Quest Diagnostics 2008 Annual Report Download - page 41

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Our efforts to develop commercially successful medical diagnostic products may not succeed.
We may commit substantial efforts, funds and other resources to developing commercially successful medical
diagnostic products. A high rate of failure is inherent in the development of new medical diagnostic products.
There is no assurance that our efforts to develop these products will be commercially successful. Failure can
occur at any point in the development process, including after significant funds have been invested.
Promising new product candidates may fail to reach the market or may have only limited commercial
success because of efficacy or safety concerns, failure to achieve positive clinical outcomes, inability to obtain
necessary regulatory approvals, limited scope of approved uses, excessive costs to manufacture, the failure to
establish or maintain intellectual property rights, or the infringement of intellectual property rights of others. Even
if we successfully develop new products or enhancements or new generations of our existing products, they may
be quickly rendered obsolete by changing customer preferences or changing industry standards. Innovations may
not be accepted quickly in the marketplace because of, among other things, entrenched patterns of clinical
practice or uncertainty over third party reimbursement. We cannot state with certainty when or whether any of
our medical diagnostic products under development will be launched, whether we will be able to develop, license
or otherwise acquire products, or whether any diagnostic products will be commercially successful. Failure to
launch successful new products or new indications for existing products may cause our products to become
obsolete.
Our operations may be adversely impacted by the effects of natural disasters such as hurricanes and
earthquakes, hostilities or acts of terrorism and other criminal activities.
Our operations may be adversely impacted by the effects of natural disasters such as hurricanes and
earthquakes, hostilities or acts of terrorism or other criminal activities. Such events may result in a temporary
decline in the number of patients who seek clinical testing services. In addition, such events may temporarily
interrupt our ability to transport specimens, to receive materials from our suppliers or otherwise to provide our
services.
Our business could be adversely impacted by CMS’ adoption of the new coding set for diagnoses.
CMS has adopted a new coding set for diagnosis, commonly known as ICD-10, which significantly expands
the coding set for diagnoses. The new coding set is currently required to be implemented by October 1, 2013.
We may be required to incur significant expense in implementing the new coding set, and if we do not
adequately implement it, our business could be adversely impacted. In addition, if as a result of the new coding
set physicians fail to provide appropriate codes for desired tests, we may not be reimbursed for such tests.
Adverse results in material litigation could have an adverse financial impact and an adverse impact on our
client base and reputation.
We are involved in various legal proceedings arising in the ordinary course of business including, among
other things, disputes as to intellectual property, professional liability and employee-related matters, as well as
inquiries from governmental agencies and Medicare or Medicaid carriers regarding billing issues. Some of the
proceedings against us involve claims that are substantial in amount and could divert management’s attention
from operations. The proceedings also may result in substantial monetary damages, as well as damage to our
reputation, and decrease the demand for our services and products, all of which could have a material adverse
effect on our business. We do not have insurance or are substantially self-insured for a significant portion of any
liability with respect to such claims. The ultimate outcome of the various proceedings or claims could have a
material adverse effect on our financial condition, results of operations or cash flows in the period in which the
impact of such matters is determined or paid.
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