Henry Schein 2009 Annual Report Download - page 29

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If we fail to comply with laws and regulations relating to healthcare fraud, we could suffer penalties or be
required to make significant changes to our operations.
We are subject to extensive and frequently changing federal and state laws and regulations relating to
healthcare fraud. These measures, which focus on our relationships with pharmaceutical manufacturers and
healthcare providers, have been subject to varying interpretations, as well as heightened enforcement activity,
over the past few years. Significant enforcement activity has been the result of actions brought by “relators,”
who file complaints in the name of the United States (and if applicable, particular states) under federal and
state False Claims Act statutes. Damages can be catastrophic if a violation is found. These healthcare fraud
laws and regulations, among other things, (i) prohibit persons from soliciting, offering, receiving or paying
any remuneration in order to induce the referral of a patient for treatment or to induce the ordering,
purchasing, leasing or arranging for or recommending ordering, purchasing or leasing of items or services that
are in any way paid for by government-sponsored healthcare programs and (ii) impose a number of
restrictions upon referring physicians and providers of designated health services under government
healthcare programs. While we believe that we are substantially compliant with all applicable laws, many of
the regulations applicable to us are vague or indefinite and have not been interpreted by the courts. They may
be interpreted or applied by a prosecutorial, regulatory or judicial authority in a manner that could require us
to make changes in our operations. If we fail to comply with applicable laws and regulations, we could suffer
civil and criminal penalties, including the loss of licenses or our ability to participate in federal and state
healthcare programs.
Expansion of group purchasing organizations (“GPO”) or hospital purchasing power and the multi-tiered
costing structure may place us at a competitive disadvantage.
The medical-products industry is subject to a multi-tiered costing structure, which can vary by
manufacturer and/or product. Under this structure, certain institutions can obtain more favorable prices for
medical products than we are able to obtain. The multi-tiered costing structure continues to expand as many
large integrated healthcare providers and others with significant purchasing power, such as GPOs, demand
more favorable pricing terms. This may threaten our ability to compete effectively, which would in turn
negatively impact our results of operations. Although we are seeking to obtain similar terms from
manufacturers and obtain access to lower prices demanded by GPO contracts or other contracts, we cannot
assure such terms will be obtained or contracts will be executed.
Our international operations are subject to inherent risks that could adversely affect our operating results.
International operations are subject to risks that may materially adversely affect our business, results of
operations and financial condition. The risks that our international operations are subject to include, among
other things:
• difficulties and costs relating to staffing and managing foreign operations;
• difficulties in establishing channels of distribution;
• fluctuations in the value of foreign currencies;
• longer payment cycles of foreign customers and difficulty of collecting receivables in foreign
jurisdictions;
• repatriation of cash from our foreign operations to the United States;
• regulatory requirements;
• unexpected difficulties in importing or exporting our products;
• imposition of import/export duties, quotas, sanctions or penalties; and
• unexpected regulatory, economic and political changes in foreign markets.