Henry Schein 2014 Annual Report Download - page 54

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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.
The fraud and abuse laws and regulations have been subject to varying interpretations, as well as heightened
enforcement activity over the past few years, and significant enforcement activity has been the result of “relators,”
who serve as whistleblowers by filing complaints in the name of the United States (and if applicable, particular
states) under federal and state false claims laws. Under the federal False Claims Act relators can be entitled to
receive up to 30% of total recoveries. Also, violations of the federal False Claims Act can result in treble damages,
and each false claim submitted can be subject to a penalty of up to $11,000 per claim. The Health Care Reform
Law significantly strengthened the federal False Claims Act and the federal Anti-Kickback Law provisions, which
could lead to the possibility of increased whistleblower or relator suits, and among other things made clear that a
federal Anti-Kickback Law violation can be a basis for federal False Claims Act liability.
The United States government (among others) has expressed concerns about financial relationships between
suppliers on the one hand and physicians and dentists on the other. As a result, we regularly review and revise our
marketing practices as necessary to facilitate compliance.
We also are subject to certain United States and foreign laws and regulations concerning the conduct of our
foreign operations, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other anti-bribery
laws and laws pertaining to the accuracy of our internal books and records, which have been the focus of increasing
enforcement activity globally in recent years.
Failure to comply with fraud and abuse laws and regulations could result in significant civil and criminal
penalties and costs, including the loss of licenses and the ability to participate in federal and state health care
programs, and could have a material adverse effect on our business. Also, these measures 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 or incur substantial defense and settlement expenses. Even unsuccessful challenges by regulatory
authorities or private relators could result in reputational harm and the incurring of substantial costs. In addition,
many of these laws are vague or indefinite and have not been interpreted by the courts, and have been subject to
frequent modification and varied interpretation by prosecutorial and regulatory authorities, increasing the risk of
noncompliance.
While we believe that we are substantially compliant with applicable fraud and abuse laws and regulations, and
have adequate compliance programs and controls in place to ensure substantial compliance, we cannot predict
whether changes in applicable law, or interpretation of laws, or changes in our services or marketing practices in
response to changes in applicable law or interpretation of laws, could have a material adverse effect on our
business.
Operating and Security Standards
The Federal Food, Drug, and Cosmetic Act (“FDC Act”) and similar foreign laws generally regulate 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.