Strength

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Weakness

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Opportunity

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Threat

1. Risks associated with mergers and acquisitions: A key part of Abbott’s growth and competitive strategy is mergers and acquisitions. But these deals are fraught with a lot of risks. Abbott has been affected by many regulatory and legal issues during previous deals. Many of these were not directly Abbott’s fault. In 2016, the acquisition process of St. Jude Medical faced hurdles when St. Jude faced accusations that its heart monitoring equipment is prone to hacking. Already, Abbott was dealing with problems regarding acquisition of another company Alere, whose business was undergoing probes for accounting issues. In 2015, Abbott had acquired Mylan. But in 2016, the value of the Mylan stake fell due to uproar against the increase in price of the Epipen allergy shot. Though they we were not completely Abbott’s fault, to some extent it was the Abbott CEO’s decisions that led to these situations. Mylan was having issues earlier too, in its failed acquisition attempt of Perrigo and aggressively resisting a takeover from Teva. Though most of Alere’s problems came out in the open only after the deal with Abbott was done, Abbott was aware of one government investigation, which should have been a warning sign.

2. Rising use of technology in healthcare has led to increased vulnerability to cyber-attacks: Healthcare sector is increasingly using technology to provide better care for patients. However, the rising use of technology brings with it the threat of cyber-attacks. Hackers can implant malicious software in medical devices at the distribution center in the supply chain, from where the devices are sent to various hospitals and patients who use them are at risk. Hackers can also disrupt hospital operations by hacking into IoT-enabled water systems and HVAC systems. Abbott has also been affected by cyber security concerns in the past. In 2017, 500,000 pacemakers where recalled by the US Food and Drug administration over hacking vulnerabilities. Many of these pacemakers were manufactured by Abbott and sold under St. Jude Medical brand. Abbott had then announced a firmware update to fix the danger.

3. Government regulations regarding drug pricing controls: US drug prices have been found to be higher by as much as four times when compared to the prices in similarly developed countries. Overall medication costs are also significantly more in the US even after subtracting rebates. A proposal presented by House Speaker Nancy Pelosi in 2019 recommends giving the federal government the power to negotiate and set a limit on the price of drugs. All US citizens, and not just Medicare patients, will be positively impacted by this bill. By virtue of this bill, the government will also be able to penalize drug companies who do not follow the price limits. However, lesser profits in the pharma industry will translate to it being less lucrative for investors. The demand for new research and innovative cures will thus be reduced and will directly impact companies such as Abbot.

Political

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Economic

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Social

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Technological

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Legal

1. Anti-trust laws in American healthcare sector: Anti-trust laws aim to stop practices that attempt to restrain competition because such practices reduce choices for customers while increasing the prices. Rapid evolution of the healthcare industry is leading to change in the effects of anti-trust laws. Anti-trust laws are especially important in the context of American healthcare system because healthcare is a significant portion of the US economy. Spending in healthcare in the country was $3.3 trillion in 2016, which was 17.9% of GDP. The Medicare Trust Fund is expected to dry up by 2026 and the Social Security Trust Fund by 2034. Abbott being a major player in the American healthcare market has faced multiple anti-trust issues in the past. In 2011, GlaxoSmithKline had accused Abbott of violating anti-trust laws by unfair pricing of a drug Norvir to preserve sales growth of another HIV drug KAletra. Though the jury refused to accept the $571 million of damages claimed by GSK, Abbott was asked to pay $3.4 million. In 2016, Abbott’s attempt to acquire St. Jude was initially rejected by the anti-trust regulators due to the possibility of elimination of competition. Later the acquisition was allowed when Abbott agreed to sell off St. Jude’s vascular closure device business and Abbott’s steerable sheath business.

2. Consumer protection laws in healthcare: Consumer protection is especially important in healthcare to prevent harmful effects of drugs from causing harm to life. Abbott has found itself embroiled in consumer protection law violations in the past. In Canada, Abbott was accused of not abiding by its duty to inform the public about the neuropsychiatric side effects of its drug Biaxin. Fortunately for Abbott, the court ruled in its favor in May 2019. However, in another case Abbott was not so lucky. In 2012, Abbott was ruled guilty of illegal promotion of Depakote drug and had to pay $1.6 billion as penalty. The company had marketed the drug between 1998 and 2008 for uses not approved by the FDA and had made false statements about the safety and dosing of the drug.

Environmental

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