Despite overall revenue growth, AbbVie reported a significant decline in net income due to substantial business acquisition costs, research and development (R&D) licensing fees, and asset impairments.
1. Financial Results Overview
- Revenue Growth: Net revenue for the third quarter of 2025 was $15.776 billion, a 9.1% increase compared to $14.460 billion in the same period last year. Total revenue for the first nine months of 2025 reached $44.542 billion, up 8.0% year-over-year.
- Significant Profit Decline: Net income for the third quarter plummeted to $188 million ($0.10 per share), down sharply from $1.564 billion ($0.88 per share) in the prior-year period.
- Surge in Costs and Expenses: The increase in operating costs was primarily driven by “Acquired IPR&D and Milestones,” which reached $2.68 billion in Q3 compared to just $82 million a year ago. Additionally, the cost of products sold increased by approximately $1.1 billion due to asset impairments.
- Abnormal Tax Rate: The effective tax rate for Q3 soared to 74% (compared to 25% last year), primarily due to business development activities and changes in the fair value of contingent consideration.
2. Core Products and Therapeutic Area Performance
The company’s revenue structure is undergoing a major transition as growth in new immunology drugs offsets the impact of patent expirations for legacy products.
- Immunology:
- Skyrizi and Rinvoq showed strong performance, with Q3 revenues growing 47.0% ($4.708 billion) and 35.3% ($2.184 billion), respectively, driven by market share gains and indications expansion.
- Humira continues to face heavy impact from biosimilar competition, with global Q3 revenue plunging 55.4% to $993 million; U.S. revenue dropped 65.0%.
- Neuroscience:
- Overall performance was steady, with Vraylar revenue increasing 6.7% to $934 million.
- Migraine treatments Ubrelvy (+31.5%) and Qulipta (+64.1%) both demonstrated strong growth momentum.
- Oncology:
- Imbruvica global revenue declined 14.8%, primarily due to decreased demand in the U.S. market.
- Venclexta revenue grew 7.1%.
- Elahere (acquired via ImmunoGen) contributed $170 million in revenue during the third quarter.
- Aesthetics:
- The segment faced headwinds with global revenue down 4.9%. Core product Botox Cosmetic saw an 8.4% decline in U.S. revenue, affected by lower consumer demand and pricing factors.
3. Major Acquisitions and Strategic Collaborations
AbbVie engaged in intensive acquisition and licensing activities between 2024 and 2025 to expand its R&D pipeline, directly impacting current-period expenses.
- Recent Acquisitions and Licensing (2025):
- Capstan Therapeutics: Completed in August 2025, resulting in a $1.9 billion IPR&D charge for an in vivo CAR-T therapy pipeline.
- Ichnos Glenmark Innovation: Licensing agreement completed in September 2025 with a $700 million upfront payment for the rights to ISB-2001, a multiple myeloma treatment.
- Gilgamesh Pharmaceuticals: Acquisition completed after September 30, 2025 (Q4), with an upfront payment of approximately $900 million for psychiatric disorder therapies.
- Nimble Therapeutics: Completed in January 2025 for approximately $288 million.
- Other Collaborations: Includes agreements with ADARx ($335 million) and Gubra ($350 million) for siRNA therapies and obesity treatments, respectively.
- Integration of Past Large Acquisitions:
- Cerevel Therapeutics: Completed in August 2024 for a total consideration of $8.7 billion, strengthening the neuroscience pipeline.
- ImmunoGen: Completed in February 2024 for a total consideration of $9.8 billion, acquiring the ADC drug Elahere.
4. Asset Impairments and Restructuring
- Intangible Asset Impairment: The company recognized $847 million in impairment charges in Q3.
- Resonic: A total impairment of $407 million was recorded following the decision to terminate development of this cellulite-removal device.
- Durysta: Partial impairment was recognized following a decision to reduce sales and marketing investment for this ophthalmic drug.
- Contingent Consideration Revaluation: A charge of $5.089 billion was recognized in the first nine months (recorded in other expenses), primarily due to increased sales estimates for Skyrizi and a lower discount rate, which raised the fair value of potential milestone payments to the original developer.
5. Cash Flow and Debt
- Cash Flow: Despite earnings volatility, operating cash flow remained robust at $13.812 billion for the first nine months.
- Dividends: The company paid $8.746 billion in cash dividends during the first nine months and announced an increase in the quarterly dividend from $1.64 to $1.73 per share (approx. 5.5%).
- Debt Activity: In 2025, the company issued $4 billion in senior notes and repaid several maturing debts, including $3 billion and $3.8 billion in senior notes.
6. Legal Proceedings
- Humira Litigation: The company faces multiple class-action lawsuits alleging excessive drug pricing or the use of rebate schemes to block biosimilar competition.
- Opioid Litigation: Approximately 380 lawsuits related to Allergan products remain pending.
- Patent Litigation: The company has reached settlements with several generic manufacturers regarding Rinvoq, with no generics expected to enter the U.S. market until April 2037.
Below is the Consolidated Statement of Earnings and Product Revenue Detail for AbbVie Inc. for the third quarter ended September 30, 2025, based on the Form 10-Q filing.
(Amounts in millions, except per share data)
| Item | 2025 Q3 Amount | % of Total Rev | 2024 Q3 Amount | YoY % |
| Total Net Revenues | $15,776 | 100.0% | $14,460 | +9.1% |
| Product Revenues: | ||||
| Immunology | $7,885 | 50.0% | $7,046 | +11.9% |
| Skyrizi | $4,708 | 29.8% | $3,205 | +46.8% |
| Rinvoq | $2,184 | 13.8% | $1,614 | +35.3% |
| Humira | $993 | 6.3% | $2,227 | -55.4% |
| Neuroscience | $2,661 | 16.9% | $2,212 | +20.3% |
| Vraylar | $934 | 5.9% | $875 | +6.7% |
| Botox Therapeutic | $985 | 6.2% | $848 | +16.1% |
| Ubrelvy | $354 | 2.2% | $269 | +31.5% |
| Qulipta | $288 | 1.8% | $176 | +64.1% |
| Oncology | $1,682 | 10.7% | $1,687 | -0.3% |
| Imbruvica | $706 | 4.5% | $828 | -14.8% |
| Venclexta | $726 | 4.6% | $677 | +7.1% |
| Elahere | $170 | 1.1% | $139 | +23.3% |
| Aesthetics | $1,193 | 7.6% | $1,239 | -3.7% |
| Botox Cosmetic | $637 | 4.0% | $671 | -4.9% |
| Juvederm Collection | $253 | 1.6% | $258 | -2.2% |
| Eye Care | $509 | 3.2% | $525 | -3.0% |
| Other Key Products | $1,846 | 11.7% | $1,751 | +5.4% |
| Mavyret | $312 | 2.0% | $302 | +3.5% |
| — | — | — | — | — |
| Operating Costs & Expenses: | ||||
| Cost of products sold | $5,304 | 33.6% | $4,212 | +25.9% |
| SG&A | $3,569 | 22.6% | $4,205 | -15.1% |
| R&D | $2,319 | 14.7% | $2,130 | +8.9% |
| Acquired IPR&D | $2,680 | 17.0% | $82 | +3168.3% |
| Total Operating Costs & Expenses | $13,872 | 87.9% | $10,629 | +30.5% |
| — | — | — | — | — |
| Operating Earnings | $1,904 | 12.1% | $3,831 | -50.3% |
| Interest expense, net | $667 | 4.2% | $591 | +12.9% |
| Other expense, net | $503 | 3.2% | $1,159 | -56.6% |
| Earnings Before Tax | $714 | 4.5% | $2,084 | -65.7% |
| Income tax expense | $526 | 3.3% | $520 | +1.2% |
| Net Earnings | $188 | 1.2% | $1,564 | -88.0% |
| Net Earnings Attributable to AbbVie | $186 | 1.2% | $1,561 | -88.1% |
| — | — | — | — | — |
| Diluted EPS | $0.10 | N/A | $0.88 | -88.6% |
Key Insights
- Shift in Revenue Mix: Skyrizi has emerged as the largest single source of revenue, accounting for 29.8% of total sales with a massive growth rate of 46.8%. This successfully offset the decline of Humira, which now accounts for only 6.3% of revenue (down 55.4% YoY).
- Profitability Impact: Despite a 9.1% increase in total revenue, Net Earnings plummeted by 88.0%. This was primarily driven by the Acquired IPR&D (In-Process R&D) expenses, which surged to $2.68 billion (17.0% of revenue) following the acquisition of Capstan Therapeutics and the licensing deal with Ichnos Glenmark.
- Decrease in Other Expenses: “Other expense, net” decreased compared to the prior year. While still reflecting a $503 million charge related to the fair value change of contingent consideration, it was significantly lower than the $1.159 billion recorded in Q3 2024.
Below is the English translation of the Condensed Consolidated Balance Sheets for AbbVie Inc. as of September 30, 2025, compared to the fiscal year ended December 31, 2024.
(Amounts in millions)
| Item | Sept 30, 2025 | % of Total Assets | Dec 31, 2024 | Change % |
| ASSETS | ||||
| Current Assets | ||||
| Cash and cash equivalents | $5,629 | 4.2% | $5,524 | +1.9% |
| Short-term investments | $42 | 0.0% | $31 | +35.5% |
| Accounts receivable, net | $12,769 | 9.5% | $10,919 | +16.9% |
| Inventories | $4,938 | 3.7% | $4,181 | +18.1% |
| Prepaid expenses and other | $5,161 | 3.9% | $4,927 | +4.7% |
| Total Current Assets | $28,539 | 21.3% | $25,582 | +11.6% |
| Non-Current Assets | ||||
| Investments | $291 | 0.2% | $279 | +4.3% |
| Property and equipment, net | $5,483 | 4.1% | $5,134 | +6.8% |
| Intangible assets, net | $54,315 | 40.6% | $60,068 | -9.6% |
| Goodwill | $35,626 | 26.6% | $34,956 | +1.9% |
| Other assets | $9,644 | 7.2% | $9,142 | +5.5% |
| Total Assets | $133,898 | 100.0% | $135,161 | -0.9% |
| LIABILITIES AND EQUITY | ||||
| Current Liabilities | ||||
| Short-term borrowings | $3,790 | 2.8% | $— | N/A |
| Current portion of long-term debt | $1,982 | 1.5% | $6,804 | -70.9% |
| Accounts payable and accrued liabilities | $33,619 | 25.1% | $31,945 | +5.2% |
| Total Current Liabilities | $39,391 | 29.4% | $38,749 | +1.7% |
| Non-Current Liabilities | ||||
| Long-term debt | $62,971 | 47.0% | $60,340 | +4.4% |
| Deferred income taxes | $2,480 | 1.9% | $2,579 | -3.8% |
| Other long-term liabilities | $31,655 | 23.6% | $30,129 | +5.1% |
| Total Liabilities | $136,497 | 101.9% | $131,797 | +3.6% |
| Stockholders’ Equity | ||||
| Common stock | $18 | 0.0% | $18 | 0.0% |
| Treasury stock | $(9,143) | -6.8% | $(8,201) | +11.5% |
| Additional paid-in capital | $22,291 | 16.6% | $21,333 | +4.5% |
| Accumulated deficit | $(14,234) | -10.6% | $(7,900) | +80.2% |
| Accumulated other comprehensive loss | $(1,574) | -1.2% | $(1,925) | -18.2% |
| Total AbbVie Inc. stockholders’ equity | $(2,642) | -2.0% | $3,325 | -179.5% |
| Noncontrolling interests | $43 | 0.0% | $39 | +10.3% |
| Total Equity (Deficit) | $(2,599) | -1.9% | $3,364 | -177.3% |
| Total Liabilities and Equity | $133,898 | 100.0% | $135,161 | -0.9% |
Key Insights
- Significant Decrease in Intangible Assets (-9.6%):Intangible assets dropped from $60.068 billion at year-end 2024 to $54.315 billion. This reduction was primarily driven by heavy amortization expenses ($5.593 billion for the first nine months) and $847 million in asset impairment charges recognized in Q3 (notably for Resonic and Durysta).
- Transition to Negative Equity (Deficit):The company shifted from a positive equity of $3.364 billion at the end of 2024 to a stockholders’ deficit of $2.599 billion. This was caused by the “Accumulated Deficit” widening from $7.9 billion to $14.2 billion, as the company continued high cash outflows for dividends ($8.746 billion) and share repurchases ($977 million) that exceeded net income ($2.418 billion) for the period.
- Changes in Debt Structure:
- Short-term borrowings rose to $3.79 billion (from zero at year-end 2024), consisting of commercial paper and a $2 billion term loan.
- The current portion of long-term debt decreased significantly (from $6.8 billion to $1.98 billion), reflecting the repayment of substantial maturing debt in 2025, including $3.0 billion in March and $3.8 billion in May.
- Growth in Goodwill:Goodwill increased by approximately $670 million, reflecting 2025 acquisition activities (such as the acquisition of Nimble Therapeutics, which added $170 million to goodwill) and the impact of foreign currency exchange rate fluctuations.
AbbVie Inc.’s net earnings for the third quarter of 2025 were $188 million, a sharp 88% decrease from the $1.564 billion reported in the same period last year. Although total net revenues grew by 9.1%, profitability was severely eroded by several key factors:
1. Massive Acquired IPR&D Expenses (Primary Driver)
This was the single largest factor contributing to the decline in profit. “Acquired IPR&D and Milestones” expenses surged to $2.68 billion this quarter, compared to just $82 million in the prior year. This was driven primarily by two major transactions completed during the quarter:
- Acquisition of Capstan Therapeutics: Resulted in a $1.9 billion charge (net of cash acquired).
- Ichnos Glenmark Licensing Agreement: Involved a $700 million upfront payment for the rights to ISB-2001, a multiple myeloma therapy.
2. Intangible Asset Impairment
The company recognized $847 million in asset impairment charges this quarter, which were recorded within “Cost of products sold.” This primarily involved strategic adjustments for two products:
- Resonic: A decision to terminate the development of this cellulite-reduction device led to a full impairment of $407 million.
- Durysta: A partial impairment was recognized following the decision to reduce sales and marketing investment for this ophthalmic implant, leading to lower projected future cash flows.
3. Changes in Fair Value of Contingent Consideration
A charge of $776 million was recognized (recorded in “Other expense, net”), reflecting an increase in the estimated value of potential payments owed to original technology developers.
- This was mainly due to higher projected sales for the flagship drug Skyrizi and a decrease in the discount rate, which increased the valuation of the associated liabilities.
4. Exceptionally High Effective Tax Rate
The effective tax rate for the quarter spiked to 74%, compared to 25% in the same period last year.
- This anomaly was primarily caused by the aforementioned business development activities (acquisitions and licensing) and the changes in the fair value of contingent consideration, which distorted the relationship between pre-tax earnings and tax expense.
Summary
In conclusion, while AbbVie’s core business remains strong—driven by the robust performance of Skyrizi and Rinvoq—the heavy investments made to expand its future pipeline (IPR&D) and the revaluation of assets (impairments and contingent consideration) directly led to the substantial contraction in reported net profit for the quarter.
Based on AbbVie Inc.’s Q3 2025 report (Form 10-Q), here is a detailed analysis of the reasons for Humira’s revenue decline, its impact on the company, and the strategic countermeasures implemented.
1. Reasons for Revenue Decline
The core reason for the sharp drop in Humira’s revenue is the Loss of Exclusivity (LOE) and the subsequent intense competition from biosimilars.
- Direct Impact of Biosimilars: The filing explicitly states that the decline in Humira revenue was driven primarily by “continued biosimilar competition following the loss of exclusivity.”
- Collapse of the U.S. Market: Competition has been particularly aggressive in the United States. In Q3 2025, Humira’s net revenue in the U.S. plummeted by 65.0% year-over-year (falling from $1.765 billion to $619 million).
- Continued International Contraction: International revenues decreased by 18.9% (or 20.5% on a constant currency basis), indicating global pressure from alternative medications.
- Price and Demand Pressure: While the report does not provide a specific breakdown of price vs. volume, it mentions class-action lawsuits regarding high pricing and rebate practices. This suggests significant pricing pressure from competitors and Payers, driving demand toward more affordable alternatives.
2. Impact on the Company
While Humira was once AbbVie’s primary revenue pillar, its decline has significantly altered the company’s financial structure—though overall revenue has continued to grow.
- Significant Shrinkage in Revenue Contribution: Humira is no longer the company’s top revenue generator. In Q3 2025, global revenue fell to just $993 million, a 55.4% year-over-year decline. In contrast, the next-generation immunology drug, Skyrizi, reached $4.708 billion—more than four times the revenue of Humira.
- Reduced Single-Product Dependency: Despite Humira’s revenue being cut by more than half, AbbVie’s total net revenue still grew by 9.1% for the quarter. This demonstrates that Humira’s decline, while severe, has been successfully offset by the robust growth of other products, effectively diversifying the company’s revenue risk.
- Ongoing Legal Risks: Humira’s historical pricing strategies and rebate practices have triggered multiple antitrust and consumer protection lawsuits. Some allegations claim that AbbVie’s rebate schemes blocked biosimilar competition, while others focus on excessive pricing. These cases require the maintenance of legal reserves and represent potential future liabilities.
3. Countermeasures & Strategic Transformation
AbbVie has adopted an aggressive “portfolio transformation” strategy, using the promotion of next-generation immunology drugs and external acquisitions to fill the gap left by Humira.
- Promoting Successor Drugs (Skyrizi & Rinvoq):
- Market Share Expansion: The company is fully committed to driving the growth of Skyrizi (up 47.0%) and Rinvoq (up 35.3%). Together, these two drugs contributed nearly $6.9 billion in quarterly revenue, more than compensating for Humira’s losses.
- Patient Switching Strategy: AbbVie has utilized “head-to-head” clinical data, such as the SELECT-SWITCH study. This study demonstrated that for patients with rheumatoid arthritis who had an inadequate response to Humira, Rinvoq showed superior efficacy. Such data supports clinicians in transitioning patients from Humira to AbbVie’s newer therapies.
- Indication Expansion: The company continues to seek new indications for Skyrizi and Rinvoq (e.g., Giant Cell Arteritis, Alopecia Areata, and Vitiligo) to expand the potential patient population.
- Diversifying the Pipeline through M&A:To reduce reliance on legacy immunology products, AbbVie has executed large-scale acquisitions, including Cerevel Therapeutics (Neuroscience), ImmunoGen (Oncology/ADC therapy), and Capstan Therapeutics. While these acquisitions increased R&D expenses and reduced short-term profits, they serve as long-term growth engines for the “Post-Humira” era.
- Legal Defense:The company is actively defending itself against lawsuits concerning Humira’s pricing and alleged obstruction of competition to protect its commercial interests and brand reputation.
Summary
In conclusion, AbbVie has successfully navigated its “Post-Humira” transition. By leveraging the high-speed growth of Skyrizi and Rinvoq and strategically positioning itself through M&A, the company has ensured that the collapse of Humira’s revenue did not derail its overall growth trajectory.
Based on AbbVie Inc.’s Form 10-Q for the period ended September 30, 2025, the company is involved in various legal proceedings spanning antitrust, product liability, intellectual property, and tax disputes. As of September 30, 2025, the company has recorded aggregate reserves of approximately $1.5 billion for these matters.
Below is a detailed breakdown of the primary legal proceedings:
1. Antitrust & Commercial Litigation
These cases generally allege that the company used anti-competitive tactics to maintain market exclusivity or manipulate pricing, with a heavy focus on Humira:
- Humira-Related Litigation:
- Excessive Pricing (Camargo Case): A class-action lawsuit filed in April 2023 alleging that the list price of Humira is unconscionably high, violating various state consumer protection laws regarding unconscionable trade practices.
- Obstructing Competition (Sheet Metal Workers Case): A new class-action lawsuit filed in January 2025 alleging that AbbVie’s rebating practices suppressed competition between biosimilars and Humira, violating federal and state antitrust laws.
- Niaspan Litigation: Involves settlement agreements reached by subsidiary Kos Pharmaceuticals with generic manufacturers in 2005. Allegations claim these “pay-for-delay” settlements violated antitrust laws; several federal and state cases remain ongoing.
2. Product Liability Litigation
- Opioid Litigation:
- Primarily concerns Allergan entities acquired by AbbVie.
- Approximately 380 cases remain pending, alleging improper promotion and sale of prescription opioid medications. Plaintiffs include state and local governments, Native American tribes, and third-party payers.
- Most federal cases are consolidated in the Northern District of Ohio (MDL No. 2804).
- Biocell Breast Implant Litigation:
- Concerns Allergan’s Biocell textured breast implants, which were voluntarily recalled globally in 2019.
- Plaintiffs allege these implants are linked to Breast Implant-Associated Anaplastic Large Cell Lymphoma (BIA-ALCL) and other injuries.
- Thousands of cases exist globally; approximately 1,450 cases are consolidated in U.S. federal court (MDL No. 2921), with hundreds more in state and international courts.
3. Intellectual Property (IP) Litigation
AbbVie aggressively uses patent litigation to protect the market exclusivity of its core products:
- Rinvoq (Upadacitinib):
- AbbVie previously filed patent infringement suits against multiple generic manufacturers (e.g., Sandoz, Hetero) seeking to launch generic versions.
- Major Development: In September 2025, AbbVie announced it had settled with all relevant generic filers. Under the agreements, generic versions of Rinvoq are not expected to enter the U.S. market until April 2037.
- Ubrelvy (Ubrogepant):
- In March 2024, AbbVie filed suits against several manufacturers (Aurobindo, Zydus, etc.) alleging their proposed generics infringe Ubrelvy patents. The company is currently seeking injunctive relief to block these launches.
4. Tax Litigation
- 2014 Termination Fee Dispute: AbbVie and the IRS have a dispute over a $572 million tax benefit arising from a fee paid to a third party following a terminated merger in 2014.
- Status: The U.S. Tax Court ruled in favor of AbbVie in June 2025, determining no tax deficiency. However, the Commissioner of the IRS filed an appeal against this decision in September 2025.
5. Financial Impact
Management believes that, beyond the recorded reserves, the ultimate resolution of these legal proceedings should not have a material adverse effect on the company’s consolidated financial position, results of operations, or cash flows.
In the pharmaceutical industry, “rebates” are a complex and highly controversial financial mechanism. While they can serve as legitimate tools for price negotiation, they can also be weaponized by large pharmaceutical companies to block competition and maintain monopolies.
The following is a detailed explanation of the rebate mechanism, the specific legal allegations against AbbVie, and their broader market impact.
1. The Rebate Mechanism: Legitimate vs. Anticompetitive
In markets like the U.S., drug manufacturers rarely lower the “list price” of a drug. Instead, they offer rebates to Pharmacy Benefit Managers (PBMs) or insurance companies in exchange for “preferred status” on a drug formulary (the list of covered drugs).
- Legitimate Rebates (Safe Harbor):
- Purpose: To lower the cost for insurers through volume-based discounts.
- Format: The manufacturer returns a percentage of the drug’s price to the payer (PBM or insurer) based on sales volume. This is legal if it is transparent and falls under “Safe Harbor” provisions of Anti-Kickback statutes.
- Anticompetitive Rebates (The “Rebate Wall”):
- Purpose: To exclude competitors, particularly lower-priced biosimilars, from the market.
- The Tactic: A dominant manufacturer (like AbbVie) tells a PBM: “If you include a competitor’s biosimilar on your formulary, I will revoke the deep rebates I provide for all existing patients using Humira.” Because PBMs rely on these massive rebates to balance their budgets, the financial penalty for switching to a cheaper competitor becomes too high. This creates an invisible “Rebate Wall.”
2. The Legal Controversy: AbbVie (Humira)
AbbVie’s flagship drug, Humira, is one of the best-selling drugs in history. Its rebate practices have been targeted in multiple lawsuits (e.g., the Sheet Metal Workers case) for alleged illegalities:
- Abuse of Monopoly Power (Antitrust Violation):AbbVie is accused of using Humira’s massive existing patient base to implement “bundled” or “all-or-nothing” rebates. If a PBM introduces a cheaper biosimilar, they risk losing the retroactive rebates on every Humira prescription they manage. This is viewed as exclusionary conduct because it forces PBMs to reject cheaper alternatives to save their overall rebate revenue.
- Illegal Kickbacks:In cases such as those in California, AbbVie was accused of using its “Nurse Ambassador” program to provide illegal kickbacks. These “ambassadors” provided free administrative and clinical services to doctors’ offices, which essentially relieved the medical practices of overhead costs. Courts found this to be a form of inducement to ensure doctors kept prescribing Humira, violating the Insurance Fraud Prevention Act (IFPA).
- The “Patent Thicket” and “Rebate Wall” Synergy:AbbVie built a “patent thicket” of over 100 patents to delay competitors from entering the market. Once competitors finally gained approval to launch, AbbVie allegedly used the “rebate wall” to ensure those competitors could not gain any market share, even if their prices were significantly lower.
3. Market and Social Impact
The AbbVie cases have fundamentally changed the conversation around drug pricing and regulation:
- Impact on Consumers (Inflated Out-of-Pocket Costs):While PBMs receive the rebates, these discounts are often not passed directly to the patient at the pharmacy counter. Patients often pay a coinsurance percentage based on the List Price (the un-discounted price). Since AbbVie raised Humira’s list price by over 470% over 20 years, patients’ out-of-pocket costs remained high despite the rebates given to PBMs.
- Impact on the Industry (The “Biosimilar Chill”):AbbVie’s strategy is seen as a “textbook” example of how to stifle innovation. Even after several Humira biosimilars launched, their market share remained extremely low for the first few years. This discouraged other biotech firms from investing in expensive biosimilars, fearing that they would be “walled out” regardless of product quality or price.
- Regulatory Shift:The U.S. Federal Trade Commission (FTC) has launched deep investigations into the PBM-Manufacturer rebate complex, seeking to limit practices that exclude competition. Additionally, AbbVie has had to pay hundreds of millions in settlements (e.g., a $24 million settlement with California in 2020) over marketing and rebate allegations.
Summary
AbbVie is accused of transforming rebates from a promotional tool (to lower prices) into a defensive weapon (to block competitors). While this protected company profits in the short term, it fueled the global debate on why drug prices continue to rise even as competition increases, leading to significant policy reforms in drug pricing.