Medtronic 2016 Annual Report Download - page 13

Table of Contents
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The laws applicable to us are subject to change and are subject to evolving interpretations. If a governmental authority were to
conclude that we are not in compliance with applicable laws and regulations, Medtronic and its officers and employees could be
subject to severe criminal and civil penalties including substantial fines and damages, and exclusion from participation as a supplier
of product to beneficiaries covered by Medicare or Medicaid.
Product Approval Processes
Authorization to commercially distribute a new medical device or technology in the U.S. is generally received in one of two ways.
The first, known as pre-market notification or the 510(k) process, requires us to demonstrate that our new medical device or
technology is substantially equivalent to a legally marketed medical device or technology. In this process, we must submit data
that supports our equivalence claim. If human clinical data is required, it must be gathered in compliance with U.S. FDA
investigational device exemption regulations. We must receive an order from the U.S. FDA finding substantial equivalence to
another legally marketed medical device or technology before we can commercially distribute the new medical device or technology.
Modifications to cleared medical devices or technologies can be made without using the 510(k) process if the changes do not
significantly affect safety or effectiveness. Minimally Invasive Therapies Group products are generally subject to the pre-market
notification process. A very small number of our devices are exempt from pre-market review.
The second, more rigorous process, known as pre-market approval (PMA), requires us to independently demonstrate that the new
medical device is safe and effective. We do this by collecting data regarding design, materials, bench and animal testing, and
human clinical data for the medical device. The U.S. FDA will authorize commercial distribution if it determines there is reasonable
assurance that the medical device is safe and effective. This determination is based on the benefit outweighing the risk for the
population intended to be treated with the device. This process is much more detailed, time-consuming, and expensive than the
510(k) process. A third, seldom used, process for approval exists for humanitarian use devices, intended for patient populations
of less than 4,000 patients per year in the U.S. This exemption is similar to the PMA process; however, a full showing of product
effectiveness from large clinical trials is not required. The threshold for approving these products is probable benefit and safety.
Many countries outside the U.S. to which we export medical devices also subject such medical devices and technologies to their
own regulatory requirements. Frequently, regulatory approval may first be obtained in a country outside of the U.S. prior to
application in the U.S. due to differing regulatory requirements; however, other countries, such as China for example, require
approval in the country of origin first. Most countries outside of the U.S. require that product approvals be recertified on a regular
basis, generally every five years. The recertification process requires that we evaluate any device or technology changes and any
new regulations or standards relevant to the device or technology and, where needed, conduct appropriate testing to document
continued compliance. Where recertification applications are required, they must be approved in order to continue selling our
products in those countries. Because export control and economic sanctions laws and regulations are complex and constantly
changing, it is possible that laws and regulations may be enacted, amended, enforced or interpreted in a manner materially impacting
our ability to sell or distribute products.
In the E.U., a single regulatory approval process exists, and conformity with the legal requirements is represented by the CE Mark.
To obtain a CE Mark, defined products must meet minimum standards of performance, safety, and quality (i.e., the essential
requirements), and then, according to their classification, comply with one or more of a selection of conformity assessment routes.
A notified body assesses the quality management systems of the manufacturer and the product conformity to the essential and
other requirements within the medical device directive. Medtronic is subject to inspection by notified bodies for compliance. The
competent authorities of the E.U. countries, generally in the form of their ministries or departments of health, oversee the clinical
research for medical devices and are responsible for market surveillance of products once they are placed on the market. We are
required to report device failures and injuries potentially related to product use to these authorities in a timely manner. Various
penalties exist for non-compliance with the laws transcribing the medical device directives. We anticipate a new Medical Device
Regulation to be published by the European Union in 2016, and it is likely to impose additional premarket and postmarket
requirements.
To be sold in Japan, most medical devices must undergo thorough safety examinations and demonstrate medical efficacy before
they are granted approval, or “shonin.” The Japanese government, through the Ministry of Health, Labour, and Welfare (MHLW),
regulates medical devices under the Pharmaceutical Affairs Law (PAL). Oversight for medical devices is conducted with
participation by the Pharmaceutical and Medical Devices Agency (PMDA), a quasi-government organization performing many
of the review functions for MHLW. Penalties for a company’s noncompliance with PAL could be severe, including revocation or
suspension of a company’s business license and criminal sanctions. MHLW and PMDA also assess the quality management systems
of the manufacturer and the product conformity to the requirements of the PAL. Medtronic is subject to inspection for compliance
by these agencies.
Our global regulatory environment is becoming increasingly stringent, and unpredictable, which could increase the time, cost and
complexity of obtaining regulatory approvals for our products. Several countries that did not have regulatory requirements for
medical devices have established such requirements in recent years and other countries have expanded, or plan to expand, on