Cardinal Health 2009 Annual Report Download - page 40

Risks generally associated with the Company’s information systems could adversely affect the Company’s
results of operations.
The Company relies on information systems in its business to obtain, rapidly process, analyze and manage
data to:
• facilitate the purchase and distribution of thousands of inventory items from numerous distribution
centers;
• receive, process and ship orders on a timely basis;
• manage the accurate billing and collections for thousands of customers;
• process payments to suppliers; and
• facilitate the manufacturing and assembly of medical products.
The Company’s results of operations could be adversely affected if these systems are interrupted, damaged
by unforeseen events or fail for any extended period of time, including due to the actions of third parties.
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 multiple federal,
state and local agencies, the DEA, the FDA, the NRC, HHS, various state boards of pharmacy, state health
departments 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 these 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 assurances 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. For example, in 2007, the DEA suspended the licenses to
distribute controlled substances held by three of the Company’s distribution centers until the Company reached a
settlement to reinstate the licenses. Any noncompliance by the Company with applicable laws and regulations or
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 by the government to grant approvals, restrictions on operations or
withdrawal of existing approvals. See Note 11 of “Notes to Consolidated Financial Statements” for a discussion
of a Consent Decree for Condemnation and Permanent Injunction between the Company and the FDA to resolve
seizure litigation over Alaris®SE pumps. 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 relating to these issues.
The Company is also subject to extensive and frequently changing laws and regulations relating to
healthcare fraud and abuse. Many of these laws and regulations are vague or indefinite and may be interpreted or
applied by a prosecutorial, regulatory or judicial authority in a manner that could require the Company to make
changes in its operations. If the Company fails to comply with applicable laws and regulations, it could suffer
civil and criminal penalties, including the loss of licenses or its ability to participate in Medicare, Medicaid and
other federal and state healthcare programs. See “Item 1—Business—Regulatory Matters” above for more
information regarding healthcare fraud and abuse laws and regulations.
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