Abbott has four reportable revenue segments:
Pharmaceutical Products, Diagnostic Products, Ross Products, and International.
Abbott also has a 50 percent owned joint venture, TAP Pharmaceutical
Products Inc.
In August 2003, Abbott announced a plan
to create a separate publicly traded company for its existing core hospital
products business. The new company, Hospira, Inc., will own the worldwide core
hospital products business historically conducted by Abbott including:
medication delivery systems, such as electronic drug delivery systems and
infusion therapy, and critical care devices; specialty injectable
pharmaceuticals, including generic and proprietary products; and injectable
pharmaceutical contract manufacturing. Hospira will include most of Abbott's
Hospital Products segment and portions of Abbott's International segment. Abbott
will retain all of its other pharmaceutical, diagnostic, and nutritionals
businesses. In addition, Abbott is retaining the following businesses that have
historically been part of Abbott's hospital products business: hospital
operating room pharmaceuticals, proprietary hospital pharmaceuticals, pain
management products, vascular devices and the orthopedic devices business.
Distribution
The Pharmaceutical Products segment markets its
products in the United States and generally sells its products directly to
wholesalers, government agencies, health care facilities and independent
retailers from Abbott-owned distribution centers and public warehouses. This
segment directs its primary marketing efforts toward securing the prescription
of Abbott's brand of products by physicians. Managed care purchasers (for
example, health maintenance organizations and pharmacy benefit managers) and
state and federal governments and agencies (for example, the Department of
Veterans Affairs and the Department of Defense) are also important customers.
In addition, under its strategic alliance with
Celera Diagnostics, a joint venture between the Applied Biosystems Group and the
Celera Genomics Group of Applera Corporation, the Diagnostic Products segment
develops, manufactures and markets a broad range of in vitro molecular
diagnostic products for disease detection, disease progression monitoring and
therapy selection. Through a sales and marketing agreement with Enfer
Scientific Ltd., the Diagnostic Products segment also distributes diagnostic
tests in Europe and Japan that are used to detect bovine spongiform
encephalopathy (BSE) in cattle.
The Diagnostic Products segment markets
its products worldwide. These products are generally marketed and sold directly
to hospitals, laboratories, clinics, and physicians' offices from Abbott-owned
distribution centers and public warehouses. Outside the United States, sales are
made either directly to customers or through distributors, depending on the
market served. Blood glucose monitoring meters and test strips for people with
diabetes are also sold over the counter to consumers.
The Hospital Products segment's principal
products also include venipuncture products and Faultless® rubber sundry
products.
The Hospital Products segment markets its
products primarily in the United States. This segment's products are generally
distributed from Abbott-owned distribution centers and public warehouses to
wholesalers and directly to hospitals, integrated delivery networks, and other
alternate site locations where patient care is delivered. The Hospital Products
segment also develops and manufactures injectable pharmaceuticals for other
companies.
The Ross Products segment markets its
products in the United States and generally sells nutritional products directly
to retailers, wholesalers, health care facilities, and government agencies. In
most cases, these products are distributed from Abbott-owned distribution
centers or public warehouses. Currently, primary marketing efforts for
nutritional products are directed toward securing the recommendation of Abbott's
brand of products by physicians or other health care professionals. In addition,
nutritional products are also promoted through direct to consumer marketing
efforts. Similac®Advance®, PediaSure®, Pedialyte®, Ensure®, and Glucerna® retail
products are promoted directly to the public by consumer advertising. These
products are generally sold directly to retailers and wholesalers.
The Ross Products segment's
pharmaceutical products are generally marketed directly to physicians, health
care facilities, and government agencies and sold through wholesalers. In most
cases, they are distributed from Abbott-owned distribution centers or public
warehouses. Primary marketing efforts for this segment's pharmaceutical products
are directed at securing the prescription of these products by physicians.
The International segment's pharmaceutical
and nutritional products are generally sold directly to government agencies,
retailers, wholesalers, and health care facilities. In most cases, they are
distributed from Abbott-owned distribution centers. Certain products are
co-marketed or co-promoted with other companies. Some of these products are
marketed and distributed through distributors. Primary marketing efforts for
pharmaceutical products are directed toward securing the prescription of
Abbott's brand of products by physicians. Primary marketing efforts for
nutritional products are directed toward securing the recommendation of Abbott's
brand of products by physicians or other health care professionals. The
International segment's hospital products are generally distributed to
wholesalers and directly to hospitals from distribution centers maintained by
Abbott.
Competition in the Pharmaceutical Products
segment is generally from other health care and pharmaceutical companies. The
search for technological innovations in pharmaceutical products is a significant
aspect of competition in this segment. The introduction of new products by
competitors and changes in medical practices and procedures can result in
product obsolescence in the Pharmaceutical Products segment, and price can also
be a factor. In addition, the substitution of generic drugs for the brand
prescribed has increased competitive pressures on pharmaceutical products which
are off-patent.
The Diagnostic Products segment's products
are subject to competition in technological innovation, price, convenience of
use, service, instrument warranty provisions, product performance, long-term
supply contracts, and product potential for overall cost-effectiveness and
productivity gains. Some products in this segment can be subject to rapid
product obsolescence. Although Abbott has benefitted from technological
advantages of certain of its current products, these advantages may be reduced
or eliminated as competitors introduce new products. Certain of this segment's
products are subject to restrictions on their sale in the United States.
Products in the Hospital Products segment
are subject to competition in long-term supply contracts, technological
innovation, price, convenience of use, service, product performance, product
potential for overall cost effectiveness and productivity gains, and product
warranty provisions. Some products in this segment can be subject to rapid
product obsolescence. Although Abbott has benefitted from technological
advantages of certain of its current products, these advantages may be reduced
or eliminated as competitors introduce new products.
Competition for nutritional products in
the Ross Products segment is generally other diversified consumer and health
care manufacturers. Competitive factors include consumer advertising,
formulation, packaging, scientific innovation, price, and availability of
private label product forms. Competition for pharmaceutical products in the Ross
Products segment is generally from other health care and pharmaceutical
companies. A significant aspect of competition is the search for technological
innovations. The introduction of new products by competitors and changes in
medical practices and procedures can result in product obsolescence. Price can
also be a factor. In addition, the substitution of generic drugs for the brand
prescribed has increased competitive pressures on pharmaceutical products which
are off-patent.
Competition for the International segment's
pharmaceutical products is generally from other health care and pharmaceutical
companies. A significant aspect of competition is the search for technological
innovations. The introduction of new products by competitors and changes in
medical practices and procedures can result in product obsolescence. Price can
also be a factor. In addition, the substitution of generic drugs for the brand
prescribed has increased competitive pressures on pharmaceutical products.
Competition for the segment's nutritional products is generally from other
health care manufacturers and food companies. Nutritional products are subject
to competition in price, scientific innovation, formulation, and promotional
initiatives. The International segment's hospital products are subject to
competition in technological innovation, price, convenience of use, product
warranty provisions, service, product performance, long-term supply contracts,
and product potential for overall cost effectiveness and productivity gains.
Products in this segment can be subject to rapid product obsolescence. Although
Abbott has benefitted from technological advantages of certain of its current
products, these advantages may be reduced or eliminated as competitors introduce
new products.
