Amgen 2013 Annual Report Download - page 36

Concentration of sales at certain of our wholesaler distributors and consolidation of free-standing dialysis clinic businesses may negatively
impact our bargaining power and profit margins.
The substantial majority of our U.S. product sales are made to three pharmaceutical product wholesaler distributors, AmerisourceBergen Corporation,
Cardinal Health, Inc. and McKesson Corporation. These distributors, in turn, sell our products 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 costly verdicts, fines and 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 and various other parties to settle certain allegations regarding our sales and marketing practices.
However, 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.
The adoption of new tax legislation or exposure to additional tax liabilities could affect our profitability.
We are subject to income and other taxes in the United States and other jurisdictions in which we do business. As a result, our provision for income
taxes is derived from a combination of applicable tax rates in the various places we operate. Significant judgment is required for determining our provision for
income tax and our tax returns are periodically examined by various tax authorities. We believe our accrual for tax liabilities is adequate for all open years
based on past experience, interpretations of tax law, and judgments about potential actions by tax authorities; however, due to the complexity of the provision
for income taxes, the ultimate resolution of any tax matters may result in payments greater or less than amounts accrued. Our provision for income taxes and
results of operations in the future could be adversely affected by changes to our operating structure, changes in the mix of income and expenses in countries
with differing tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in applicable tax laws, regulations or administrative
interpretations thereof. For example, there are several proposals under consideration in the United States to reform tax law, including proposals that may reduce
or eliminate the deferral of U.S. income tax on our unrepatriated foreign earnings. A significant change to the U.S. tax system, such as a change to the taxation
of income earned outside the United States including credits allowed for foreign taxes, or a significant change to the Puerto Rico tax system, could have a
material and adverse effect on our business and on the results of our operations.
We may not be able to access the capital and credit markets on terms that are favorable to us, or at all.
The capital and credit markets may experience extreme volatility and disruption which may lead to uncertainty and liquidity issues for both borrowers
and investors. We may access the capital markets to supplement our existing funds and cash generated from operations in satisfying our needs for working
capital; capital expenditure and debt service requirements; our plans to pay dividends; and other business initiatives we plan to strategically pursue, including
acquisitions and licensing activities. In the event of adverse capital and credit market conditions, we may be unable to obtain capital market financing on
similar favorable terms, or at all, which could have a material adverse effect on our business and results of operations. Changes in credit ratings issued by
nationally recognized credit rating agencies could adversely affect our cost of financing and have an adverse effect on the market price of our securities.
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