Medtronic 2012 Annual Report Download - page 40

Consolidation in the health care industry could have an adverse effect on our revenues and results
of operations.
Many health care industry companies, including health care systems, are consolidating to create new
companies with greater market power. As the health care industry consolidates, competition to provide
goods and services to industry participants will become more intense. These industry participants may try
to use their market power to negotiate price concessions or reductions for medical devices that incorporate
components produced by us. If we are forced to reduce our prices because of consolidation in the health care
industry, our revenues would decrease and our consolidated earnings, financial condition, and/or cash flows
would suffer.
Our business is indirectly subject to health care industry cost-containment measures that could result
in reduced sales of medical devices containing our components.
Most of our customers, and the health care providers to whom our customers supply medical devices,
rely on third-party payers, including government programs and private health insurance plans, to reimburse
some or all of the cost of the procedures in which medical devices that incorporate components we
manufacture or assemble are used. The continuing efforts of governmental authorities, insurance companies,
and other payers of health care costs to contain or reduce these costs could lead to patients being unable
to obtain approval for payment from these third-party payers. If third-party payer payment approval cannot
be obtained by patients, sales of finished medical devices that include our components may decline
significantly and our customers may reduce or eliminate purchases of our components. The cost-containment
measures that health care providers are instituting, both in the U.S. and internationally, could harm our
ability to operate profitably. For example, managed care organizations have successfully negotiated volume
discounts for pharmaceuticals. While this type of discount pricing does not currently exist for medical
devices, if managed care or other organizations were able to affect discount pricing for devices, it could
result in lower prices to our customers from their customers and, in turn, reduce the amounts we can charge
our customers for our medical devices.
Our research and development efforts rely upon investments and investment collaborations, and we
cannot guarantee that any previous or future investments or investment collaborations will be successful.
Our strategy to provide a broad range of therapies to restore patients to fuller, healthier lives requires
a wide variety of technologies, products, and capabilities. The rapid pace of technological development in
the medical industry and the specialized expertise required in different areas of medicine make it difficult
for one company alone to develop a broad portfolio of technological solutions. In addition to internally
generated growth through our research and development efforts, historically we have relied, and expect to
continue to rely, upon investments and investment collaborations to provide us access to new technologies
both in areas served by our existing businesses as well as in new areas.
We expect to make future investments where we believe that we can stimulate the development of, or
acquire, new technologies and products to further our strategic objectives and strengthen our existing
businesses. Investments and investment collaborations in and with medical technology companies are
inherently risky, and we cannot guarantee that any of our previous or future investments or investment
collaborations will be successful or will not materially adversely affect our consolidated earnings, financial
condition, and/or cash flows.
The continuing development of many of our products depends upon us maintaining strong
relationships with physicians.
If we fail to maintain our working relationships with physicians, many of our products may not be
developed and marketed in line with the needs and expectations of the professionals who use and support
our products, which could cause a decline in our earnings and profitability. The research, development,
marketing, and sales of many of our new and improved products is dependent upon our maintaining working
relationships with physicians. We rely on these professionals to provide us with considerable knowledge
and experience regarding the development, marketing, and sale of our products. Physicians assist us as
researchers, marketing and product consultants, inventors, and public speakers. If we are unable to maintain
our strong relationships with these professionals and continue to receive their advice and input, the
development and marketing of our products could suffer, which could have a material adverse effect on
our consolidated earnings, financial condition, and/or cash flows.
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