Medtronic 2015 Annual Report Download - page 22

devices intended for human use. In addition, the U.S. FDA and other U.S. regulatory bodies (including the Federal Trade
Commission, the Office of the Inspector General of the Department of Health and Human Services, the Department of Justice
(DOJ), and various state Attorneys General) monitor the manner in which we promote and advertise our products. Although
surgeons are permitted to use their medical judgment to employ medical devices for indications other than those cleared or
approved by the U.S. FDA, we are prohibited from promoting products for such “off-label” uses, and can only market our
products for cleared or approved uses. 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 require
us to notify health professionals and others that the devices present unreasonable risks of substantial harm to the public health,
order a recall, repair, replacement, or refund of such devices, detain or seize adulterated or misbranded medical devices, or ban
such medical devices. The U.S. FDA may also impose operating restrictions, enjoin and/or restrain certain conduct resulting in
violations of applicable law pertaining to medical devices, including a hold on approving new devices until issues are resolved
to its satisfaction, and assess civil or criminal penalties against our officers, employees, or us. The U.S. FDA may also
recommend prosecution to the DOJ. Conduct giving rise to civil or criminal penalties may also form the basis for private civil
litigation by third-party payers or other persons allegedly harmed by our conduct.
In April 2015 we entered into a consent decree with the FDA relating to our Neuromodulation business’ SynchroMed drug
infusion system and the Neuromodulation quality system. The consent decree requires the Company to complete certain
corrections and enhancements to the SynchroMed pump and the Neuromodulation quality system. The consent decree limits the
Company’s ability to manufacture and distribute the SynchroMed drug infusion system, unless specific conditions are met. The
agreement does not require the retrieval of any of the Company’s products, but the Company must retain a third-party expert to
inspect the Neuromodulation quality system and to provide a certification that the system complies with the requirements of the
consent decree. Once this certification is provided to the FDA’s satisfaction, the limitations on manufacturer and distribution of
SynchroMed pumps will be lifted. Thereafter, the Company must submit periodic audit reports to the FDA to ensure ongoing
compliance with the consent decree.
Governmental Trade Regulations
The sale and shipment of our products and services across international borders, as well as the purchase of components and
products from international sources, subject us to extensive governmental trade regulations. A variety of laws and regulations,
both in the U.S. and in the countries in which we transact business, apply to the sale, shipment and provision of goods, services
and technology across international borders. Because we are subject to extensive regulations in the countries in which we
operate, we are subject to the risk that laws and regulations could change in a way that would expose us to additional costs,
penalties or liabilities. These laws and regulations govern, among other things, our import and export activities.
The U.S. FDA, in cooperation with U.S. Customs and Border Protection (CBP), administers controls over the import of medical
devices into the U.S. The CBP imposes its own regulatory requirements on the import of our products, including inspection and
possible sanctions for noncompliance. Medtronic is also subject to foreign trade controls administered by several U.S.
government agencies, including the Bureau of Industry and Security within the Commerce Department and the Office of
Foreign Assets Control within the Treasury Department. We import raw materials, components and finished products into the
countries in which we transact business. We act as the import of record in many instances, but we also sell and ship goods to
third parties who are themselves responsible for complying with applicable trade laws and regulations. In our role as importer of
record, we are directly responsible for complying with customs laws and regulations concerning the importation of our raw
materials, components and finished products. If applicable government agencies were to determine that we or such third parties
were not in compliance with applicable U.S. FDA or customs laws and regulations when engaging in cross-border transactions
involving our products, we may be subject to civil or criminal enforcement action, and varying degrees of liability, depending
on the nature of the violation and the extent of our culpability. In addition, such determinations may cause supply chain
disruptions and delays in the distribution of our products that impact our business activities.
Many countries, including the U.S., control the export and re-export of goods, technology and services for reasons including
public health, national security, regional stability, antiterrorism policies and other reasons. In certain circumstances, approval
from governmental authorities may be required before goods, technology or services are exported or re-exported to certain
destinations, to certain end-users and for certain end-uses. In addition, international sales of our medical devices that have not
received U.S. FDA approval are subject to U.S. FDA export requirements. Some governments may also impose economic
sanctions against certain countries, persons or entities. In addition to our need to comply with such regulations in connection
with our direct export activities, we also sell and provide goods, technology and services to agents, representatives and
distributors who may export such items to customers and end-users. If applicable government agencies were to determine that
we, or the third parties through which we export goods, were not in compliance with applicable export control or economic
12