Invacare 2008 Annual Report Download - page 27

company’s profit margins and reducing the company’s overall profitability. Asian goods had a particularly strong
negative impact on the company’s sales of Standard Products (this category includes products such as manual
wheelchairs, canes, walkers and bath aids) during 2006 and 2007.
The company’s failure to comply with regulatory requirements or receive regulatory clearance or approval
for the company’s products or operations in the United States or abroad could adversely affect the
company’s business.
The company’s medical devices are subject to extensive regulation in the United States by the Food and
Drug Administration, or the “FDA,” and by similar governmental authorities in the foreign countries where the
company does business. The FDA regulates virtually all aspects of a medical device’s development, testing,
manufacturing, labeling, promotion, distribution and marketing. In addition, the company is required to file
reports with the FDA if the company’s products cause, or contribute to, death or serious injury, or if they
malfunction and would be likely to cause, or contribute to, death or serious injury if the malfunction were to
recur. In general, unless an exemption applies, the company’s wheelchair and respiratory medical devices must
receive a pre-marketing clearance from the FDA before they can be marketed in the United States. The FDA also
regulates the export of medical devices to foreign countries. The company cannot be assured that any of the
company’s devices, to the extent required, will be cleared by the FDA through the pre-market clearance process
or that the FDA will provide export certificates that are necessary to export certain of the company’s products. If
FDA issues a warning letter as a result of its findings from recent inspections, the FDA could refuse to provide
export certificates until the matters covered in the warning letter are resolved.
Additionally, the company may be required to obtain pre-marketing clearances to market modifications to
the company’s existing products or market its existing products for new indications. The FDA requires device
manufacturers themselves to make and document a determination as to whether or not a modification requires a
new clearance; however, the FDA can review and disagree with a manufacturer’s decision. The company has
applied for, and received, a number of such clearances in the past. The company may not be successful in
receiving clearances in the future or the FDA may not agree with the company’s decisions not to seek clearances
for any particular device modification. The FDA may require a clearance for any past or future modification or a
new indication for the company’s existing products. Such submissions may require the submission of additional
data and may be time consuming and costly, and ultimately may not be cleared by the FDA.
If the FDA requires the company to obtain pre-marketing clearances for any modification to a previously
cleared device, the company may be required to cease manufacturing and marketing the modified device or to
recall the modified device until the company obtains FDA clearance and the company may be subject to
significant regulatory fines or penalties. In addition, the FDA may not clear these submissions in a timely
manner, if at all. The FDA also may change its policies, adopt additional regulations or revise existing
regulations, each of which could prevent or delay pre-market clearance of the company’s devices, or could
impact the company’s ability to market a device that was previously cleared. Any of the foregoing could
adversely affect the company’s business.
The company’s failure to comply with the regulatory requirements of the FDA and other applicable
U.S. regulatory requirements may subject the company to administrative or judicially imposed sanctions. These
sanctions include warning letters, civil penalties, criminal penalties, injunctions, product seizure or detention,
product recalls and total or partial suspension of production.
In many of the foreign countries in which the company markets its products, the company is subject to
extensive regulations that are similar to those of the FDA, including those in Europe. The regulation of the
company’s products in Europe falls primarily within the European Economic Area, which consists of the
27 member states of the European Union, as well as Iceland, Liechtenstein and Norway. Only medical devices
that comply with certain conformity requirements of the Medical Device Directive are allowed to be marketed
within the European Economic Area. In addition, the national health or social security organizations of certain
foreign countries, including those outside Europe, require the company’s products to be qualified before they can
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