Medtronic 2013 Annual Report Download - page 31

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Table of Contents
The second, more rigorous process, known as pre-market approval (PMA), requires us to independently demonstrate that the new
medical device is safe and effective. We do this by collecting data regarding design, materials, bench and animal testing, and
human clinical data for the medical device. The U.S. FDAwill authorize commercial distribution if it determines there is reasonable
assurance that the medical device is safe and effective. This determination is based on the benefit outweighing the risk for the
population intended to be treated with the device. This process is much more detailed, time-consuming, and expensive than the
510(k) process. A third, seldom used, process for approval exists for humanitarian use devices, intended for patient populations
of less than 4,000 patients per year in the U.S. This exemption is similar to the PMA process; however, a full showing of product
effectiveness from large clinical trials is not required. The threshold for approving these products is probable benefit and safety.
Both before and after a product is commercially released, we have ongoing responsibilities under U.S. FDA regulations. The U.S.
FDA reviews design and manufacturing practices, labeling and record keeping, and manufacturers’ required reports of adverse
experiences and other information to identify potential problems with marketed medical devices. We are also subject to periodic
inspection by the U.S. FDA for compliance with the U.S. FDA’s quality system regulations, which govern the methods used in,
and the facilities and controls used for, the design, manufacture, packaging, and servicing of all finished medical devices intended
for human use. In addition, the U.S. FDA and other U.S. regulatory bodies (including the Federal Trade Commission, the Office
of the Inspector General of the Department of Health and Human Services, the Department of Justice (DOJ), and various state
Attorneys General) monitor the manner in which we promote and advertise our products. Although surgeons are permitted to use
their medical judgment to employ medical devices for indications other than those cleared or approved by the U.S. FDA, we are
prohibited from promoting products for such “off-label” uses, and can only market our products for cleared or approved uses. If
the U.S. FDA were to conclude that we are not in compliance with applicable laws or regulations, or that any of our medical
devices are ineffective or pose an unreasonable health risk, the U.S. FDA could require us to notify health professionals and others
that the devices present unreasonable risks of substantial harm to the public health, order a recall, repair, replacement, or refund
of such devices, detain or seize adulterated or misbranded medical devices, or ban such medical devices. The U.S. FDA may also
impose operating restrictions, enjoin and/or restrain certain conduct resulting in violations of applicable law pertaining to medical
devices, including a hold on approving new devices until issues are resolved to its satisfaction, and assess civil or criminal penalties
against our officers, employees, or us. The U.S. FDA may also recommend prosecution to the DOJ. Conduct giving rise to civil
or criminal penalties may also form the basis for private civil litigation by third-party payers or other persons allegedly harmed
by our conduct.
The U.S. FDA, in cooperation with U.S. Customs and Border Protection (CBP), administers controls over the import of medical
devices into the U.S. The CBP imposes its own regulatory requirements on the import of our products, including inspection and
possible sanctions for noncompliance. Medtronic is also subject to foreign trade controls administered by several U.S. government
agencies, including the Bureau of Industry and Security within the Commerce Department and the Office of Foreign Assets Control
within the Treasury Department.
The U.S. FDA also administers certain controls over the export of medical devices from the U.S. International sales of our medical
devices that have not received U.S. FDA approval are subject to U.S. FDA export requirements. Many countries outside the U.S.
to which we export medical devices also subject such medical devices to their own regulatory requirements. Frequently, we obtain
regulatory approval for medical devices in countries outside the U.S. first because their regulatory approval is faster than that of
the U.S. FDA. However, as a general matter, non-U.S. regulatory requirements are becoming increasingly common and more
stringent.
In the EU, a single regulatory approval process exists, and conformity with the legal requirements is represented by the CE Mark.
To obtain a CE Mark, defined products must meet minimum standards of performance, safety, and quality (i.e., the essential
requirements), and then, according to their classification, comply with one or more of a selection of conformity assessment routes.
A notified body assesses the quality management systems of the manufacturer and the product conformity to the essential and
other requirements within the medical device directive. Medtronic is subject to inspection by notified bodies for compliance. The
competent authorities of the EU countries, generally in the form of their ministries or departments of health, oversee the clinical
research for medical devices and are responsible for market surveillance of products once they are placed on the market. We are
required to report device failures and injuries potentially related to product use to these authorities in a timely manner. Various
penalties exist for non-compliance with the laws transcribing the medical device directives.
To be sold in Japan, most medical devices must undergo thorough safety examinations and demonstrate medical efficacy before
they are granted approval, or “shonin.” The Japanese government, through the Ministry of Health, Labour, and Welfare (MHLW),
regulates medical devices under the Pharmaceutical Affairs Law (PAL). Oversight for medical devices is conducted with
participation by the Pharmaceutical and Medical Devices Agency (PMDA), a quasi-government organization performing many
of the review functions for MHLW. Penalties for a company’s noncompliance with PAL could be severe, including revocation or
suspension of a company’s business license and criminal sanctions. MHLW and PMDAalso assess the quality management systems
of the manufacturer and the product conformity to the requirements of the PAL. Medtronic is subject to inspection for compliance
by these agencies.
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