AbbVie 2014 Annual Report Download - page 24

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private payers to control patient access to products, may provide payers the leverage to negotiate higher or
additional rebates or discounts that could have a material adverse effect on AbbVie’s operations.
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.
Laws and regulations affecting government benefit programs could impose new obligations on
AbbVie, require it to change its business practices, and restrict its operations in the future.
The health care industry is subject to various federal, state, and international laws and regulations
pertaining to government benefit programs reimbursement, rebates, price reporting and regulation, and
health care fraud and abuse. In the United States, these laws include anti-kickback and false claims laws,
the Medicaid Rebate Statute, the Veterans Health Care Act, and individual state laws relating to pricing and
sales and marketing practices. Violations of these laws may be punishable by criminal and/or civil sanctions,
including, in some instances, substantial fines, imprisonment, and exclusion from participation in federal and
state health care programs, including Medicare, Medicaid, and Veterans Administration health programs.
These laws and regulations are broad in scope and they are subject to change and evolving interpretations,
which could require AbbVie to incur substantial costs associated with compliance or to alter one or more of
its sales or marketing practices. In addition, violations of these laws, or allegations of such violations, could
disrupt AbbVie’s business and result in a material adverse effect on its business and results of operations.
AbbVie could be subject to increased monetary penalties and/or other sanctions, including exclusion
from federal health care programs, if it fails to comply with the terms of the May 7, 2012 resolution of
the Department of Justice’s investigation into sales and marketing activities for Depakote.
On May 7, 2012, Abbott settled United States federal and 49 state investigations into its sales and
marketing activities for Depakote by pleading guilty to a misdemeanor violation of the Food, Drug, and
Cosmetic Act and agreeing to pay approximately $700 million in criminal fines and forfeitures and
approximately $900 million to resolve civil claims. Under the plea agreement, Abbott submitted to a term
of probation that was initially set at 5 years, but was shortened to 3 years upon the separation of Abbott
and AbbVie. The obligations of the plea agreement have transferred to and become fully binding on
AbbVie. The conditions of probation include certain reporting requirements, maintenance of certain
18 2014 Form 10-K