Cardinal Health 2008 Annual Report Download - page 42

manufacturers, a reduction in the frequency and magnitude of price increases, as well as restrictions in the
amount of inventory available to the Company, could adversely affect the Company’s results of operations and
financial condition. In addition, the pharmaceutical supply chain business distributes generic pharmaceuticals,
which are generally subject to price deflation. An increase in the rate and magnitude of generic pharmaceutical
price deflation could adversely affect the Company’s results of operations and financial condition.
The Company is involved in legal proceedings that could adversely affect the Company’s results of
operations and financial condition.
The Company is involved in a number of legal proceedings, certain of which are discussed in Note 12 of
“Notes to Consolidated Financial Statements.” Litigation is inherently unpredictable and unfavorable resolutions
could occur. It is possible that cash flows or results of operations could be materially affected in any particular
period by the unfavorable resolution of one or more of these contingencies.
In addition, the Company’s products and services expose it to product and professional liability risks. The
availability of product liability insurance for large companies in the pharmaceutical and medical device industry
is generally more limited than insurance available to smaller companies and companies in other industries.
Insurance carriers providing product liability insurance to large pharmaceutical and medical device companies
generally limit the amount of available policy limits, require larger self-insured retentions and include exclusions
for certain products. Large self-insured retentions may also apply to certain professional liability risks. There can
be no assurance that a successful product or professional liability claim would be adequately covered by the
Company’s applicable insurance policies or by any applicable contractual indemnity and, as such, these claims
could adversely affect the Company’s results of operations and financial condition.
Failure to comply with existing and future regulatory requirements, including DEA operating and security
standards, could adversely affect the Company’s results of operations and financial condition.
The healthcare industry is highly regulated. The Company is subject to various local, state, federal, foreign
and transnational laws and regulations, which include the operating and security standards of the DEA, the FDA,
the NRC, HHS, various state boards of pharmacy, state health departments, the European Union member states
and other comparable agencies. Certain of the Company’s subsidiaries may be required to register for permits
and/or licenses with, and comply with operating and security standards of, the DEA, the FDA, the NRC, HHS
and various state boards of pharmacy, state health departments and/or comparable state agencies as well as
foreign agencies and certain accrediting bodies depending upon the type of operations and location of product
distribution, manufacturing and sale.
There can be no assurance that the Company will be able to maintain or renew existing permits, licenses or
any other regulatory approvals or obtain without significant delay future permits, licenses or other approvals
needed for the operation of the Company’s businesses. See Note 12 of “Notes to Consolidated Financial
Statements” for a discussion of actions taken by the DEA suspending the licenses to distribute controlled
substances held by three of the Company’s distribution centers and actions the Company has taken regarding its
controls against diversion of controlled substances. Any noncompliance by the Company with applicable laws
and regulations or the failure to maintain, renew or obtain necessary permits and licenses could have an adverse
effect on the Company’s results of operations and financial condition.
The manufacture, distribution and marketing of certain of the Company’s products are subject to extensive
ongoing regulation by the FDA. Failure to comply with the requirements of the FDA could result in warning
letters, product recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution of
products, civil or criminal sanctions, refusal of the government to grant approvals, restrictions on operations or
withdrawal of existing approvals. Any of these actions could cause a loss of customer confidence in the
Company and its products which could adversely affect the Company’s sales. In addition, third parties may file
claims against the Company in connection these issues.
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