Invacare 2015 Annual Report Download - page 24

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Sanford facility in the warning letter and Form 483. In January 2014, the FDA conducted inspections at the company's manufacturing
facility in Suzhou, China and at the company's electronic components subsidiary in Christchurch, New Zealand, covering quality
systems and current Good Manufacturing Practice regulations. In August 2014, the FDA inspected Alber GmbH in Albstadt,
Germany. The FDA issued its inspectional observations on Form 483 to the company after these inspections, and the company
submitted its responses to the agency in a timely manner. However, the results of regulatory claims, proceedings or investigations
are difficult to predict. An unfavorable resolution or outcome of the FDA warning letter or the Form 483 observations, or any
other matter that may arise out of any FDA inspection of the company's sites, could materially and adversely affect the company's
business, financial condition, liquidity and results of operations.
In many of the foreign countries in which the company manufactures or markets its products, the company is subject to
extensive medical device 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 be marketed in those countries. Failure to receive, or delays in the receipt of, relevant foreign qualifications
in the European Economic Area or other foreign countries could have a material adverse effect on the company’s business.
Being in the health care industry, the company is subject to extensive government regulation, and if the company fails to
comply with applicable health care laws or regulations, the company could suffer severe civil or criminal sanctions or may be
required to make significant changes to the company’s operations that could have a material adverse effect on the company’s
results of operations.
The company sells its products principally to medical equipment and home health care providers who resell or rent those
products to consumers. Many of those providers (the company’s customers) are reimbursed by third-party payors, including
Medicare and Medicaid, for the company products sold to their customers and patients. The U.S. federal government and the
governments in the states and other countries in which the company operates regulate many aspects of the company’s business
and the business of the company's customers. As a part of the health care industry, the company and its customers are subject to
extensive government regulation, including numerous laws directed at preventing fraud and abuse and laws regulating
reimbursement under various government programs. The marketing, invoicing, documenting and other practices of health care
suppliers and manufacturers are all subject to government scrutiny. Government agencies periodically open investigations and
obtain information from health care suppliers and manufacturers pursuant to the legal process. Violations of law or regulations
can result in severe administrative, civil and criminal penalties and sanctions, including disqualification from Medicare and other
reimbursement programs, which could have a material adverse effect on the company’s business. While the company has established
numerous policies and procedures to address compliance with these laws and regulations, there can be no assurance that the
company's efforts will be effective to prevent a material adverse effect on the company’s business from noncompliance issues.
For example, as discussed in the preceding Risk Factors, the company is subject to a FDA consent decree affecting its Corporate
facility and Taylor Street manufacturing facility in Elyria, Ohio and received a FDA warning letter related to its Sanford, Florida
facility.
Health care is an area of rapid regulatory change. Changes in the law and new interpretations of existing laws may affect
permissible activities, the costs associated with doing business, and reimbursement amounts paid by federal, state and other third-
party payors, all of which may affect the company and its customers. The company cannot predict the future of federal, state and
local regulation or legislation, including Medicare and Medicaid statutes and regulations, or possible changes in health care policies
in any country in which the company conducts business. Future legislation and regulatory changes could have a material adverse
effect on the company’s business.
The company’s products are subject to recalls, which could be costly and harm the company’s reputation and business.
The company is subject to ongoing medical device reporting regulations that require the company to report to the FDA or
similar governmental authorities in other countries 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 light
of a deficiency, defect in design or manufacturing or defect in labeling, the company may voluntarily elect to recall or correct the
company’s products. In addition, the FDA and similar governmental authorities in other countries could force the company to do
a field correction or recall the company’s products in the event of material deficiencies or defects in design or manufacturing. A
government mandated or voluntary recall or field correction by the company could occur as a result of component failures,
manufacturing errors or design defects, including defects in labeling. Any recall or field correction could divert managerial and
financial resources and could harm the company’s reputation with its customers, product users and the health care professionals
that use, prescribe and recommend the company’s products. The company could have product recalls or field actions that result