AbbVie 2013 Annual Report Download - page 22

AbbVie is subject to cost-containment efforts and pricing pressures that could cause a reduction in future
revenues and operating income.
Cost-containment efforts by governments and private organizations are described in greater detail
in Item 1, ‘‘Business—Regulation—Commercialization, Distribution, and Manufacturing.’’ To the extent
these cost containment efforts are not offset by greater demand, increased patient access to health care,
or other factors, AbbVie’s future revenues and operating income will be reduced. In the United States,
the European Union and other countries, AbbVie’s business has experienced downward pressure on
product pricing, and this pressure could increase in the future.
In the United States, practices of managed care groups and institutional and governmental
purchasers and United States federal laws and regulations related to Medicare and Medicaid, including
the Medicare Prescription Drug Improvement and Modernization Act of 2003 and the Patient
Protection and Affordable Care Act, contribute to pricing pressures. Recently enacted changes to the
health care system in the United States and the increased purchasing power of entities that negotiate
on behalf of Medicare, Medicaid, and private sector beneficiaries could result in additional pricing
pressures.
In numerous major markets worldwide, the government plays a significant role in funding health
care services and determining the pricing and reimbursement of pharmaceutical products.
Consequently, in those markets, AbbVie is subject to government decision-making and budgetary
actions with respect to its products. In particular, many European countries have ongoing government-
mandated price reductions for many pharmaceutical products, and AbbVie anticipates continuing
pricing pressures in Europe. Differences between countries in pricing regulations could lead to third-
party cross-border trading in AbbVie’s products that results in a reduction in future revenues and
operating income.
AbbVie is subject to numerous governmental regulations, and it can be costly to comply with these regulations
and to develop compliant products and processes.
AbbVie’s products are subject to rigorous regulation by numerous international, supranational,
federal, and state authorities, as described in Item 1, ‘‘Business—Regulation—Discovery and Clinical
Development.’’ The process of obtaining regulatory approvals to market a pharmaceutical product can
be costly and time consuming, and approvals might not be granted for future products, or additional
indications or uses of existing products, on a timely basis, if at all. Delays in the receipt of, or failure to
obtain approvals for, future products, or new indications and uses, could result in delayed realization of
product revenues, reduction in revenues, and substantial additional costs.
In addition, AbbVie cannot guarantee that it will remain compliant with applicable regulatory
requirements once approval has been obtained for a product. These requirements include, among other
things, regulations regarding manufacturing practices, product labeling, and advertising and
post-marketing reporting, including adverse event reports and field alerts due to manufacturing quality
concerns. AbbVie must incur expense and spend time and effort to ensure compliance with these
complex regulations.
Possible regulatory actions could result in substantial modifications to AbbVie’s business practices
and operations; refunds, recalls, or seizures of AbbVie’s products; a total or partial shutdown of
production in one or more of AbbVie’s or its suppliers’ facilities while AbbVie or its supplier remedies
the alleged violation; the inability to obtain future approvals; and withdrawals or suspensions of current
products from the market. Any of these events could disrupt AbbVie’s business and have a material
adverse effect on its business and results of operations.
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