Invacare 2015 Annual Report Download - page 23

I-17
approval to resume full operations, the company may be required to restructure its business strategy to rebuild profitability, and
there can be no assurance that it would be successful in doing so.
The company’s failure to comply with medical device 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 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 may have caused, or contributed to, a death or serious injury,
or if they malfunction and would be likely to cause, or contribute to, a death or serious injury if the malfunction were to recur. In
general, unless an exemption applies, the company’s mobility and respiratory therapy products must receive a pre-market 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. Export certificates are required for the company to have its products registered for sale in certain foreign
countries. In connection with the FDA warning letter received by the company's Sanford, Florida facility in December 2010, as
described below, the FDA has refused to provide new export certificates for company products until the matters covered in the
warning letter are resolved. Currently, the company cannot obtain new certificates of export for Sanford, Florida facility products
until the warning letter has been closed and for Taylor Street facility products until the company has exited the injunctive phase
of the consent decree. The inability to obtain export certificates for products produced at its Taylor Street or Sanford facilities has
limited the company's ability to support new foreign markets with such products.
Additionally, the company is required to obtain pre-market 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 pre-market clearances for modifications
to marketed devices. 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-market 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, consent decrees, product seizure or detention, product recalls and total or partial
suspension of production.
As part of its regulatory function, the FDA routinely inspects the sites of medical device companies, and from 2010 through
2015, the FDA inspected certain of the company's facilities. In December 2012, the company and the FDA agreed to a consent
decree of injunction affecting the company's Corporate facility and its Taylor Street manufacturing facility in Elyria, Ohio. See
the previous Risk Factor regarding the FDA consent decree. In December 2015, the FDA issued Form 483 observations following
a 2015 inspection of approximately 5 months at the Corporate and Taylor Street facilities in Elyria, Ohio which included a review
of the company’s compliance with terms of the consent decree and the matters covered by the first and second expert certification
reports previously accepted in 2013. The FDA’s inspection included a review of the company's compliance with terms of the
consent decree, and the matters covered by the first and second expert certification reports previously reviewed and accepted in
2013. The company has timely responded to the FDA's inspectional findings and intends to incorporate the FDA’s observations
into the company's ongoing quality system improvements. In addition, in December 2010, the company received a warning letter
from the FDA related to quality system processes and procedures at the company's Sanford, Florida facility. In October 2014, the
FDA conducted an inspection at the Sanford facility and, at the conclusion, issued its Form 483 observations. The company is
executing a comprehensive quality systems remediation plan that is intended to address all of the FDA’s concerns regarding the