Amgen 2012 Annual Report Download - page 54

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to their customers, which include physicians or their clinics, dialysis centers, hospitals and pharmacies. One of our products,
EPOGEN®, is sold primarily to free-standing dialysis clinics, which have experienced significant consolidation. Two organizations,
DaVita and Fresenius Medical Care North America, own or manage a large number of the outpatient dialysis facilities located in
the United States and account for a substantial majority of all EPOGEN® sales in the free-standing dialysis clinic setting. Due to
this concentration, these entities have substantial purchasing leverage, which may put pressure on our pricing by their potential
ability to extract price discounts on our products or fees for other services, correspondingly negatively impacting our bargaining
position and profit margins.
Our business may be affected by litigation and government investigations.
We and certain of our subsidiaries are involved in legal proceedings. (See Note 18, Contingencies and commitments, to the
Consolidated Financial Statements.) Civil and criminal litigation is inherently unpredictable, and the outcome can result in excessive
verdicts, fines, penalties, exclusion from the federal healthcare programs and/or injunctive relief that affect how we operate our
business. Defense of litigation claims can be expensive, time-consuming and distracting and it is possible that we could incur
judgments or enter into settlements of claims for monetary damages or change the way we operate our business, which could have
a material adverse effect on our business and results of operations. In addition, product liability is a major risk in testing and
marketing biotechnology and pharmaceutical products. We may face substantial product liability exposure in human clinical trials
and for products that we sell after regulatory approval. Product liability claims, regardless of their merits, could be costly and
divert management's attention and adversely affect our reputation and the demand for our products. Amgen and Immunex have
previously been named as defendants in product liability actions for certain of our products.
We are also involved in government investigations that arise in the ordinary course of our business. As we announced on
December 19, 2012, we finalized a settlement agreement with the U.S. government, 49 states and the District of Columbia to settle
certain allegations regarding our sales and marketing practices arising out of ongoing civil and criminal investigations conducted
by the U.S. Attorney's Offices for the Eastern District of New York and the Western District of Washington (the “Federal
Investigations”). As more fully described in Note 18, Contingencies and commitments, to the Consolidated Financial Statements,
this settlement resolved the Federal Investigations, the related state Medicaid claims (except for those of the State of South Carolina)
and the claims of ten civil qui tam actions that had been pending against us. However, the settlement does not resolve certain of
other litigation matters that will continue to be pending against us, and we may also be subject to actions by governmental entities,
including those not participating in the settlement, and may in the future become subject to claims by other parties, in each case
with respect to the alleged conduct which is the subject of the settlement. We may see new governmental investigations of or
actions against us citing novel theories of recovery. Any of these results could have a material adverse effect on our business and
results of operations.
We rely on third-party suppliers for certain of our raw materials, medical devices and components.
We rely on unaffiliated third-party suppliers for certain raw materials, medical devices and components necessary for the
manufacturing of our commercial and clinical products. Certain of those raw materials, medical devices and components are the
proprietary products of those unaffiliated third-party suppliers and are specifically cited in our drug application with regulatory
agencies so that they must be obtained from that specific sole source or sources and could not be obtained from another supplier
unless and until the regulatory agency approved such supplier.
Among the reasons we may be unable to obtain these raw materials, medical devices and components include:
• regulatory requirements or action by regulatory agencies or others;
• adverse financial or other strategic developments at or affecting the supplier;
• unexpected demand for or shortage of raw materials, medical devices or components;
• labor disputes or shortages, including the effects of a pandemic flu outbreak, natural disaster, or otherwise;
• failure to comply with our quality standards which results in quality and product failures, product contamination and/
or recall; and
• discovery of previously unknown or undetected imperfections in raw materials, medical devices or components.
These events could negatively impact our ability to satisfy demand for our products, which could materially and adversely
affect our product use and sales and our business and operating results. For example, in prior years we have experienced shortages