Medtronic 2012 Annual Report Download - page 42

The medical device industry is the subject of numerous governmental investigations into marketing
and other business practices. These investigations could result in the commencement of civil and/or
criminal proceedings, substantial fines, penalties, and/or administrative remedies, divert the attention of
our management, and have an adverse effect on our financial condition and results of operations.
We are subject to rigorous regulation by the U.S. FDA and numerous other federal, state, and foreign
governmental authorities. These authorities have been increasing their scrutiny of our industry. We have
received subpoenas and other requests for information from state and federal governmental agencies,
including, among others, the U.S. Department of Justice and the Office of Inspector General of HHS. These
investigations have related primarily to financial arrangements with health care providers, regulatory
compliance, and product promotional practices. Similar requests were made of our major competitors.
We are fully cooperating with these investigations and are responding to these requests. However, we
cannot predict when these investigations will be resolved, the outcome of these investigations, or their
impact on us. An adverse outcome in one or more of these investigations could include the commencement
of civil and/or criminal proceedings, substantial fines, penalties, and/or administrative remedies, including
exclusion from government reimbursement programs, entry into Corporate Integrity Agreements (CIAs)
with governmental agencies and amendments to existing CIAs. In addition, resolution of any of these
matters could involve the imposition of additional and costly compliance obligations. Finally, if these
investigations continue over a long period of time, they could divert the attention of management from the
day-to-day operations of our business and impose significant administrative burdens, including cost, on us.
These potential consequences, as well as any adverse outcome from these investigations or other
investigations initiated by the government at any time, could have a material adverse effect on our financial
condition and results of operations.
Changes in tax laws or exposure to additional income tax liabilities could have a material impact
on our financial condition and results of operations.
We are subject to income taxes as well as non-income based taxes, in both the U.S. and various
jurisdictions outside the U.S. We are subject to ongoing tax audits in various jurisdictions. Tax authorities may
disagree with certain positions we have taken and assess additional taxes. We regularly assess the likely
outcomes of these audits in order to determine the appropriateness of our tax provision. However, there can
be no assurance that we will accurately predict the outcomes of these audits, and the actual outcomes of
these audits could have a material impact on our consolidated earnings and financial condition. Additionally,
changes in tax laws or tax rulings could materially impact our effective tax rate.
We are increasingly dependent on sophisticated information technology and if we fail to properly
maintain the integrity of our data or if our products do not operate as intended, our business could be
materially affected.
The Company is increasingly dependent on sophisticated information technology for its products and
infrastructure. As a result of technology initiatives, recently enacted regulations, changes in our system
platforms and integration of new business acquisitions, we have been consolidating and integrating the
number of systems we operate and have upgraded and expanded our information systems capabilities. Our
information systems require an ongoing commitment of significant resources to maintain, protect, and
enhance existing systems and develop new systems to keep pace with continuing changes in information
processing technology, evolving systems and regulatory standards, the increasing need to protect patient
and customer information, and changing customer patterns. In addition, third parties may attempt to hack
into our products or systems and may obtain data relating to patients with our products or the Company’s
proprietary information. If we fail to maintain or protect our information systems and data integrity
effectively, we could lose existing customers, have difficulty attracting new customers, have problems in
determining product cost estimates and establishing appropriate pricing, have difficulty preventing,
detecting, and controlling fraud, have disputes with customers, physicians, and other health care
professionals, have regulatory sanctions or penalties imposed, have increases in operating expenses, incur
expenses or lose revenues as a result of a data privacy breach, or suffer other adverse consequences. There
can be no assurance that our process of consolidating the number of systems we operate, upgrading and
expanding our information systems capabilities, protecting and enhancing our systems and developing new
systems to keep pace with continuing changes in information processing technology will be successful or that
additional systems issues will not arise in the future. Any significant breakdown, intrusion, interruption,
corruption, or destruction of these systems, as well as any data breaches, could have a material adverse
effect on our business.
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