AbbVie (ABBV) Risk Analysis

AbbVie's success is largely dependent on its continued ability to attract, develop and retain diverse, highly qualified scientific, technical and management personnel, as well as personnel with expertise in clinical research and development, governmental regulation and commercialization. Competition for qualified personnel in the biopharmaceutical field is intense and increasing. AbbVie cannot be sure that it will be able to attract and retain quality personnel or that the costs of doing so will not materially increase.

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 revenues and operating earnings will be reduced. In the United States, European Union member states and other countries, AbbVie's business has experienced downward pressure on product pricing, and this pressure could increase in the future. AbbVie is subject to increasing public and legislative pressure with respect to pharmaceutical pricing. In the United States, practices of managed care organizations, and institutional and governmental purchasers, as well as federal laws and regulations related to Medicare and Medicaid, contribute to pricing pressures. In particular, the IRA will have the effect of reducing prices and reimbursements for certain of our products, which could significantly impact AbbVie's results of operations. Under the IRA, HHS can effectively set prices for certain single-source drugs and biologics reimbursed under Medicare Part B and Part D. Generally, these government prices can apply as soon as nine years (for small-molecule drugs) or 13 years (for biological products) from their FDA approval and will be capped at a statutory ceiling price that is likely to represent a significant discount from average prices to wholesalers and direct purchasers. In August 2023, HHS, through CMS,selected Imbruvica as one of 10 medicines subject to government-set prices in Medicare Part D beginning January 1, 2026, and in January 2025, selected Vraylar and Linzess as two of 15 medicines subject to government-set prices in Medicare Part D beginning January 1, 2027. In January 2026, Botox was selected as one of 15 medicines subject to government-set prices in Medicare Parts B and D beginning January 1, 2028. It is possible that more of our products, including products that generate substantial revenues, could be selected in future years, which could, among other things, accelerate revenue erosion prior to expiration of intellectual property protections. In addition, beginning in January 2025, under the IRA, the 70% coverage gap discount program was replaced by a 10% manufacturer discount for all Medicare Part D beneficiaries that have met their deductible and incurred out of pocket drug costs below a $2,000 threshold and a 20% discount for beneficiaries that have incurred out of pocket drug costs above the $2,000 threshold under the new Part D benefit redesign. Manufacturers that fail to comply with the IRA may be subject to various penalties, including civil monetary penalties, which could be significant. The IRA has and will continue to meaningfully impact AbbVie's business strategies and those of others in the pharmaceutical industry. The full impact of the IRA on AbbVie's business and the pharmaceutical industry, including the implications to us of our or a competitor's product being selected for price setting, remains uncertain. In addition to the pricing mechanisms established under the IRA, governments and other payers may pursue or implement additional approaches intended to reduce pharmaceutical costs, including arrangements or frameworks that reference international prices, most-favored-nation (MFN) concepts, or other comparative pricing methodologies. Such approaches may be implemented through legislation, regulation, administrative action, negotiated arrangements, or other means, and their scope, structure, and application may continue to evolve. In January 2026, AbbVie entered into a voluntary agreement with the United States government to provide certain pricing concessions and U.S.-based research and development and capital investments in exchange for exemptions from tariffs and future pricing mandates during the three-year agreement period. In addition, our pricing concessions and expansion of direct-to-patient offerings may subject AbbVie to new pricing or reimbursement policies that could affect our commercial performance. Where pricing arrangements incorporate MFN, reference pricing, or similar concepts, AbbVie's realized pricing, revenues, or commercial flexibility could be affected by factors outside of AbbVie's control, including changes in applicable policies, methodologies, guidance, or related pricing regimes, as well as interactions with other governmental or private-sector pricing and reimbursement programs. Such arrangements could also influence pricing expectations or negotiations in other markets or with other payers. AbbVie continues to evaluate the impact that pricing and cost-containment related policy developments may have on the company. The potential for continuing 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, including pharmacy benefit managers (PBMs) and managed care organizations may result in additional pricing pressures and formulary restrictions that limit patient access to our products. For further discussion of PBM formulary practices and their impact on pricing and patient access, see "Pharmacy benefit managers and other supply chain intermediaries exert significant influence over pricing and patient access to our products" below. In major markets worldwide, governments play 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' pricing regulations could lead to third-party cross-border trading in AbbVie's products that results in a reduction in revenues and operating earnings. Rebates related to government programs, such as fee-for-service Medicaid or Medicaid managed care programs, arise from laws and regulations. AbbVie cannot predict with certainty whether additional government initiatives to contain health care costs or other factors could lead to new or modified regulatory or contractual requirements that include higher or incremental rebates, discounts or other price concessions. Other rebate and discount programs arise from contractual agreements with private payers, including PBMs and managed care organizations. Various factors, including market factors, consolidation among PBMs and the ability of private payers to control patient access to products, including through formulary management and utilization controls, 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 relies on sophisticated software applications and complex information technology systems (including cloud services) to operate its business, which are inherently vulnerable to malicious intrusion, random attack, loss of data privacy, disruption, degradation or breakdown. Certain of these applications and systems are managed, hosted, provided or used by third parties. Data privacy or security breaches of our internal systems or those of our information technology vendors may in the future result in the failure of critical business operations. Such breaches may cause sensitive data, including intellectual property, trade secrets or personal information belonging to AbbVie, its patients, customers, employees or business partners, to be exposed to unauthorized persons or to the public. The healthcare and biopharmaceutical industries remain targets of cybersecurity threats due to the value and sensitivity of the data they hold. Cybersecurity attacks and incidents are increasing in their frequency, sophistication and intensity and, due to the nature of some of these attacks, there is a risk that they may remain undetected for a period of time. AbbVie's investments in the protection of its data and information technology and its efforts to monitor its systems on an ongoing basis may be insufficient to prevent compromises in AbbVie's information technology systems that could have a material adverse effect on AbbVie's business. Such adverse consequences could include loss of revenue or the loss of critical or sensitive information from AbbVie's or third-party providers' databases or information technology systems and could also result in legal, financial, reputational or business harm to AbbVie and potentially substantial remediation costs. In addition, AbbVie's cyber insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of AbbVie systems or those of our third-party vendors. Additionally, AbbVie utilizes AI and other emerging technologies in select applications to support its operations. These technologies may present opportunities for AbbVie's business but may also entail risks, including that AI-generated analyses utilized by AbbVie could be deficient or exacerbate regulatory, cybersecurity or other significant risks. Further, our failure to effectively implement these technologies could hinder our ability to compete, as competitors' advancements in AI may lead to more efficient operations.

AbbVie competes with other research-based pharmaceutical and biotechnology companies that research, develop, manufacture, market and sell proprietary pharmaceutical products and biologics. All of these competitors may introduce new products or develop technological advances that compete with AbbVie's products in therapeutic areas such as immunology, neuroscience, oncology and aesthetics. In addition, as AbbVie products lose exclusivity, competition surrounding such products will increase and generic and biosimilar products will increasingly penetrate the markets. Furthermore, consolidation among certain pharmaceutical and biotechnology companies can enhance such advantages. These advantages may make it difficult for us to compete with them successfully to discover, develop and market new products and for our current products to compete with new products or indications they may bring to market. AbbVie cannot predict with certainty the timing or impact of the introduction by competitors of new products or technological advances. Such competing products may be safer, more effective, more effectively marketed or sold, have lower prices or better insurance coverage or reimbursement levels, or have superior performance features than AbbVie's products, and this may negatively impact AbbVie's business and results of operations.

In the ordinary course of business, AbbVie is the subject of product liability claims and lawsuits alleging that AbbVie's current or historical products or the products of other companies that it promotes have resulted or could result in an unsafe condition for or injury to patients. Product liability claims and lawsuits and safety alerts or product recalls, regardless of their ultimate outcome, may have a material adverse effect on AbbVie's business, results of operations and reputation and on its ability to attract and retain customers. Consequences may also include additional costs, a decrease in market share for the product in question, lower revenue and exposure to other claims. Additionally, some of these matters involve numerous plaintiffs and parties seeking large or indeterminate financial claims and may remain unresolved for several years. AbbVie evaluates its risks and has determined that the cost of obtaining product liability insurance outweighs the likely benefits of the coverage that is available and, as such, AbbVie's product liability losses are self-insured. AbbVie is also the subject of other claims, legal proceedings and investigations in the ordinary course of business, which relate to intellectual property, commercial, securities and other matters. Adverse outcomes in such claims, legal proceedings and investigations may also adversely affect AbbVie's business, results of operations and reputation. See Note 15, "Legal Proceedings and Contingencies" to the Consolidated Financial Statements included under Item 8, "Financial Statements and Supplementary Data." AbbVie cannot predict with certainty the outcome of these proceedings.

AbbVie's business is subject to risks associated with doing business internationally, including in emerging markets. Net revenues outside of the United States made up approximately 24% of AbbVie's total net revenues in 2025. The risks associated with AbbVie's operations outside the United States include: - fluctuations in currency exchange rates;- changes in medical reimbursement policies and programs and pricing restrictions;- multiple legal and regulatory requirements that are subject to change and that could restrict AbbVie's ability to manufacture, market and sell its products;- differing local product preferences and product requirements;- import or export licensing requirements;- international trade disruptions or disputes;- difficulty in establishing, staffing and managing operations;- differing labor regulations;- potentially negative consequences from changes in or interpretations of tax laws;- political and economic instability;- conflicts or crises in individual countries or regions, including terrorist activities or wars;- sovereign debt issues;- price and currency exchange controls, limitations on participation in local enterprises, expropriation, nationalization and other governmental action and regulation;- inflation, recession and fluctuations in interest rates;- restrictions on transfers of funds;- potential deterioration in the economic position and credit quality of certain non-U.S. countries; and - potential penalties or other adverse consequences for violations of anti-corruption, anti-bribery and other similar laws and regulations, including the United States Foreign Corrupt Practices Act and the United Kingdom Bribery Act.

AbbVie operates in a global environment and relies on complex international supply chains for the development, manufacture, and distribution of its products, including the sourcing of active pharmaceutical ingredients and key materials. Changes in global trade policy, including the potential imposition of import or export tariffs, trade restrictions, or other measures affecting pharmaceutical products or related inputs, could increase manufacturing and procurement costs, reduce margins or disrupt supply continuity. If AbbVie is unable to substantially mitigate or offset increased costs or disruptions resulting from such measures through pricing adjustments, operational changes, or alternative sourcing arrangements, it may have an adverse effect on AbbVie's business and results of operations.