Cardinal Health 2015 Annual Report Download - page 32

Business
31 Cardinal Health | Fiscal 2015 Form 10-K
Regulatory Matters
Our business is highly regulated in the United States at both the
federal and state level and in foreign countries. Depending upon their
specific business, our subsidiaries may be subject to regulation by
government entities including:
• the U.S. Drug Enforcement Administration (the “DEA”);
• the U.S. Food and Drug Administration (the “FDA”) and other
agencies within the U.S. Department of Health and Human
Services, including the Centers for Medicare and Medicaid
Services, the Office of Inspector General and the Office for Civil
Rights;
• the U.S. Nuclear Regulatory Commission (the “NRC”);
• the U.S. Federal Trade Commission; (the "FTC);
• U.S. Customs and Border Protection;
• state boards of pharmacy;
• state controlled substance agencies;
• state health departments, insurance departments, Medicaid
departments or other comparable state agencies; and
• foreign agencies that are comparable to those listed above.
These regulatory agencies have a variety of civil, administrative and
criminal sanctions at their disposal for failure to comply with
applicable legal or regulatory requirements. They can suspend our
ability to distribute products or can initiate product recalls; they can
seize products or impose criminal, civil and administrative sanctions;
and they can seek injunctions to halt the manufacture and distribution
of products.
Distribution
The FDA, DEA and various state authorities regulate the marketing,
purchase, storage and distribution of pharmaceutical and medical
products under various state and federal statutes including the
Prescription Drug Marketing Act of 1987 and the Federal Controlled
Substances Act (the "CSA"), which governs the sale, packaging,
storage and distribution of controlled substances. Wholesale
distributors of controlled substances must hold valid DEA
registrations and state-level licenses, meet various security and
operating standards, and comply with the CSA.
Manufacturing and Marketing
The FDA and other domestic and foreign governmental agencies
administer requirements that cover the design, testing, safety,
effectiveness, manufacturing (including good manufacturing
practices), quality systems, labeling, promotion and advertising,
distribution, importation and post-market surveillance of most of our
manufactured products. In addition, we need specific approval or
clearance from regulatory authorities before we can market and sell
some of these products in the United States and certain other
countries. Even after we obtain approval or clearance to market a
product, the product and our manufacturing processes are subject
to continued regulatory oversight. It can be costly and time-
consuming to obtain regulatory approvals or clearances to market a
medical device, and such approvals or clearances might not be
granted on a timely basis, if at all.
From time to time, we may determine that products we manufacture
or market do not meet our specifications, regulatory requirements,
or published standards. When we or a regulatory agency identify a
quality or regulatory issue, we investigate and take appropriate
corrective action, which may include withdrawing the product from
the market, correcting the product at the customer location, revising
product labeling, and notifying customers.
Nuclear Pharmacies and Related Businesses
Our nuclear pharmacies and cyclotron facilities require licenses or
permits and must abide by regulations issued by the NRC, applicable
state boards of pharmacy and the radiologic health agency or
department of health of each state in which we operate. In addition,
our cyclotron facilities must comply with the FDA's good
manufacturing practices regulations for positron emission
tomography, or PET, drugs.
Prescription Drug Tracing and Supply Chain Integrity
In November 2013, the U.S. Congress enacted the Drug Supply
Chain Security Act. This law establishes a phased-in national system
for tracing pharmaceutical products through the pharmaceutical
distribution supply chain to prevent the introduction of counterfeit,
adulterated or mislabeled drugs. The first phase of implementation
began on January 1, 2015, and upon full implementation in 2023, we
and other supply chain stakeholders will participate in an electronic,
interoperable, prescription drug tracing system.
Government Healthcare Programs
We are subject to U.S. federal healthcare fraud and abuse laws.
These laws generally prohibit persons from soliciting, offering,
receiving or paying any compensation in order to induce someone
to order or purchase items or services that are in any way paid for
by Medicare, Medicaid or other federally-funded healthcare
programs. They also prohibit submitting or causing to be submitted
any fraudulent claim for payment by the federal government. There
are similar state healthcare fraud and abuse laws that apply to
Medicaid and other state-funded healthcare programs. Violations of
these laws may result in criminal or civil penalties, as well as breach
of contract claims and qui tam actions (false claims cases initiated
by private parties purporting to act on behalf of federal or state
governments).
Our Cardinal Health at Home business and a few of our other
businesses are Medicare-certified suppliers or participate in state
Medicaid programs. These businesses are subject to accreditation
and quality standards and other rules and regulations, including
applicable billing, payment and record-keeping requirements. In
addition, a few of our businesses manufacture or repackage
pharmaceuticals and are subject to federal and state laws that
establish eligibility for reimbursement by federal and state healthcare
programs. Failure to comply with applicable standards and
regulations could result in civil or criminal sanctions, including the