Medtronic 2016 Annual Report Download - page 22

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certain of our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins for
all conflict minerals used in our products through the procedures we implement.
Governmental regulations outside the U.S have become increasingly stringent and more common, and we may become subject
to more rigorous regulation by governmental authorities in the future. In the European Union, for example, we anticipate a new
Medical Device Regulation to be published in 2016, and it is likely to impose additional premarket and postmarket requirements.
Penalties for a company’s non-compliance with governmental regulation could be severe, including fines, revocation or suspension
of a company’s business license, mandatory price reductions and criminal sanctions. Any governmental law or regulation imposed
in the future may have a material adverse effect on us.
We are subject to environmental laws and regulations and the risk of environmental liabilities, violations and litigation.
We are subject to numerous U.S. federal, state, local and non-U.S. environmental, health and safety laws and regulations concerning,
among other things, the generation, storage, use and transportation of hazardous materials, emissions or discharges of substances
into the environment, investigation and remediation of hazardous substances or materials at various sites, chemical constituents
in medical equipment and end-of-life disposal and take-back programs, and the health and safety of our employees. Our operations
involve the use of substances regulated under such laws and regulations, primarily those used in manufacturing and sterilization
processes. If we violate these environmental laws and regulations, we could be fined, criminally charged or otherwise sanctioned
by regulators. Furthermore, environmental laws outside of the U.S. are becoming more stringent, resulting in increased costs and
compliance burdens.
In addition, certain environmental laws assess liability on current or previous owners or operators of real property for the costs of
investigation, removal or remediation of hazardous substances or materials at their properties or at properties which they have
disposed of hazardous substances. Liability for investigative, removal and remedial costs under certain U.S. federal and state laws
are retroactive, strict and joint and several. In addition to cleanup actions brought by governmental authorities, private parties
could bring personal injury or other claims due to the presence of, or exposure to, hazardous substances. The ultimate cost of site
cleanup and timing of future cash outflows is difficult to predict, given the uncertainties regarding the extent of the required
cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods.
We may in the future be subject to additional environmental claims for personal injury or cleanup based on our past, present or
future business activities (including the past activities of companies we have acquired). The costs of complying with current or
future environmental protection and health and safety laws and regulations, or liabilities arising from past or future releases of,
or exposures to, hazardous substances, may exceed our estimates, or have a material adverse effect on our business, consolidated
earnings, financial condition, and/or cash flow.
Our failure to comply with laws and regulations relating to reimbursement of health care goods and services may subject us
to penalties and adversely impact our reputation, business, financial condition and cash flows.
Our devices, products and therapies are purchased principally by hospitals or physicians that typically bill various third-party
payers, such as governmental programs (e.g., Medicare, Medicaid and comparable non-U.S. programs), private insurance plans
and managed care plans, for the healthcare services provided to their patients. The ability of our customers to obtain appropriate
reimbursement for products and services from third-party payers is critical because it affects which products customers purchase
and the prices they are willing to pay. As a result, our devices, products and therapies are subject to regulation regarding quality
and cost by HHS, including the Centers for Medicare & Medicaid Services (CMS) as well as comparable state and non-U.S.
agencies responsible for reimbursement and regulation of health care goods and services. The principal U.S. federal laws implicated
include those that prohibit (i) the filing of false or improper claims for federal payment, known as the false claims laws, (ii)
unlawful inducements for the referral of business reimbursable under federally-funded health care programs, known as the anti-
kickback laws, and (iii) health care service providers from seeking reimbursement for providing certain services to a patient who
was referred by a physician who has certain types of direct or indirect financial relationships with the service provider, known as
the Stark law. Many states have similar laws that apply to reimbursement by state Medicaid and other funded programs as well
as in some cases to all payers. Insurance companies can also bring a private cause of action for treble damages against a manufacturer
for causing a false claim to be filed under the federal Racketeer Influenced and Corrupt Organizations Act, RICO. In addition, as
a manufacturer of U.S. FDA-approved devices reimbursable by federal healthcare programs, we are subject to the Physician
Payments Sunshine Act, which requires us to annually report certain payments and other transfers of value we make to U.S.-
licensed physicians or U.S. teaching hospitals.
Our profitability and international operations are subject to risks relating to changes in government and private medical
reimbursement programs and policies, and changes in legal regulatory requirements in the U.S. and around the world.
Implementation of further legislative or administrative reforms to the reimbursement system in the U.S. and abroad, or adverse
decisions relating to our products by administrators of these systems in coverage or reimbursement, could significantly reduce