Henry Schein 2014 Annual Report Download - page 25

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The FDC Act also requires the FDA to establish standards and identify and validate effective technologies for
the purpose of securing the pharmaceutical supply chain against counterfeit drugs. These standards include any
track and trace or authentication technologies, such as radio frequency identification, or RFID, and other
technologies. The FDA has also continued to develop its policies with respect to the integrity of the supply chain
by issuing a Final Guidance in 2010 regarding standardized numerical identification for prescription drug packages,
and a final rule in 2013 for a unique medical device identification system to be phased in over seven years that will
require most medical devices distributed in the United States to carry a unique device identifier. The DSCSA also
addresses product tracing using unique product identifiers on packaging, and may affect previously issued FDA
guidance regarding standardized numerical identifiers. The DSCSA and its forthcoming implementing regulations
may affect previously issued FDA guidance regarding standardized numerical identifiers.
Under the Controlled Substances Act, as a distributor of controlled substances, we are required to obtain and
renew annually registrations for our facilities from the United States Drug Enforcement Administration (“DEA”)
permitting us to handle controlled substances. We are also subject to other statutory and regulatory requirements
relating to the storage, sale, marketing, handling and distribution of such drugs, in accordance with the Controlled
Substances Act and its implementing regulations, and these requirements have been subject to heightened
enforcement activity in recent times. We are subject to inspection by the DEA.
Certain of our businesses are also required to register for permits and/or licenses with, and comply with
operating and security standards of, the DEA, the FDA, the United States Department of Health and Human
Services, and various state boards of pharmacy, state health departments and/or comparable state agencies as well
as comparable 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 HCT/P 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. We are also subject to
foreign government regulation of such products. The DEA, the FDA and state regulatory authorities have broad
inspection and 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. Foreign regulations subject us to similar foreign powers.
Furthermore, compliance with legal requirements has required and may in the future require us to institute
voluntary recalls of products we sell, which could result in financial losses and potential reputational harm. Our
customers are also subject to significant federal, state, local and foreign governmental regulation.
Certain of our businesses are subject to various additional federal, state, local and foreign laws and regulations,
including with respect to the sale, transportation, storage, handling and disposal of hazardous or potentially
hazardous substances, and safe working conditions. There have also been increasing efforts by various levels of
government globally to regulate the pharmaceutical distribution system in order to prevent the introduction of
counterfeit, adulterated or misbranded pharmaceuticals into the distribution system.
Certain of our businesses also maintain contracts with governmental agencies and are subject to certain
regulatory requirements specific to government contractors.
Health Care Fraud
Certain of our businesses are subject to federal and state (and similar foreign) health care fraud and abuse,
referral and reimbursement laws and regulations with respect to their operations. Some of these laws, referred to as
“false claims laws,” prohibit the submission or causing the submission of false or fraudulent claims for
reimbursement to federal, state and other health care payers and programs. Other laws, referred to as “anti-
kickback laws,” prohibit 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 federal, state and other health care payers and programs.