Medtronic 2012 Annual Report Download - page 35

face competition from providers of alternative medical therapies such as pharmaceutical companies.
Competitive factors include:
• product reliability,
• product performance,
• product technology,
• product quality,
• breadth of product lines,
• product services,
• customer support,
• price, and
• reimbursement approval from health care insurance providers.
Major shifts in industry market share have occurred in connection with product problems, physician
advisories, and safety alerts, reflecting the importance of product quality and quality systems in the medical
device industry. In the current environment of managed care, consolidation among health care providers,
increased competition, and declining reimbursement rates, we have been increasingly required to compete
on the basis of price. In order to continue to compete effectively, we must continue to create, invest in, or
acquire advanced technology, incorporate this technology into our proprietary products, obtain regulatory
approvals in a timely manner, and manufacture and successfully market our products. Given these factors,
we cannot guarantee that we will be able to continue our level of success in the industry.
Reduction or interruption in supply and an inability to develop alternative sources for supply may
adversely affect our manufacturing operations and related product sales.
We manufacture most of our products at 38 manufacturing facilities located throughout the world. We
purchase many of the components and raw materials used in manufacturing these products from numerous
suppliers in various countries. Generally we have been able to obtain adequate supplies of such raw
materials and components. However, for reasons of quality assurance, cost effectiveness, or availability, we
procure certain components and raw materials from a sole supplier. We work closely with our suppliers to
try to ensure continuity of supply while maintaining high quality and reliability. However, we cannot
guarantee that these efforts will be successful. In addition, due to the stringent regulations and requirements
of the U.S. FDA regarding the manufacture of our products, we may not be able to quickly establish
additional or replacement sources for certain components or materials. A reduction or interruption in supply,
and an inability to develop alternative sources for such supply, could adversely affect our ability to
manufacture our products in a timely or cost-effective manner and to make our related product sales.
Our industry is experiencing greater scrutiny and regulation by governmental authorities, which may
lead to greater regulation in the future.
Our medical devices and our business activities are subject to rigorous regulation, including by the U.S.
FDA, DOJ, and numerous other federal, state, and foreign governmental authorities. These authorities and
members of Congress have been increasing their scrutiny of our industry. For example, we have received
inquiries from members of Congress and other government agencies regarding a variety of matters. In
addition, certain states have recently passed or are considering legislation restricting our interactions with
health care providers and requiring disclosure of certain payments to them. We anticipate that governmental
authorities will continue to scrutinize our industry closely, and that additional regulation may increase
compliance and legal costs, exposure to litigation, and other adverse effects to our operations.
We are subject to many laws and governmental regulations and any adverse regulatory action may
materially adversely affect our financial condition and business operations.
Our medical devices are subject to regulation by numerous government agencies, including the U.S.
FDA and comparable agencies outside the U.S. To varying degrees, each of these agencies requires us to
comply with laws and regulations governing the development, testing, manufacturing, labeling, marketing,
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