What changed in this filing

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Item 1A. Risk Factors

2022-11-04 compared with 2022-08-05 · 36 added, 91 removed, 103 unchanged (55% of the section changed)

This report and other documents we file with the SEC contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business, our beliefs and our management’s assumptions.

These statements are not guarantees of future performance, and they involve certain risks, uncertainties and assumptions that are difficult to predict.

These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict.

You should carefully consider the risks and uncertainties our business faces.

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Continued intense public scrutiny of the price of drugs and other healthcare costs, together with payer dynamics, have limited, and are likely to continue to limit, our ability to set or adjust the price of our products based on their value, which can have a material adverse effect on our business.

In the United States, particularly over the past few years, a number of legislative and regulatory proposals have been introduced to attempt to lower drug prices.

These include proposals that would enable the U.S.

government to negotiate drug prices directly, limit drug reimbursement in Medicare and/or the commercial market based on reference prices, impose penalties if drug prices are increased at a rate faster than inflation or permit importation of drugs from Canada.

Additional proposals would require a rebate to the government for any price increase in excess of the Consumer Price Index for All Urban Consumers and/or to shift some of the costs of these Medicare Part D reforms to manufacturers to offset the costs.

Certain proposals focused on drug pricing have been adopted, and additional proposals are likely to be adopted and implemented in some form.

In the United States, particularly over the past few years, a number of legislative and regulatory proposals have been introduced and/or signed into law that attempt to lower drug prices.

These include legislation promulgated by the Inflation Reduction Act of 2022 (IRA) that enables the U.S.

government to impose penalties if drug prices are increased at a rate faster than inflation, redesigns Medicare Part D benefits to shift a greater portion of the costs to manufacturers and allows for the U.S.

government to set prices for certain drugs in Medicare.

Other proposals include limiting drug reimbursement in Medicare and/or the commercial market based on reference prices, or permitting importation of drugs from Canada.

Certain proposals focused on drug pricing (such as the IRA) have been adopted, and additional proposals are likely to be adopted and implemented in some form.

—Changing U.S.

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Congress has focused on drug pricing reforms and oversight since 2018, and this activity is still ongoing and has intensified.

Since 2019, a number of Congressional committees debated drug pricing reform proposals, and in 2020, Amgen participated in House Oversight and Reform Committee hearings on drug pricing practices.

In 2019, the Senate Finance Committee advanced a bill that would, among other things, penalize pharmaceutical manufacturers for raising prices on drugs covered by Medicare Parts B and/or D faster than the rate of inflation, cap out-of-pocket expenses for Medicare Part D beneficiaries and require higher or additional manufacturer discounts in Medicare Part D.

Additionally, in late 2019, a drug-pricing bill, H.R.

3, passed the House of Representatives and included provisions that, among other things, enabled direct price negotiations by the federal government on certain drugs, (with the maximum price paid by Medicare capped by prices derived from an international index), penalized failures to reach agreement with the government and required that manufacturers offer these negotiated prices to other payers.

Provisions from H.R.

been incorporated and adapted into other proposed legislation, including the most recent reconciliation bill released by the Senate in July 2022, which included penalties if drug price benchmarks rise faster than inflation, Medicare price setting for certain drugs paid for under Parts B and D (whereby manufacturers must accept a price established by the government or face penalties on all U.S.

sales), and Part D redesign including a cap on beneficiary spending and a new manufacturer discount program.

This framework remains in discussion with policymakers in Congress and the Administration.

For example, in August 2022, the IRA was enacted and includes provisions requiring that:

(1) beginning in 2026, mandatory price setting be introduced in Medicare for certain drugs paid for under Parts B and D, whereby manufacturers must accept a price established by the government or face penalties on all U.S.

sales (starting with 10 drugs in 2026, adding 15 in 2027 and 2028, and adding 20 in 2029 and subsequent years such that approximately one hundred drugs could be subject to such set prices by 2031);

(2) Medicare Part D be redesigned to cap beneficiary out-of-pocket costs starting in 2024 and, beginning January 1, 2025, reduce Federal reinsurance in the catastrophic phase (resulting in a shift and increase of such costs to Part D plans and manufacturers, including by requiring discounts from manufacturers on certain drugs);

and (3) beginning October 1, 2022, manufacturers will owe rebates on drugs reimbursed under Medicare Part D if price increases outpace inflation, and beginning in January 1, 2023, will owe rebates on drugs reimbursed

under Medicare Part B if price increases outpace inflation.

The IRA’s drug pricing controls and Medicare redesign is likely to have a material adverse effect on our sales (particularly for our products that are more substantially reliant on Medicare reimbursement), our business and our results of operations.

However, as the degree of impact from this legislation on our business depends on a number of implementation decisions, the extent of the IRA’s impact on our sales and, in turn, our business remains unclear.

Further, following the passage of the IRA, the environment remains dynamic, and in October 2022, the Administration issued an Executive Order on Lowering Prescription Drug Costs for Americans that calls for the HHS to issue a report within 90 days on Innovation Center models that would lower drug costs and promote access to innovative drug therapies for Medicare and Medicaid beneficiaries.

There are other outstanding proposals that, if enacted and implemented, in whole or in part, could also affect access to and sales of our products, including, but not limited to, federal and various state proposals to allow importation of prescription medications from Canada or other countries.

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In July 2021, the Administration issued an Executive Order designed to address anticompetitive behavior across multiple sectors, and for the healthcare sector, called for, among other things, the FDA to work with states and Indian tribes to develop prescription drug importation programs, more scrutiny of anticompetitive activity by the FTC, emphasized the need for actions to allow for greater competition from generics and biosimilars, and included a process and timeline for federal agencies to deliver to the Administration ideas that address drug pricing.

Subsequently, in September 2021, HHS released a report that presented guiding principles for the Administration’s drug pricing proposals, including changes to promote competition throughout the prescription drug industry, highlighting potential legislative policies that Congress could pursue (including drug price negotiation in Medicare Parts B and D, making those negotiated prices available to commercial plans and legislation to speed the entry of biosimilar and generic drugs) and examples of potential administrative tools available to the HHS (including testing various models and enhanced focus of the FTC and the USPTO to address impediments to generic drug and biosimilar competition).

Subsequently, in September 2021, the HHS released a report that presented guiding principles for the Administration’s drug pricing proposals, including changes to promote competition throughout the prescription drug industry, highlighting potential legislative policies that Congress could pursue (including drug price negotiation in Medicare Parts B and D, making those negotiated prices available to commercial plans and legislation to speed the entry of biosimilar and generic drugs) and examples of potential administrative tools available to the HHS (including testing various models and enhanced focus of the FTC and the USPTO to address impediments to generic drug and biosimilar competition).

Also, in response to the July 2021 Executive Order, the FDA sent a letter to the USPTO describing ways to strengthen coordination between the two agencies, offering training to help identify prior art and seeking USPTO’s views on practices that extend market exclusivities, whether pharmaceutical patent examiners need additional resources, and the effect of post-grant challenges at the PTAB on drug patents.

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Also, the American Rescue Plan Act of 2021 includes a provision that increases the Medicaid rebate liability, beginning in 2024, by no longer capping Medicaid rebates at 100% of the Average Manufacturer Price for certain medicines that raise prices in excess of inflation .

The implementation of a final rule issued by HHS that revises regulations under the federal antikickback statute to encourage PBMs to use rebates received from biopharmaceutical manufacturers to reduce patient cost-sharing at the point of sale under Medicare Part D has been delayed to January 1, 2027.

However, the future of this rule remains uncertain because, among other issues, it is subject to litigation and because a permanent repeal is being considered in other legislation.

The implementation of a final rule issued by the HHS that revises regulations under the federal antikickback statute to encourage PBMs to use rebates received from biopharmaceutical manufacturers to reduce patient cost-sharing at the point of sale under Medicare Part D has been delayed to January 1, 2032.

Our business has been, and is expected to continue to be, affected by changes in U.S.

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This rule is in litigation, but should such litigation be unsuccessful, it could allow for the importation of Canadian versions of certain of Amgen’s products (including Otezla), that could have a material adverse effect on Amgen’s business.

Also in response to an Executive Order, CMS released an interim final rule to implement the MFN pricing approach aimed at setting the reimbursement rate for 50 Medicare Part B drugs (including our products, such as Prolia, XGEVA, KYPROLIS, Neulasta, Nplate, EPOGEN and Aranesp) equal to the lowest adjusted price in 22 OECD nations for these drugs.

In December 2021, subsequent to challenges, including procedural defects, CMS announced it was withdrawing the MFN rule.

Also in response to an Executive Order, CMS previously released an interim final rule to implement the MFN pricing approach aimed at setting the reimbursement rate for 50 Medicare Part B drugs (including our products, such as Prolia, XGEVA, KYPROLIS, Neulasta, Nplate, EPOGEN and Aranesp) equal to the lowest adjusted price in 22 OECD nations for these drugs.

In December 2021, subsequent to challenges, including procedural defects, CMS withdrew the MFN rule.

Notwithstanding the withdrawal of the rule, the MFN rule’s approach to drug pricing and other similar approaches remain of interest to policymakers.

In connection with its withdrawal of the MFN rule, CMS noted that it will “… explore all options to incorporate value into payments for Medicare Part B drugs, improve beneficiaries’ access to evidence-based care, and reduce drug spending for consumers and throughout the health care system.” Further, we expect continued significant focus on healthcare and similar drug pricing proposals for the foreseeable future, including proposals under which the government would set drug prices or limit drug reimbursement.

In the second quarter of 2022, several Medicare Administrative Contractors issued notice, in contravention of TEZSPIRE’s FDA approved labeling, that TEZSPIRE would be added to their “self-administered drug” exclusion lists.

While the effective date for adding TEZSPIRE to the exclusion list has been deferred until further notice, this exclusion, if implemented, would result in Medicare beneficiaries with severe asthma losing access to TEZSPIRE coverage under Medicare Part B and potentially also under Medicare Advantage.

In connection with its withdrawal of the MFN rule, CMS noted that it will “… explore all options to incorporate value into payments for Medicare Part B drugs, improve beneficiaries’ access to evidence-based care, and reduce drug spending for consumers and throughout the health care system.” We expect continued significant focus on healthcare and similar drug pricing proposals for the foreseeable future.

Our business is also affected by policies implemented by private healthcare entities that process Medicare claims, including Medicare Administrative Contractors.

For example, in the second quarter of 2022, several Medicare Administrative Contractors issued notice, in contravention of TEZSPIRE’s FDA approved labeling, that TEZSPIRE would be added to their “self-administered drug” exclusion lists.

Although the Medicare Administrative Contractors

subsequently removed TEZSPIRE from their exclusion lists, these exclusions, if reintroduced and/or implemented, would result in Medicare beneficiaries with severe asthma losing access to TEZSPIRE coverage under Medicare Part B and potentially also under Medicare Advantage.

CMS policy changes and demonstration projects to test new care, delivery and payment models can also significantly affect how drugs, including our products, are covered and reimbursed.

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While the Oncology Care Model demonstration ended on June 30, 2022, CMS announced a new oncology model (the Enhancing Oncology Model) that will run for five years (from July 2023 through June 2028) that builds on this prior demonstration program.

Further, HHS’s September 2021 comprehensive plan to address drug pricing included potential future mandatory models that link payment for prescription drugs and biologics to factors such as:

Further, the HHS’s September 2021 comprehensive plan to address drug pricing included potential future mandatory models that link payment for prescription drugs and biologics to factors such as:

improved patient outcomes, reductions in health disparities, patient affordability and lower overall costs;

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CMS also recently finalized a national Medicare coverage determination for certain Alzheimer’s disease medications that received accelerated FDA approvals that limits coverage to only patients in qualifying clinical trials, thereby suggesting that accelerated regulatory approval does not necessarily result in full Medicare coverage.

In this dynamic environment, particularly in light of the pressures on healthcare budgets as a result of the pandemic, we are unable to predict which or how many federal policy, legislative, regulatory, executive or administrative changes may ultimately be, or effectively estimate the consequences to our business if, enacted and implemented.

Further, pressures on healthcare budgets from the pandemic and the economic downturn remain.

We are unable to predict which or how many federal policy, legislative, regulatory, executive or administrative changes may ultimately be, or effectively estimate the consequences to our business if, enacted and implemented.

However, to the extent that these or other federal government initiatives further decrease or modify the coverage or reimbursement available for our products, require that we pay increased rebates or shift other costs to us, limit or affect our decisions regarding the pricing of or otherwise reduce the use of our U.S.

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At the state level, government actions or ballot initiatives can also affect how our products are covered and reimbursed and/or create additional pressure on our pricing decisions.

A number of states have adopted, and many other states are considering, drug importation programs or other new pricing actions, including proposals designed to require biopharmaceutical manufacturers to publicly report proprietary pricing information, limit price increases or place a maximum price ceiling or cap on biopharmaceutical products.

Existing and proposed state pricing laws have added complexity to the pricing of drugs and may already be affecting industry pricing decisions.

For example, a California law, the constitutionality of which is currently being challenged, purports to require biopharmaceutical manufacturers to notify health insurers and government health plans at least 60 days before scheduled prescription drug price increases that exceed certain thresholds.

A number of states have adopted, and many other states are considering, drug importation programs or other pricing actions, including proposals designed to require biopharmaceutical manufacturers to report to the state proprietary pricing information or provide advance notice of certain price increases.

For example, a California law requires biopharmaceutical manufacturers to notify health insurers and government health plans at least 60 days before scheduled prescription drug price increases that exceed certain thresholds.

Similar laws exist in Oregon and Washington.

Additional proposals directed at Medicaid seek to penalize manufacturers for price increases above a certain threshold or limit spending on biopharmaceutical products.

States are also seeking to change the way they pay for drugs for patients covered by state programs.

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New York has established a Medicaid drug spending cap, and Massachusetts implemented a new review and supplemental rebate negotiation process.

Six states (Colorado, Maine, New Hampshire, Maryland, Oregon and Washington) have enacted laws that establish Prescription Drug Affordability Boards (PDABs) to study drug prices and identify drugs that pose affordability challenges, and in three states (Colorado, Maryland and Washington) include authority for the state PDAB to set upper payment limits on certain drugs in state regulated plans.

Other states may consider implementing similar policies and procedures as they face budget deficits from the effects of the COVID-19 pandemic.

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With increasing frequency, payers are adopting benefit plan changes that shift a greater proportion of drug costs to patients.

Such measures include more limited benefit plan designs, high deductible plans, higher patient copay or coinsurance obligations and more significant limitations on patients’ use of manufacturer commercial copay assistance programs.

Such measures include more limited benefit plan designs, high deductible plans, higher patient co-pay or coinsurance obligations and more significant limitations on patients’ use of manufacturer commercial co-pay assistance programs.

Further, government regulation of payers may affect these trends.

For example, CMS finalized a policy in May 2020 (for plan years starting on or after January 1, 2021, which remains standing policy for 2022) that has caused commercial payers to more widely adopt copay accumulator adjustment programs.

For example, CMS finalized a policy in May 2020 (for plan years starting on or after January 1, 2021, which remains standing policy for 2022) that is subject to litigation and has caused commercial payers to more widely adopt co-pay accumulator adjustment programs.

Payers have sought, and continue to seek, price discounts or rebates in connection with the placement of our products on their formularies or those they manage, particularly in treatment areas in which the payer has taken the position that multiple branded products are therapeutically comparable.

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Business—Reimbursement of our Annual Report on Form 10-K for the year ended December 31, 2021.

Pressures to decrease drug expenditures may further intensify as economic conditions continue to worsen in certain regions, including in Europe where high inflation and the energy crisis relating to the Russia–Ukraine conflict are challenging the economies in that region.

IRP has been widely used by many countries outside the United States to control costs based on an external benchmark of a product’s price in other countries.

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In addition, countries may refuse to reimburse or may restrict the reimbursed population for a product when their national health technology assessments do not consider a medicine to demonstrate sufficient clinical benefit beyond existing therapies or to meet certain cost effectiveness thresholds.

For example, despite the EMA’s approval of Repatha for the treatment of patients with established atherosclerotic disease, the reimbursement for Repatha in France prior to

2020 was limited to a narrower patient population (such as those with homozygous familial hypercholesterolemia (HoFH)) following a national health technology assessment, which had limited our efforts in France to expand Repatha access to the broader patient population covered by the approved label.

For example, despite the European Medicines Agency’s approval of Repatha for the treatment of patients with established atherosclerotic disease, the reimbursement for Repatha in France prior to 2020 was limited to a narrower patient population (such as those with homozygous familial hypercholesterolemia (HoFH)) following a national health technology assessment, which had limited our efforts in France to expand Repatha access to the broader patient population covered by the approved label.

Some countries decide on reimbursement between potentially competing products through national or regional tenders that often result in one product receiving most or all of the sales in that country or region.

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Such changes have had, and could in the future have, a material adverse effect on our product sales, business and results of operations.

The adoption and interpretation 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.

One or more of our legal entities file income tax returns in the U.S.

federal jurisdiction, various U.S.

state jurisdictions and certain foreign jurisdictions.

Our income tax returns are routinely examined by tax authorities in those jurisdictions.

Significant disputes can and have arisen with tax authorities involving issues regarding the timing and amount of deductions, the use of tax credits and allocations of income and expenses among various tax jurisdictions because of differing interpretations of tax laws, regulations and relevant facts, and such tax authorities (including the IRS) are becoming more aggressive in their audits and are particularly focused on such matters.

In 2017, we received an RAR and a modified RAR from the IRS for the years 2010–2012, proposing significant adjustments that primarily relate to the allocation of profits between certain of our entities in the United States and the U.S.

territory of Puerto Rico.

We disagreed with the proposed adjustments and calculations and pursued resolution with the IRS administrative appeals office but were unable to reach resolution.

In July 2021, we filed a petition in the U.S.

Tax Court to contest two duplicate Notices for the years 2010–2012 that we received in May and July 2021 which seek to increase our U.S.

taxable income for the years 2010–2012.

In 2020, we received an RAR and a modified RAR from the IRS for the years 2013, 2014 and 2015, also proposing significant adjustments that primarily relate to the allocation of profits between certain of our entities in the United States and the U.S.

territory of Puerto Rico similar to those proposed for the years 2010–2012.

We disagreed with the proposed adjustments and calculations and pursued resolution with the IRS appeals office but were unable to reach resolution.

In July 2022, we filed a petition in the U.S.

Tax Court to contest a Notice for the years 2013–2015 that we previously reported receiving in April 2022 that seeks to increase our U.S.

taxable income for the years 2013–2015 and asserts penalties.

We firmly believe that the IRS positions set forth in the 2010–2012 and 2013–2015 Notices are without merit.

We are contesting the 2010–2012 and 2013–2015 Notices through the judicial process, and we will seek consolidation of the two periods into one case in the U.S.

We are currently also under examination by the IRS for the years 2016, 2017 and 2018 with respect to issues similar to those for the 2010 through 2015 period.

In addition, we are under examination by a number of state and foreign tax jurisdictions.

Final resolution of these complex matters is not likely within the next 12 months.

We continue to believe our accrual for income tax liabilities is appropriate based on past experience, interpretations of tax law, application of the tax law to our facts and judgments about potential actions by tax authorities;

however, due to the complexity of the provision for income taxes and uncertain resolution of these matters, the ultimate outcome of any tax matters may result in payments substantially greater than amounts accrued and could have a material adverse effect on the results of our operations.

See Part I, Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations, Income Taxes, and Part I—Note 4, Income taxes, to the condensed consolidated financial statements.

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.

The 2017 Tax Act is complex and a large volume of regulations and guidance has been issued and could be subject to different interpretations.

We could face audit challenges to our application of the 2017 Tax Act.

The Administration proposed and Congress is considering a variety of potentially significant changes to existing tax law.

These changes, or others, could substantially increase taxes we pay to the U.S.

Further, the OECD recently reached an agreement to align countries on a minimum corporate tax rate and an expansion of the taxing rights of market countries.

If enacted, either by all OECD participants or unilaterally by individual countries, this agreement could result in tax increases in both the United States and

foreign jurisdictions.

Treasury recently released final foreign tax credit regulations that eliminate U.S.

creditability of the Puerto Rico Excise Tax beginning 2023, which would increase our U.S.

tax liability.

However, the U.S.

territory of Puerto Rico recently enacted Act 52-2022, which provides for an alternate fixed tax rate on industrial development income that is expected to be creditable under U.S.

As part of this new law, eligible businesses would be subject to incremental income and withholding taxes in lieu of payment of the Puerto Rico Excise Tax.

In order to qualify for the alternative fixed tax rate, we must amend our current tax grant with the Puerto Rico government by December 31, 2022.

Once we qualify for this alternative fixed tax rate, which we expect to occur as of January 1, 2023, our tax expense will increase.

While we expect these taxes to be partially offset by U.S.

foreign tax credits, the U.S.

Treasury has not yet issued guidance on whether the alternative fixed tax rate will be creditable under U.S.

Changes to existing tax law in the United States, the U.S.

territory of Puerto Rico, or other jurisdictions, including the changes and potential changes discussed above, could result in tax increases where we do business and could have a material adverse effect on the results of our operations.

Our efforts to collaborate with or acquire other companies, products, or technology, and to integrate the operations of companies or to support the products or technology we have acquired, may not be successful, and may result in unanticipated costs, delays or failures to realize the benefits of the transactions.

We seek innovation through significant investment in both internal R&D and external transactions, including collaborations, partnerships, alliances, licenses, joint ventures, mergers and acquisitions (collectively, acquisition activity).

Acquisition activities may be subject to regulatory approvals or other requirements that are not within our control.

There can be no assurance that such regulatory or other approvals will be obtained or that all closing conditions required in connection with our acquisition activities will be satisfied or waived, which could result in us being unable to complete the planned acquisition activities.

In addition, antitrust scrutiny by regulatory agencies and changes to regulatory approval process in the U.S.

and foreign jurisdictions may cause approvals to take longer than anticipated to obtain, not be obtained at all, or contain burdensome conditions, which may jeopardize, delay or reduce the anticipated benefits of acquisitions to us and could impede the execution of our business strategy.

Acquisition activities are complex, time consuming and expensive and may result in unanticipated costs, delays or other operational or financial problems related to integrating the acquired company and business with our company, which may divert our management’s attention from other business issues and opportunities and restrict the full realization of the anticipated benefits of such transactions within the expected timeframe or at all.

We may pay substantial amounts of cash, incur debt or issue equity securities to pay for acquisition activities, which could adversely affect our liquidity or result in dilution to our stockholders, respectively.

Further, failures or difficulties in integrating or retaining new personnel or in integrating the operations of the businesses, products or assets we acquire (including related technology, commercial operations, compliance programs, manufacturing, distribution and general business operations and procedures) may affect our ability to realize the benefits of the transaction and grow our business and may result in us incurring asset impairment or restructuring charges.

These and other challenges may arise in connection with our proposed acquisition of ChemoCentryx, in addition to our acquisitions of Otezla, Five Prime, Teneobio and/or our collaborations with BeiGene and Kyowa Kirin Co., Ltd., or with other acquisition activities, which could have a material adverse effect on our business, results of operations and stock price.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors