length
of time it takes to collect payments in Greece, Italy, Spain, Portugal or other countries, or we may never collect some or all of
these receivables, which could have a material adverse impact on our operating cash flows and a material adverse effect on our
financial position, liquidity or results of operations. See Our sales depend on coverage and reimbursement from third-party payers.
We also rely upon third parties for certain parts of our business, including licensees and partners, wholesale distributors of
our products, contract clinical trial providers, contract manufacturers and single third-party suppliers. Because of the recent volatility
in the financial markets, there may be a disruption or delay in the performance or satisfaction of commitments to us by these third
parties which could have a material adverse effect on the sales of our products, our business and results of operations. Current
economic conditions may adversely affect the ability of our distributors, customers and suppliers to obtain liquidity required to
buy inventory or raw materials and to perform their obligations under agreements with us, which could disrupt our operations.
Further, economic conditions appear to have affected, and may continue to affect, the business practices of our wholesale distributors
in a manner that contributes to lower sales of our products. Although we monitor our distributors', customers' and suppliers' financial
condition and their liquidity in order to mitigate our business risks, some of our distributors, customers and suppliers may become
insolvent, which could have a material adverse effect on the sales of our products, our business and results of operations. These
risks may be elevated with respect to our interactions with third parties with substantial operations in countries where current
economic conditions are the most severe, particularly where such third parties are themselves exposed to sovereign risk from
business interactions directly with fiscally-challenged government payers.
We maintain a significant portfolio of investments disclosed as cash equivalents and marketable securities on our Consolidated
Balance Sheet. The value of our investments may be adversely affected by interest rate fluctuations, downgrades in credit ratings,
illiquidity in the capital markets and other factors that may result in other than temporary declines in the value of our investments.
Any of those events could cause us to record impairment charges with respect to our investment portfolio or to realize losses on
the sale of investments.