Medtronic 2015 Annual Report Download - page 29

materials. We will incur expenses as we work with our suppliers to evaluate the source of any conflict minerals in our products,
and compliance with these requirements could adversely affect the sourcing, supply, and pricing of our raw materials.
Our industry is experiencing greater scrutiny and regulation by governmental authorities, which may lead to greater
regulation in the future.
Our medical devices and technologies and our business activities are subject to a complex regime of regulations and an
aggressive enforcement environment, including by the U.S. FDA, DOJ, Health and Human Services-Office of the Inspector
General, and numerous other federal, state, and foreign governmental authorities. These authorities and members of Congress
have been increasing their scrutiny of our industry. In addition, certain state governments and the federal government have
enacted legislation aimed at increasing transparency of our interactions with health care providers. As a result, we are required
by law to disclose payments and other transfers of value to health care providers licensed by certain states and, starting with
payments or other transfers of value made on or after August 1, 2013, to all U.S. physicians and U.S. teaching hospitals at the
federal level. Any failure to comply with these legal and regulatory requirements could impact our business. In addition, we
may continue to devote substantial additional time and financial resources to further develop and implement policies, systems,
and processes to comply with enhanced legal and regulatory requirements, which may also impact our business. We anticipate
that governmental authorities will continue to scrutinize our industry closely, and that additional regulation may increase
compliance and legal costs, exposure to litigation, and other adverse effects to our operations.
We are subject to costly and complex U.S. and foreign laws and governmental regulations and any adverse regulatory action
may materially adversely affect our financial condition and business operations.
Our medical devices are subject to regulation by numerous U.S. and foreign government agencies, including the U.S. FDA and
comparable agencies outside the U.S. To varying degrees, each of these agencies requires us to comply with laws and
regulations governing the development, testing, manufacturing, labeling, marketing, and distribution of our products. We cannot
guarantee that we will be able to obtain or maintain marketing clearance for our new products or enhancements or modifications
to existing products, and the failure to maintain approvals or obtain approval or clearance could have a material adverse effect
on our business, results of operations, financial conditions and cash flows. Even if we are able to obtain such approval or
clearance, it may:
•take a significant amount of time,
•require the expenditure of substantial resources,
•involve stringent clinical and pre-clinical testing, as well as increased post-market surveillance,
•involve modifications, repairs, or replacements of our products, and
•result in limitations on the proposed uses of our products.
Both before and after a product is commercially released, we have ongoing responsibilities under U.S. FDA regulations. Many
of our facilities and procedures and those of our suppliers are also subject to periodic inspections by the U.S. FDA to determine
compliance with the U.S. FDA’s requirements, including primarily the quality system regulations and medical device reporting
regulations. The results of these inspections can include inspectional observations on U.S. FDA’s Form-483, warning letters, or
other forms of enforcement. Since 2009, the U.S. FDA has significantly increased its oversight of companies subject to its
regulations, including medical device companies, by hiring new investigators and stepping up inspections of manufacturing
facilities. The U.S. FDA has recently also significantly increased the number of warning letters issued to companies. 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 ban such medical devices, detain or seize adulterated or
misbranded medical devices, order a recall, repair, replacement, or refund of such devices, refuse to grant pending pre-market
approval applications or require certificates of foreign governments for exports, and/or require us to notify health professionals
and others that the devices present unreasonable risks of substantial harm to the public health. The U.S. FDA may also assess
civil or criminal penalties against us, our officers or employees and impose operating restrictions on a company-wide basis, or
enjoin and/or restrain certain conduct resulting in violations of applicable law. The U.S. FDA may also recommend prosecution
to the DOJ. Any adverse regulatory action, depending on its magnitude, may restrict us from effectively marketing and selling
our products and limit our ability to obtain future pre-market clearances or approvals, and could result in a substantial
modification to our business practices and operations.
In addition, device manufacturers are permitted to promote products solely for the uses and indications set forth in the approved
product labeling. A number of enforcement actions have been taken against manufacturers that promote products for “off-label”
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