affix the CE Mark on its products and
commercially distribute those products throughout the European
We have received the right to affix the CE Mark
to each of our products that has received 510(k) clearance in
the U.S. and also for our HELIOS ablation catheter. If we
modify existing products or develop new products in the future,
including new devices, we will need to apply for permission to
affix the CE Mark to such products. We will be subject to
regulatory audits, currently conducted biannually, in order to
maintain any CE Mark permissions we have already obtained. We
cannot be certain that we will be able to obtain permission to
affix the CE Mark for new or modified products or that we will
continue to meet the quality and safety standards required to
maintain the permissions we have already received. If we are
unable to maintain permission to affix the CE Mark to our
products, we will no longer be able to sell our products in
member countries of the European Union.
In addition, through Siemens, we intend to submit
an application for regulatory approval in 2004 with the Japanese
Ministry of Health, Labor and Welfare for commercial use of the
Stereotaxis System in Japan. Siemens has agreed to coordinate
the regulatory approval process and act as distributor for our
NIOBE cardiology magnet system and NAVIGANT advanced user
interface in Japan, and we have begun to formulate our clinical
plans for regulatory approval. We are currently formulating our
clinical and regulatory plans for China and anticipate using
Siemens to coordinate regulatory approval and distribute our
products in China. We will evaluate regulatory approval in other
foreign countries on an opportunistic basis.
The federal healthcare program Anti-Kickback
Statute prohibits persons from knowingly and willfully
soliciting, offering, receiving or providing remuneration,
directly or indirectly, in exchange for or to induce either the
referral of an individual, or furnishing or arranging for a good
or service, for which payment may be made under a federal
healthcare program such as the Medicare and Medicaid programs.
The definition of remuneration has been broadly
interpreted to include anything of value, including for example
gifts, discounts, the furnishing of supplies or equipment,
credit arrangements, payments of cash and waivers of payments.
Several courts have interpreted the statutes intent
requirement to mean that if any one purpose of an arrangement
involving remuneration is to induce referrals of federal
healthcare covered business, the statute has been violated.
Penalties for violations include criminal penalties and civil
sanctions such as fines, imprisonment and possible exclusion
from Medicare, Medicaid and other federal healthcare programs.
In addition, some kickback allegations have been claimed to
violate the Federal False Claims Act, discussed in more detail
The Anti-Kickback Statute is broad and prohibits
many arrangements and practices that are lawful in businesses
outside of the healthcare industry. Recognizing that the
Anti-Kickback Statute is broad and may technically prohibit many
innocuous or beneficial arrangements, Congress authorized the
OIG to issue a series of regulations, known as the safe
harbors which it did, beginning in July of 1991. These
safe harbors set forth provisions that, if all their applicable
requirements are met, will assure healthcare providers and other
parties that they will not be prosecuted under the Anti-Kickback
Statute. The failure of a transaction or arrangement to fit
precisely within one or more safe harbors does not necessarily
mean that it is illegal or that prosecution will be pursued.
However, conduct and business arrangements that do not fully
satisfy each applicable safe harbor may result in increased
scrutiny by government enforcement authorities such as the OIG.
Many states have adopted laws similar to the
Anti-Kickback Statute. Some of these state prohibitions apply to
referral of patients for healthcare items or services reimbursed
by any source, not only the Medicare and Medicaid programs.
Government officials have focused their
enforcement efforts on marketing of healthcare services and
products, among other activities, and recently have brought
cases against sales