AbbVie Inc.: 10-K Risk Factor Changes

The health care industry is subject to federal, state and international laws and regulations pertaining to government benefit program reimbursements, 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, the U.S. Physician Payments Sunshine Act, the TRICARE program, the government pricing rules applicable to the Medicaid, Medicare Part B, 340B Drug Pricing Program and individual state laws relating to pricing and sales and marketing practices. The 340B Drug Pricing Program requires participating manufacturers to offer discounts to covered entities and growth in entities claiming entitlement to 340B pricing has increased the portion of our sales subject to such discounts. Manufacturer policies designed to improve program integrity have been subject to enforcement actions and legal challenges under federal and state laws. Adverse outcomes in 340B-related litigation or significant changes to our 340B approach could adversely affect our revenues and results of operations. Violations of such laws and regulations 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. Such violations may also lead to product recalls and seizures, interruption of production leading to product shortages, import bans or denials of import certifications, delays or denials in the approvals of new products or supplemental approvals of current products pending resolution of the issues, and reputational harm, any of which would adversely affect AbbVie's business. These laws and regulations are broad in scope and 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 and regulations, or allegations of such violations, could impose new obligations on AbbVie, require it to change its business practices and restrict its operations.

The health care industry is subject to federal, state and international laws and regulations pertaining to government benefit program reimbursements, 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, the U.S. Physician Payments Sunshine Act, the TRICARE program, the government pricing rules applicable to the Medicaid, Medicare Part B, 340B Drug Pricing Program and individual state laws relating to pricing and sales and marketing practices. Violations of such laws and regulations 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. Such violations may also lead to product recalls and seizures, interruption of production leading to product shortages, import bans or denials of import certifications, delays or denials in the approvals of new products or supplemental approvals of current products pending resolution of the issues, and reputational harm, any of which would adversely affect AbbVie's business. These laws and regulations are broad in scope and 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 and regulations, or allegations of such violations, could impose new obligations on AbbVie, require it to change its business practices and restrict its operations. 19 | 2024 Form 10-K 19 | 2024 Form 10-K 19 | 2024 Form 10-K 19 | 2024 Form 10-K

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, 2025 Form 10-K | 16 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.

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 groups, 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, the U.S Department of Health and Human Services 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 the CMS, selected Imbruvica as one of the first 10 medicines subject to government-set prices beginning in 2026. In August 2024, the CMS published Medicare Part D prices that will be applicable to these medicines, including Imbruvica, beginning January 1, 2026. In January 2025, HHS, through the CMS, selected Vraylar and Linzess as two of the 15 medicines subject to government-set prices in Medicare Part D beginning in 2027. 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. AbbVie continues to evaluate the impact that the IRA 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 may result in additional pricing pressures. 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 if additional government initiatives to contain health care costs or other factors could lead to new or modified regulatory requirements that include higher or incremental rebates or discounts. Other rebate and discount programs arise from contractual agreements with private payers. Various factors, including market factors and the ability of 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. 2024 Form 10-K | 16