Medtronic 2015 Annual Report Download - page 30

uses, including actions alleging that federal health care program reimbursement of products promoted for “off-label” uses
constitute false and fraudulent claims to the government. The failure to comply with “off-label” promotion restrictions can
result in significant civil or criminal exposure, administrative obligations and costs, and/or other potential penalties from, and/or
agreements with, the federal government.
Pursuant to Dodd-Frank, the SEC promulgated final rules regarding disclosure of the use of certain minerals, known as “conflict
minerals” (tantalum, tin, tungsten (or their ores), and gold) which are mined from the Democratic Republic of the Congo and
adjoining countries. Under the rules, we are now required to disclose the procedures we employ to determine the sourcing of
such minerals and metals produced from those minerals. There are costs associated with complying with these disclosure
requirements, including for diligence in regards to the sources of any conflict minerals used in our products, in addition to the
cost of remediation and other changes to products, processes, or sources of supply as a consequence of such verification
activities. In addition, the implementation of these rules could adversely affect the sourcing, supply, and pricing of materials
used in our products. As of the date of each of Medtronic Inc.’s and Covidien’s conflict minerals report for the 2014 calendar
year, each of Medtronic, Inc. and Covidien were unable to obtain the necessary information on conflict minerals from all of its
respective suppliers and was unable to determine that all of its respective products are conflict free. In addition, we may
continue to face difficulties in gathering this information in the future. We may face reputational challenges if we determine that
certain of our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins
for all conflict minerals used in our products through the procedures we implement.
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 subject to environmental laws and regulations and the risk of environmental liabilities, violations and litigation.
We are subject to numerous U.S. federal, state, local and non-U.S. environmental, health and safety laws and regulations
concerning, among other things, the generation, storage, use and transportation of hazardous materials, emissions or discharges
of substances into the environment, investigation and remediation of hazardous substances or materials at various sites,
chemical constituents in medical equipment and end-of-life disposal and take-back programs, and the health and safety of our
employees. Our operations involve the use of substances regulated under such laws and regulations, primarily those used in
manufacturing and sterilization processes. If we violate these environmental laws and regulations, we could be fined, criminally
charged or otherwise sanctioned by regulators. Furthermore, environmental laws outside of the U.S. are becoming more
stringent, resulting in increased costs and compliance burdens.
In addition, certain environmental laws assess liability on current or previous owners or operators of real property for the costs
of investigation, removal or remediation of hazardous substances or materials at their properties or at properties which they have
disposed of hazardous substances. Liability for investigative, removal and remedial costs under certain U.S. federal and state
laws are retroactive, strict and joint and several. In addition to cleanup actions brought by governmental authorities, private
parties could bring personal injury or other claims due to the presence of, or exposure to, hazardous substances. The ultimate
cost of site cleanup and timing of future cash outflows is difficult to predict, given the uncertainties regarding the extent of the
required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods.
We may in the future be subject to additional environmental claims for personal injury or cleanup based on our, Medtronic, Inc.
and Covidien’s past, present or future business activities. The costs of complying with current or future environmental
protection and health and safety laws and regulations, or liabilities arising from past or future releases of, or exposures to,
hazardous substances, may exceed our estimates, or have a material adverse effect on our business, consolidated earnings,
financial condition, and/or cash flow.
Our failure to comply with laws and regulations relating to reimbursement of health care goods and services may subject us
to penalties and adversely impact our reputation, business, financial condition and cash flows.
Our devices, products and therapies are purchased principally by hospitals or physicians that typically bill various third-party
payors, such as governmental programs (e.g., Medicare, Medicaid and comparable foreign programs), private insurance plans
and managed care plans, for the healthcare services provided to their patients. The ability of our customers to obtain appropriate
reimbursement for products and services from third-party payors is critical because it affects which products customers
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