Henry Schein 2014 Annual Report Download - page 27

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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 pre-empts similar state reporting laws, although we or our subsidiaries may be required to report
under certain of such state laws in addition to Physician Payment Sunshine Act reporting, and some of these state
laws are also ambiguous. We completed the initial Physician Payment Sunshine Act submission to CMS due
March 31, 2014, covering the period August 1 to December 31, 2013. Beginning in 2014 and each year thereafter,
data collection for each calendar year must be submitted by March 31 of the subsequent year. We are also subject
to foreign regulations requiring transparency of certain interactions between suppliers and their customers. While
we believe we have substantially compliant programs and controls in place to comply with the Physician Payment
Sunshine Act requirements (and similar foreign requirements), our compliance with the new final rule (and similar
foreign requirements) 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. Subsequent litigation has
focused on whether the Health Care Reform Law permits the use of health insurance subsidies for low and
moderate income individuals who purchase coverage through the health insurance exchanges established by the
federal government. In most states, the health insurance exchanges are established by the federal government, not
the state itself, and federal courts have issued contradictory rulings on this matter. The United States Supreme
Court has agreed to hear a case in which a federal appeals court upheld the subsidies for federal health insurance
exchanges. The Supreme Court is expected to issue a ruling by the end of June 2015, and if the subsidies are held
to be unavailable through federal health insurance exchanges, this might significantly limit the application of the
Health Care Reform Law. 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.” With respect to the employer mandate, starting in 2015
employers with 100 or more full-time employees must generally provide certain health insurance to their workforce
or pay specified fines, while starting in 2016 the requirement will apply to employers with 50 or more full-time
employees.
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 or comparable foreign government
authorities 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.