Orphan Drugs and Big Pharma Strategy: The Curious Case of Humira
On January 1, 2013, Abbott Laboratories, one of the most recognized American pharmaceutical companies, split itself into two companies: Abbott and AbbVie Inc. Abbott retained the original company name and a diverse group of health care products, including medical devices, diagnostic tests and instruments, and nutritional products. AbbVie received all of Abbott’s big-name drugs, including the blockbuster anti-inflammatory Humira. Abbott CEO Miles White indicated that investors would benefit from the two fundamentally different investment opportunities with distinct strategic profiles and business priorities. The financial community was divided as to which company would prove to be the better long-term investment decision for investors. The fundamental issue that drove the break-up was the future revenue prospects of Humira. These prospects hinged on Humira’s status as an orphan drug and the ability of AbbVie to acquire additional FDA approved indications for its use.
- Recognize and explain how factors impacting the business environment in the biopharmaceutical sector of the health care industry influenced Abbott’s business portfolio strategy.
- Describe how agency capture explains the relationship between Abbott/AbbVie and the FDA and how the regulatory environment impacted AbbVie’s financial performance.
- Analyze the financial performance of Abbott and AbbVie before and after the split of the two firms.
- Evaluate Abbott’s decision to split from AbbVie.
- Determine how changes in the regulatory environment impact business strategy.