Cardinal Health 2009 Annual Report Download - page 33

did not maintain effective controls against diversion of particular controlled substances into other than legitimate
medical, scientific and industrial channels. On October 2, 2008, the Company entered into settlement agreements
with the DEA and seven U.S. Attorneys’ Offices resulting in reinstatement of the suspended licenses. Under the
terms of the settlement agreement with the DEA, the Company agreed to, among other things, maintain a
compliance program designed to detect and prevent diversion of controlled substances. As part of the settlements
with the DEA and the U.S. Attorneys’ Offices, the Company paid a total settlement amount of $34.0 million
during the second quarter of fiscal 2009.
Certain of the Company’s subsidiaries are subject to requirements of the Prescription Drug Marketing Act
of 1987 and similar state laws, which regulate the marketing, purchase, storage and distribution of prescription
drugs and prescription drug samples under prescribed minimum standards. Certain of the Company’s subsidiaries
that manufacture medical devices are subject to the Federal Food, Drug, and Cosmetic Act, as amended by the
Medical Device Amendments of 1976, the Safe Medical Devices Act of 1990, as amended in 1992, the FDA
Modernization Act of 1997, the Medical Device User Fee and Modernization Act of 2002, the Medical Device
User Fee and Modernization Act of 1997, the Food and Drug Amendments Act of 2007, and comparable foreign
regulations. In addition, certain of the Company’s subsidiaries are subject to the Needlestick Safety and
Prevention Act.
Laws regulating the manufacture and distribution of products also exist in most other countries where the
Company’s subsidiaries conduct business. In addition, the international manufacturing operations that reside
primarily within the Company’s Clinical and Medical Products segment are subject to local certification
requirements, including compliance with domestic and/or foreign good manufacturing practices and quality
system regulations established by the FDA and/or applicable foreign regulatory authorities.
The FDA and other governmental agencies in the United States, as well as governmental agencies outside of
the United States, administer requirements covering the design, testing, safety, effectiveness, manufacturing,
labeling, promotion and advertising, distribution and post-market surveillance of certain of the Company’s
manufactured products. The Company must obtain specific approval or clearance from the FDA and
foreign regulatory authorities before it can market and sell many of its products in a particular country. Even
after the Company obtains regulatory approval or clearance to market a product, the product and the Company’s
manufacturing processes are subject to continued review by the FDA and other regulatory authorities.
The Company is subject to possible legal actions by the FDA and other regulatory agencies. Such actions
may include product recalls, product seizures, injunctions to halt manufacture and distribution of products, and
other civil, administrative or criminal sanctions. From time to time, the Company institutes compliance actions,
such as removing products from the market that were found not to meet applicable requirements. See Note 11 of
“Notes to Consolidated Financial Statements” for a discussion of a Consent Decree for Condemnation and
Permanent Injunction between the Company and the FDA to resolve seizure litigation over Alaris®SE pumps.
The Company operates nuclear pharmacies and related businesses, such as cyclotron facilities used to
produce positron emission tomography (“PET”) products used in medical imaging. This business operates in a
regulated industry which requires licenses or permits from the NRC, the radiologic health agency and/or
department of health of each state in which it operates and the applicable state board of pharmacy. In addition,
the FDA is also involved in the regulation of cyclotron facilities where PET products are produced.
To assess and facilitate compliance with applicable FDA, DEA, NRC and other state, federal and foreign
regulatory requirements, the Company regularly reviews its quality systems to assess their effectiveness and
identify areas for improvement. As part of its quality review, the Company performs assessments of its suppliers
of the raw materials, components and finished goods that are incorporated into the medical devices that it
manufactures. In addition, the Company conducts quality management reviews designed to inform management
of key issues that may affect the quality of products and services. From time to time, the Company may
determine that products manufactured or marketed by the Company do not meet Company specifications,
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