Abbotts income dips in Q1, sales impacted by healthcare reform
Worldwide sales increased 14.6 percent to $7.7 billion. According to Abbott, “sales were reduced by approximately $60 million as a result of higher Medicaid rebates under U.S. healthcare reform." The company claimed excluding this impact, sales would have increased 15.5 percent.
Despite these increased sales, Abbott recorded net earnings of $1 billion in the first quarter of 2010, compared with net earnings of $1.44 billion in the previous-year first quarter—representing a 30.3 percentage drop.
Worldwide vascular products sales increased 15.8 percent, which the company said was driven by a favorable 3.2 percent effect of exchange rates and a strong international growth rate of 35.1 percent, following the Xience drug-eluting stent launch in Japan. However, its coronary stent unit experienced a 2.7 percent drop in U.S. sales from last year’s first quarter, totaling $261 million in the 2010 first quarter.
The company reported its worldwide sale for its molecular diagnostics were $87 million in the first quarter of 2010, representing an increase of 25.6 percent.
For its diabetes care unit, Abbott said the U.S. sales were $123 million, a 2.6 percent increase over the 2009 first quarter. Internationally, the unit recorded sales of $172 million, representing a 4.4 percent decrease from the 2009 first quarter.
Abbott further explained the impact of U.S. healthcare reform on its first quarter financials: “Beginning in 2010, this legislation includes an increase in the basic Medicaid rebate rate from 15.1 percent to 23.1 percent and extends the rebate to drugs provided through Medicaid managed care organizations.”
Additionally, Abbott recorded a one-time charge in the first quarter of $60 million, related to the impact on deferred tax assets associated with a provision of the U.S. healthcare reform legislation that will eliminate the federal income tax deduction for prescription drug expenses of retirees for which companies receive reimbursement under the Medicare Part D drug subsidy program.