prices and access.

• In the U.S., the enactment of the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the Medicare Act), which went into effect in 2006, expanded access to medicines to patients-in-need through prescription drug benefits for Medicare beneficiaries. This program has been successfully implemented, with high levels of beneficiary satisfaction and lower-than-expected costs to the government due to the enhanced purchasing power of medical plans in the private sector to negotiate on behalf of Medicare beneficiaries. Despite this success, the exclusive role of medical plans in the private sector in negotiating prices for the Medicare drug benefit remains controversial and legislative changes to allow the federal government to directly negotiate prices with pharmaceutical manufacturers have been proposed. While expanded access under the Medicare Act has resulted in increased sales of our products, the substantial purchasing power of medical plans that negotiate on behalf of Medicare beneficiaries has increased the pressure on prices.

• In response to cost concerns by payers, utilization of generics is increasing as a percentage of total pharmaceutical use, especially in the U.S. Payers are also selectively sponsoring campaigns designed to interchange generic products for molecularly dissimilar branded products within a therapeutic category.

• Consumers have become aware of global price differences that result from price controls imposed by certain governments and some have become more vocal about their desire that governments allow the sourcing of medicines across national borders. In the U.S., there have been several proposals advanced by federal legislators to allow easier importation of medicines, despite the increased risk of receiving inferior or counterfeit products.

• Pharmaceutical promotion is highly regulated in most markets around the world. In the U.S., there is growing interest at both the federal and state level in further restricting marketing communications and increasing the level of disclosure of marketing activities.

• A growing number of health systems in markets around the world are employing comparable effectiveness evaluations and using their findings to inform pricing and access decisions, especially for newly introduced pharmaceutical products. In the U.S., there is growing interest by government and private payers in adopting comparable effectiveness methodologies. While adoption may enhance the industry’s ability to demonstrate the relative value of its products, it is also possible that implemented comparative effectiveness conventions may be designed by payers to minimize product differences.

Our response:

• We will continue to work within the current legal and pricing structures, as well as continue to review our pricing arrangements and contracting methods with payers, to maximize access to patients and minimize the impact on our revenues.

• We will continue to actively engage patients, physicians and payers in dialogues about the value of our products and how we can best work with them to prevent and treat disease, and improve outcomes.

• We will continue to encourage