Skip to main content
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Current News
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Digital Health
    • Transformation
    • ESG
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Blogs
    • AI
    • Deals
    • Layoff Tracker
    • HIMSS 2023
  • Opinion
    • Breaking Bias
    • Commentaries
    • Letters
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • 40 Under 40
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Digital Health Transformation Summit
    • ESG: The Implementation Imperative Summit
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Hospital at Home
    • - Workplace of the Future
    • - AI and Digital Health
    • - Future of Staffing
    • - Hospital of the Future (Fall)
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Sponsored Video Series - One on One
    • Sponsored Video Series - Checking In with Dan Peres
  • Data & Insights
    • Data & Insights Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • Newsletters
  • MORE+
    • Contact Us
    • Advertise
    • Media Kit
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Insurance
June 22, 2020 10:45 AM

Why layoffs by other employers threaten AbbVie

Stephanie Goldberg, Crain's Chicago Business
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    abbvie_online_photo_i_0.jpg
    Bloomberg

    CEO Richard Gonzalez

    AbbVie is bracing for revenue declines as tens of millions of Americans lose their jobs—and the health insurance that comes with them—due to the COVID-19 pandemic.

    When people lose employer-provided commercial health insurance, they also lose their primary means of paying for prescription drugs. Some may eventually shift over to Medicaid, but the government-funded program for the poor and disabled pays much less for drugs than commercial health insurers pay.

    Widespread loss of commercial insurance is expected to put financial pressure on drugmakers, and it comes at a particularly challenging time for AbbVie. The North Chicago-based company has less than three years to pad sales before its top-selling Humira loses U.S. market exclusivity. In addition to facing lower reimbursements for expensive treatments, AbbVie has had fewer new patients start its drugs during the pandemic. And it's integrating newly acquired Botox-maker Allergan at a time when many cosmetic procedures have been sidelined by the coronavirus.

    PLUNGE PREDICTED

    COVID-19 could derail AbbVie's efforts to offset a plunge in sales when Humira knockoffs hit the U.S. in 2023. Piper Sandler analyst Christopher Raymond predicts that Humira sales will drop by about $10 billion by 2025.

    The pandemic "is going to make it a lot harder to milk the last extra few billion dollars out of the drug," says Erik Gordon, a professor at the University of Michigan's Ross School of Business. "Think about how big Humira is. A disappointing final couple of years of sales could be a disappointment that's counted in billions."

    AbbVie cited a potential decrease in commercially insured patients and an increase to its patient assistance programs when it cut projected 2020 earnings per share by 6 cents to a range of $7.60 to $7.70.

    "By the time we get to the third quarter, we should have a pretty good feel for whether or not that's going to play out the way we thought, or if it's going to be better than what we thought," CEO Richard Gonzalez said at a health care conference this month.

    But even as states reopen and some people return to work, the economic impact of the pandemic is still unfolding. About 27 million people could lose their employer-sponsored health insurance due to job loss between March 1 and May 2, according to a recent Kaiser Family Foundation analysis. This includes people who lose their own coverage, as well as those who are covered as dependents.

    Among those who become uninsured after a job loss, KFF estimates that 13 million people would be eligible for Medicaid and 8 million would be eligible for reduced premiums under Obamacare. And if recently unemployed people don't get new jobs before unemployment insurance ends for many in January 2021, an additional 4 million could qualify for Medicaid.

    Several drugmakers, including Eli Lilly and Novartis, addressed the concern during first-quarter earnings calls, acknowledging that a drop in commercially insured patients could squeeze sales. Eli Lilly Chief Financial Officer Joshua Smiley said, "In general, a move from a well-insured commercial patient to Medicaid is a net negative."


    Demand downer

    Job losses mean fewer people have commercial insurance, which pays for 42 percent of U.S. prescription drug sales. 78 million people lived in a family in which someone lost a job between March 1 and May 2. Here's a look at their insurance coverage.


    Source: KFF


    Some drugs are more vulnerable to economic conditions than others. During a recession, "the more critical care-oriented your drug is, the less exposed you are to some extent," says Morningstar analyst Damien Conover. While AbbVie has a "strong mix" of critical care drugs, including cancer treatments, Allergan's aesthetics products "are a little more economically sensitive," he says.

    Gonzalez didn't break down AbbVie's so-called payer mix, or the percentage of revenue that comes from various types of insurers, during the recent conference. But private insurance accounts for the largest share of U.S. drug sales at 42 percent, according to a 2017 analysis by the Kaiser Family Foundation.

    FEWER NEW PATIENTS

    Another coronavirus side effect: The number of new patients starting Humira and AbbVie's new plaque psoriasis drug Skyrizi was down 30 to 40 percent, as doctors restricted patient visits and many dermatology offices were closed, Gonzalez told analysts in May.

    Meanwhile, competition is coming for Humira in the U.S. The drugmaker has long been propped up by the $19.2 billion drug, which accounted for 58 percent of sales last year.

    AbbVie is counting on Allergan to cushion the blow. But it's integrating the acquisition at a challenging time for the industry and medical aesthetics in particular.

    "They're probably not going to get quite as much cash flows from Allergan as they could have had we not gone through this COVID-19 pandemic and related recession," Conover says.

    Allergan's aesthetics business took a hit from COVID-19, starting at the end of the first quarter, Gonzalez said at this month's conference, noting that the segment is rebounding "significantly faster than we originally planned" in areas that have reopened.

    "When the 2008-2009 financial crisis hit, almost everyone thought this was a business that would suffer disproportionately, and it ended up being more resilient than anybody thought," says Raymond. "Everyone has to get their Botox, no matter what."

    On the AbbVie side of the business, the company has high hopes for Skyrizi and new rheumatoid arthritis drug Rinvoq. It also recently announced a cancer research and development partnership to expand its oncology pipeline, and it's backing an effort to develop an antibody therapy that aims to prevent and treat COVID-19.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    healthy food prescription
    Instacart, Alignment strike Medicare Advantage deal
    stars legal
    TukeyGate: Insurers vexed by Medicare Advantage star ratings declines
    Most Popular
    1
    Centene to lay off 2,000 workers
    2
    How health systems are battling price-gouging allegations
    3
    Senate advances bill to temporarily aid hospitals, health centers
    4
    Elevance, Blue Cross Louisiana halt $2.5B proposed deal
    5
    Tower Health to sell urgent care centers, close others
    Sponsored Content
    Daily Finance Newsletter: Sign up to receive daily news and data that has a direct impact on the business and financing of healthcare.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Help Center
    • Advertise with Us
    • Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Digital Health
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • ESG
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Blogs
      • AI
      • Deals
      • Layoff Tracker
      • HIMSS 2023
    • Opinion
      • Breaking Bias
      • Commentaries
      • Letters
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • 40 Under 40
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Hospital at Home
        • - Workplace of the Future
        • - AI and Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Sponsored Video Series - One on One
      • Sponsored Video Series - Checking In with Dan Peres
    • Data & Insights
      • Data & Insights Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • Newsletters
    • MORE+
      • Contact Us
      • Advertise
      • Media Kit
      • Jobs
      • People on the Move
      • Reprints & Licensing