Medtronic 2013 Annual Report Download - page 33

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Table of Contents
Federal health care laws apply when we or customers submit claims for items or services that are reimbursed under Medicare,
Medicaid, or other federally-funded health care programs. The principal federal laws include: (1) the False Claims Act which
prohibits the submission of false or otherwise improper claims for payment to a federally-funded health care program; (2) the
Anti-Kickback Statute which prohibits offers to pay or receive remuneration of any kind for the purpose of inducing or rewarding
referrals of items or services reimbursable by a Federal health care program; (3) the Stark law which prohibits physicians from
referring Medicare or Medicaid patients to a provider that bills these programs for the provision of certain designated health
services if the physician (or a member of the physician’s immediate family) has a financial relationship with that provider; and
(4) health care fraud statutes that prohibit false statements and improper claims to any third-party payer. There are often similar
state false claims, anti-kickback, and anti-self referral and insurance laws that apply to state-funded Medicaid and other health
care programs and private third-party payers. In addition, the U.S. Foreign Corrupt Practices Act can be used to prosecute companies
in the U.S. for arrangements with physicians, or other parties outside the U.S. if the physician or party is a government official of
another country and the arrangement violates the law of that country.
The laws applicable to us are subject to change, and subject to evolving interpretations. If a governmental authority were to
conclude that we are not in compliance with applicable laws and regulations, Medtronic and its officers and employees could be
subject to severe criminal and civil penalties including substantial fines and damages, and exclusion from participation as a supplier
of product to beneficiaries covered by Medicare or Medicaid.
We operate in an industry characterized by extensive patent litigation. Patent litigation can result in significant damage awards
and injunctions that could prevent the manufacture and sale of affected products or result in significant royalty payments in order
to continue selling the products. At any given time, we are involved as both a plaintiff and a defendant in a number of patent
infringement actions, the outcomes of which may not be known for prolonged periods of time. While it is not possible to predict
the outcome of patent litigation incidents to our business, we believe the costs associated with this type of litigation could have a
material adverse impact on our consolidated results of operations, financial position, or cash flows. For additional information,
see “Item 1A. Risk Factors” and Note 17 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary
Data” in this Annual Report on Form 10-K.
We operate in an industry susceptible to significant product liability claims. These claims may be brought by individuals seeking
relief on their own behalf or purporting to represent a class. In addition, product liability claims may be asserted against us in the
future based on events we are not aware of at the present time.
We are also subject to various environmental laws and regulations both within and outside the U.S. Like other medical device
companies, our operations involve the use of substances regulated under environmental laws, primarily those used in manufacturing
and sterilization processes. To the best of our knowledge at this time, we do not expect that compliance with environmental
protection laws will have a material impact on our consolidated results of operations, financial position, or cash flows.
We have elected to self-insure most of our insurable risks. We made this decision based on conditions in the insurance marketplace
that have led to increasingly higher levels of self-insurance retentions, increasing numbers of coverage limitations, and dramatically
higher insurance premium rates. We maintain a directors and officers insurance policy providing limited coverage and we continue
to monitor the insurance marketplace to evaluate the value to us of obtaining insurance coverage for other categories of losses
in the future. Based on historical loss trends, we believe that our self-insurance program accruals and our existing insurance coverage
will be adequate to cover future losses. Historical trends, however, may not be indicative of future losses. The absence of third-
party insurance coverage for other categories of losses increases our exposure to unanticipated claims and these losses could have
a material adverse impact on our consolidated earnings, financial condition and/or cash flows.
Section 13(r) of the Securities Exchange Act of 1934, as amended
Under Section 13(r) of the Securities Exchange Act of 1934, as amended, the Company is required to include certain disclosures
in its periodic reports if the Company or any of its affiliates knowingly engaged in certain specified activities during fiscal year
2013.
As of October 9, 2012, all of Medtronic's business dealings with Iran (including business conducted by non-U.S. affiliates) have
been conducted pursuant to general or specific licenses issued by the U.S. Treasury Department's Office of Foreign Assets Controls
(OFAC). Medtronic and its affiliates plan to continue their existing activities and operations with Iran in accordance with such
general or specific licenses.
In October 2012, the U.S. sanctions against Iran were extended to entities owned or controlled by U.S. persons. Prior to such time,
it was permissible under U.S. law for independent non-U.S. subsidiaries of U.S. companies to engage in sales to Iranian customers
under certain limited circumstances without the need for OFAC authorization. In accordance with these requirements, and without
the involvement of U.S. persons, certain of Medtronic's subsidiaries engaged in lawful sales to Iran during the first two
quarters of fiscal year 2013 from its CRDM, Coronary, Structural Heart, Endovascular, Spine, Neuromodulation, Diabetes, and
Surgical Technologies businesses. Other sales to or for Iranian customers during the first two quarters of fiscal year 2013 were
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