Cardinal Health 2009 Annual Report Download - page 116

keypad entries that could lead to over-infusion of patients. On August 23, 2006, the United States filed a
complaint in the District Court to effect the seizure of Alaris SE pumps and approximately 1,300 units were
seized by the FDA. Under the Consent Decree, the Company was required to, among other things, submit a plan
to the FDA outlining corrections for the Alaris SE pumps currently in use by customers and a reconditioning plan
for the seized Alaris SE pumps.
Since the time the original Consent Decree and the Amended Consent Decree were entered into, the
Company has been working to satisfy the obligations of the Consent Decree and the Amended Consent Decree.
On August 24, 2007, the FDA notified the Company that it had met the conditions of its reconditioning plan for
the Alaris SE pumps that were seized to the FDA’s satisfaction. In addition, on October 10, 2008, the Company
notified the FDA that it had satisfied its best efforts obligation to find and remediate Alaris SE pumps in the
United States in use by customers. The Company also had previously engaged an independent expert to inspect
the Alaris SE pump facilities and certify the infusion pump operations as required by the Consent Decree. On
April 2, 2008, the Company implemented a new quality system in its infusion pump facilities. On April 24, 2009,
the independent expert provided a certification to the FDA indicating that the infusion pump operations are in
conformity with the FDC Act, which meets the requirements of the original Consent Decree. On June 2, 2009,
the independent expert provided a certification to the FDA on the remainder of the items required by the
Amended Consent Decree.
On April 24, 2009, Cardinal Health 303 submitted the corrective action plan required by the Amended
Consent Decree to the FDA. Included in the corrective action plan was, among other proposed corrective actions,
a software correction that addresses the potential risk recently identified with the Alaris PCA (Patient Controlled
Analgesia) module when used with the Alaris PC Unit operating with software versions 8 through 9.1. When the
products are used together, the Alaris PCA module may infuse above or below the intended infusion dose if a
specific sequence of events occurs. The Company recorded a reserve of $17.8 million in the third quarter of fiscal
year 2009 based on its estimate of the costs that will be incurred in connection with the corrective action plan. On
June 2, 2009, the FDA notified the Company that the corrective action plan was acceptable and that the Company
should begin implementation of the plan. The Company had placed a hold on shipping the Alaris PCA module
and related Alaris PC Unit pending 510(k) clearance from the FDA for the software correction. The Company
received 510(k) clearance on July 9, 2009, and has since resumed shipments.
The Company cannot currently predict the outcome of this matter, whether additional amounts will be
incurred to resolve this matter, if any, or the matter’s ultimate impact on its business. The Company may be
obligated to pay more or less than the amount that has been reserved in connection with the Amended Consent
Decree and its corrective action plan because, among other things, the cost of implementing the corrective action
plan may be different than the Company’s current expectations (including as a result of changes in
manufacturing, delivery and material costs), the FDA may determine that the Company is not fully compliant
with the Amended Consent Decree or the corrective action plan and therefore impose penalties under the
Amended Consent Decree, and/or the Company may be subject to future proceedings and litigation relating to
matters addressed in the Amended Consent Decree.
Other Matters
In addition to the matters described above, the Company also becomes involved from time-to-time in other
litigation and regulatory matters incidental to its business, including, but not limited to, personal injury claims,
employment matters, commercial disputes, intellectual property matters, inclusion as a potentially responsible party
for environmental clean-up costs, and litigation in connection with acquisitions and divestitures. The Company
intends to vigorously defend itself against such litigation and does not currently believe that the outcome of any
such litigation will have a material adverse effect on the Company’s consolidated financial statements.
From time to time, the Company receives subpoenas or requests for information from various government
agencies, including from state attorneys general, the SEC and the U.S. Department of Justice relating to the
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