Medtronic 2013 Annual Report Download - page 42

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Table of Contents
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. For example, recent legislation imposed on medical device
manufacturers a 2.3 percent excise tax on U.S. sales of medical devices beginning in January 2013. Proposals for fundamental
U.S. corporate tax reform, if enacted, could have a material impact on our future results of operations.
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.
We are 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.
Item 1B. Unresolved Staff Comments
None.
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