Henry Schein 2013 Annual Report Download - page 22

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Health Care Reform
The Health Care Reform Law also included other provisions to reduce fraud and abuse and Medicare
expenditures and the cost of health care generally, to increase federal oversight of private health insurance plans
and to increase access to health coverage, some of which impact and further regulate some of our businesses. In
particular, a Health Care Reform Law provision, generally referred to as the Physician Payment Sunshine Act or
Open Payments Program, has imposed new reporting and disclosure requirements for drug and device
manufacturers with regard to payments or other transfers of value made to certain practitioners (including
physicians, dentists and teaching hospitals), and for such manufacturers and for group purchasing organizations,
with regard to certain ownership interests held by physicians in the reporting entity. On February 1, 2013, the
Centers for Medicare and Medicaid Services (“CMS”) released the final rule to implement the Physician Payment
Sunshine Act. Under this rule, data collection activities began on August 1, 2013, and first disclosure reports are
due by March 31, 2014 for the period August 1, 2013 through December 31, 2013. As required under the Physician
Payment Sunshine Act, CMS will publish information from these reports, on a publicly available website, including
amounts transferred and physician, dentist and teaching hospital identities, which according to CMS will be
available to the public by September 30, 2014.
The final rule implementing the Physician Payment Sunshine Act is complex, ambiguous, and broad in scope.
CMS commentary on the final rule and more recent CMS communications indicate that wholesale drug and device
distributors that take title to such products are to be treated as “applicable manufacturers” subject to full reporting
requirements. In addition, certain of our subsidiaries manufacture drugs and devices. Accordingly, we are required
to collect and report detailed information regarding certain financial relationships we have with physicians, dentists
and teaching hospitals. It is difficult to predict how the new requirements may impact existing relationships among
manufacturers, distributors, physicians, dentists and teaching hospitals. The Physician Payment Sunshine Act
preempts similar state reporting laws, although we or our subsidiaries may be required to continue to report under
certain of such state laws. While we expect to have substantially compliant programs and controls in place to
comply with the Physician Payment Sunshine Act requirements, our compliance with the new final rule imposes
additional costs on us.
On June 28, 2012, the United States Supreme Court upheld as constitutional a key provision in the Health Care
Reform Law often referred to as the “individual mandate,” which will require most individuals to have health
insurance in 2014, or to pay a penalty. However, the decision also invalidated a provision in the Health Care
Reform Law requiring states in 2014 to expand their Medicaid programs or risk the complete loss of all federal
Medicaid funding. The Court held that the federal government may offer states the option of accepting the
expansion requirement, but that it may not take away pre-existing Medicaid funds in order to coerce states into
complying with the expansion. Almost half the states have not yet accepted the Medicaid expansion, so the full
extent of increased health care coverage under the Health Care Reform Law is uncertain. Adding to this
uncertainty, in responding to difficulties encountered in implementing Health Care Reform, the White House and
federal agencies have instituted various temporary implementation delays, such as regarding the “employer
mandate” that generally requires employers with 50 or more full time employees to provide certain health insurance
to those employees or pay specified fines.
Regulated Software; Electronic Health Records
The FDA has become increasingly active in addressing the regulation of computer software intended for use in
health care settings, and has been developing policies on regulating clinical decision support tools as medical
devices. Certain of our businesses involve the development and sale of software and related products to support
physician and dental practice management, and it is possible that the FDA could determine that one or more of our
products is a medical device, which could subject us or one or more of our businesses to substantial additional
requirements with respect to these products.
Certain of our businesses involve access to personal health, medical, financial and other information of
individuals, and are accordingly directly or indirectly subject to numerous federal, state, local and foreign laws and
regulations that protect the privacy and security of such information, and require, among other things, the
implementation of various recordkeeping, operational, notice and other practices intended to safeguard that
information, limit its use to allowed purposes, and notify individuals in the event of privacy and security breaches.