Medtronic 2016 Annual Report Download - page 17

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to a provider that bills these programs for the provision of certain designated health services if the physician (or a member of the
physician’s immediate family) has a financial relationship with that provider; and (4) health care fraud statutes that prohibit false
statements and improper claims to any third-party payer. There are often similar state false claims, anti-kickback, and anti-self-
referral and insurance laws that apply to state-funded Medicaid and other health care programs and private third-party payers.
Insurance companies can also bring a private cause of action for treble damages against a manufacturer for a pattern of causing
false claims to be filed under the federal Racketeer Influenced and Corrupt Organizations Act, or RICO. In addition, as a
manufacturer the U.S. FDA-approved devices reimbursable by federal healthcare programs, are subject to the Physician Payments
Sunshine Act, which requires us to annually report certain payments and other transfers of value we make to U.S.-licensed physicians
or U.S. teaching hospitals. Further, the U.S. Foreign Corrupt Practices Act (FCPA) can be used to prosecute companies in the U.S.
for arrangements with physicians, or other parties outside the U.S. if the physician or party is a government official of another
country and the arrangement violates the law of that country.
The laws and regulations of health care goods and services that are applicable to us, including those described above, are subject
to evolving interpretations and enforcement discretion. If a governmental authority were to conclude that we are not in compliance
with applicable laws and regulations, we and our officers and employees could be subject to severe criminal and civil financial
penalties, including, for example, exclusion from participation as a supplier of product to beneficiaries covered by Medicare. Any
failure to comply with laws and regulations relating to reimbursement and health care goods and services could adversely affect
our reputation, business, financial condition and cash flows.
Our profitability and operations are subject to risks relating to changes in legislative, regulatory and reimbursement policies and
decisions as well as changes to private payer reimbursement coverage and payment decisions and policies. Implementation of
further legislative or administrative reforms to the reimbursement system in the U.S. and abroad, or adverse decisions relating to
our products by administrators of these systems in coverage or reimbursement, could significantly reduce reimbursement or result
in the denial of coverage, which could have an impact on the acceptance of and demand for our products and the prices that our
customers are willing to pay for them.
Environmental Health and Safety Laws
We are also subject to various environmental health and safety laws and regulations both within and outside the U.S. Similar to
other companies in our industry, our manufacturing and other operations involve the use and transportation of substances regulated
under environmental health and safety laws including those related to the transportation of hazardous materials. To the best of our
knowledge at this time, we do not expect that compliance with environmental protection laws will have a material impact on our
consolidated results of operations, financial position, and/or cash flows.
Litigation Risks
Patent Litigation We operate in an industry characterized by extensive patent litigation. Patent litigation can result in significant
damage awards and injunctions that could prevent the manufacture and sale of affected products or result in significant royalty
payments in order to continue selling the products. At any given time, we are involved as both a plaintiff and a defendant in a
number of patent infringement actions, the outcomes of which may not be known for prolonged periods of time. While it is not
possible to predict the outcome of patent litigation incidents to our business, we believe the outcomes associated with this type of
litigation could have a material adverse impact on our consolidated results of operations, financial position, or cash flows. For
additional information, see “Item 1A. Risk Factors - We are substantially dependent on patent and other proprietary rights and
failing to protect such rights or to be successful in litigation related to our rights or the rights of others may result in our payment
of significant monetary damages and/or royalty payments, negatively impact our ability to sell current or future products, or
prohibit us from enforcing our patent and other proprietary rights against others.” and Note 15 to the consolidated financial
statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.
Product Liability and Other Claims We operate in an industry susceptible to significant product liability claims. These claims
may be brought by individuals seeking relief on their own behalf or purporting to represent a class. We are also susceptible to
other litigation, including private securities litigation, shareholder derivative suits and contract litigation. These claims may be
asserted against us in the future based on events we are not aware of at the present time. While it is not possible to predict the
outcome of product liability litigation, we believe the outcomes associated with this type of litigation could have a material adverse
impact on our consolidated results of operations, financial position, or cash flows. For additional information, see “Item 1A. Risk
Factors - Quality problems with, and product liability claims in connection with, our processes, goods, and services, could lead
to recalls or safety alerts, harm our reputation and have a material adverse effect on our business, results of operations, financial
condition and our cash flows.” and Note 15 to the consolidated financial statements in “Item 8. Financial Statements and
Supplementary Data” in this Annual Report on Form 10-K.