Medtronic 2012 Annual Report Download - page 36

and distribution of our medical devices. We cannot guarantee that we will be able to obtain marketing
clearance for our new products or enhancements or modifications to existing products. If such approval is
obtained, it may:
• take a significant amount of time,
• require the expenditure of substantial resources,
• involve stringent clinical and pre-clinical testing, as well as increased post-market surveillance,
• involve modifications, repairs, or replacements of our products, and
• result in limitations on the proposed uses of our products.
Both before and after a product is commercially released, we have ongoing responsibilities under U.S.
FDA regulations. We are also subject to periodic inspections by the U.S. FDA to determine compliance with
the U.S. FDA’s requirements, including primarily the quality system regulations and medical device reporting
regulations. The results of these inspections can include inspectional observations on U.S. FDA’s Form-483,
warning letters, or other forms of enforcement. Since 2009, the U.S. FDA has significantly increased its
oversight of companies subject to its regulations, including medical device companies, by hiring new
investigators and stepping up inspections of manufacturing facilities. The U.S. FDA has recently also
significantly increased the number of warning letters issued to companies. If the U.S. FDA were to conclude
that we are not in compliance with applicable laws or regulations, or that any of our medical devices are
ineffective or pose an unreasonable health risk, the U.S. FDA could ban such medical devices, detain or
seize adulterated or misbranded medical devices, order a recall, repair, replacement, or refund of such
devices, refuse to grant pending pre-market approval applications or require certificates of foreign
governments for exports, and/or require us to notify health professionals and others that the devices present
unreasonable risks of substantial harm to the public health. The U.S. FDA may also impose operating
restrictions on a company-wide basis, enjoin and/or restrain certain conduct resulting in violations of
applicable law pertaining to medical devices, and assess civil or criminal penalties against our officers,
employees, or us. The U.S. FDA may also recommend prosecution to the DOJ. Any adverse regulatory
action, depending on its magnitude, may restrict us from effectively marketing and selling our products.
Foreign governmental regulations have become increasingly stringent and more common, and we may
become subject to more rigorous regulation by foreign governmental authorities in the future. Penalties for
a company’s non-compliance with foreign governmental regulation could be severe, including revocation or
suspension of a company’s business license and criminal sanctions. Any domestic or foreign governmental
law or regulation imposed in the future may have a material adverse effect on us.
We are also subject to various environmental laws and regulations both within and outside the U.S.
Our operations involve the use of substances regulated under environmental laws, primarily those used in
manufacturing and sterilization processes. We cannot guarantee that compliance with environmental
protection laws and regulations will not have a material impact on our consolidated earnings, financial
condition, and/or cash flows.
Our failure to comply with rules relating to reimbursement and regulation of health care goods and
services may subject us to penalties and adversely impact our reputation and business operations.
Our devices and therapies are subject to regulation regarding quality and cost by HHS, including the
Centers for Medicare & Medicaid Services (CMS) as well as comparable state and non-U.S. agencies
responsible for reimbursement and regulation of health care goods and services. U.S. federal government
health care laws apply when we submit a claim on behalf of a U.S. federal health care program beneficiary,
or when a customer submits a claim for an item or service that is reimbursed under a U.S. federal
government-funded health care program, such as Medicare or Medicaid. The principal U.S. federal laws
implicated include those that prohibit the filing of false or improper claims for federal payment, known as
the false claims laws; those that prohibit unlawful inducements for the referral of business reimbursable
under federally-funded health care programs, known as the anti-kickback laws; and that which prohibits
health care service providers seeking reimbursement for providing certain services to a patient who was
referred by a physician who has certain types of direct or indirect financial relationships with the service
provider, known as the Stark law.
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