Henry Schein 2009 Annual Report Download - page 22

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Governmental Regulations
Certain of our businesses involve the distribution of pharmaceuticals and medical devices, and in this
regard we are subject to various local, state, federal and foreign governmental laws and regulations applicable
to the distribution of pharmaceuticals and medical devices. Among the federal laws applicable to us are the
Controlled Substances Act, the Federal Food, Drug, and Cosmetic Act, as amended, the Prescription Drug
Marketing Act of 1987, and Section 361 of the Public Health Service Act. We are also subject to comparable
foreign regulations.
The Federal Food, Drug, and Cosmetic Act generally regulates the introduction, manufacture, advertising,
labeling, packaging, storage, handling, reporting, marketing and distribution of, and record keeping for,
pharmaceuticals and medical devices shipped in interstate commerce, and states may similarly regulate such
activities within the state. Section 361 of the Public Health Service Act (“Regulations to Control
Communicable Diseases”) serves as the legal basis for such regulation of human cells, tissues, and cellular
and tissue-based products.
The Prescription Drug Marketing Act of 1987, which amended the Federal Food, Drug, and Cosmetic
Act, establishes certain requirements applicable to the wholesale distribution of prescription drugs, including
the requirement that wholesale drug distributors be licensed by each state in which they conduct business,
provide certain drug pedigree information on the distribution of prescription drugs and act in accordance with
federally established guidelines on storage, handling and record maintenance.
Under the Controlled Substances Act, as a distributor of controlled substances, we are required to obtain a
registration annually from the United States Drug Enforcement Administration and are subject to other
regulatory requirements relating to the sale, marketing, handling and distribution of such drugs, in accordance
with specified rules and regulations. We are subject to inspection by the United States Drug Enforcement
Administration.
Certain of our businesses are required to register for permits and/or licenses with, and comply with
operating and security standards of, the United States Drug Enforcement Administration, the United States
Food and Drug Administration, the Department of Health and Human Services, and various state boards of
pharmacy, state health departments and/or comparable state agencies as well as foreign agencies, and certain
accrediting bodies depending on the type of operations and location of product distribution, manufacturing or
sale. These businesses include those that distribute, manufacture and/or repackage prescription
pharmaceuticals and/or medical devices and/or human cells, tissues, and cellular and tissue-based products, or
own pharmacy operations, or install, maintain or repair equipment. In addition, Section 301 of the National
Organ Transplant Act, and a number of comparable state laws, impose civil and/or criminal penalties for the
transfer of certain human tissue (for example human bone products) for valuable consideration, while
generally permitting payments for the reasonable costs incurred in procuring, processing, storing and
distributing that tissue. The United States Drug Enforcement Administration, the United States Food and
Drug Administration and state regulatory authorities have broad enforcement powers, including the ability to
suspend or limit the distribution of products by our distribution centers, seize or order the recall of products
and impose significant criminal, civil and administrative sanctions for violations of these laws and
regulations. Our customers are also subject to significant federal, state, local and foreign governmental
regulation.
Certain of our businesses are subject to federal and state (and similar foreign) healthcare fraud and abuse,
referral and reimbursement laws, and regulations with respect to their operations. Such laws prohibit, among
other things, the submission or causing the submission of false or fraudulent claims for reimbursement, and
soliciting, offering, receiving or paying remuneration in order to induce the referral of a patient or ordering,
purchasing, leasing or arranging for or recommending ordering, purchasing or leasing, of items or services
that are paid for by government health care programs. The fraud and abuse laws and regulations have been
subject to heightened enforcement activity over the past few years, particularly through “relators,” who file