Effective Auditing & Monitoring Across Multi-Country operations Nieves Liste Forensic Audit Director Covidien First International Medical Device Compliance Congress and Best Practices Forum Paris, May 2008

Covidien | | Confidential Agenda  Speaker Profile  Covidien at a Glance  Overview of Covidien Compliance Program  Auditing & Monitoring  Challenges for the future

Covidien | | Confidential Speaker Profile  BBA & MBA Degree from ESADE, Spain  2 years in public accounting (Arthur Andersen)  8 years in Tyco International in Internal Audit, Mergers & Acquisitions and Forensic Audit  1’5 years in Covidien as Director of Forensic Audit  CFE certified

Covidien | | Confidential Covidien at a glance  Spin off from Tyco – June 29, 2007  Revenue of $9 billion  A global healthcare products company –Over 42,000 employees worldwide in 57 countries –Products sold in over 130 countries –43% of sales from outside the US –61 manufacturing sites worldwide  Sales & Marketing –Direct sales force in over 50 countries –Third party distributors –23 distribution centres around the world

Covidien | | Confidential Covidien | June 3, 2016 |5 | Medical Devices $6.0B 59% 9% 13% 10% 9% Imaging Solutions $1.1B Pharmaceutical Products $0.9B Medical Supplies $0.9B 68% 10% 12% 10% 2007 Net Sales by Business Segment

Covidien | | Confidential Covidien | June 3, 2016 |6 | Medical Devices Overview  2007 Net Sales: $6.0B  Strong franchises, market leadership positions and a highly diversified product portfolio  No single product accounts for more than 1% of sales  Channels: Primarily hospitals, with an increasing presence among alternate site healthcare providers Vascular Devices Energy Devices Endomechanical 2007 Sales by Product Group Soft Tissue Repair SharpSafety Airway & Ventilation Oximetry & Monitoring Other Clinical Care 6%

Covidien | | Confidential Covidien | June 3, 2016 |7 | Imaging Solutions Overview  2007 Net Sales: $1.1B  Products: contrast media, delivery systems and radiopharmaceuticals across multiple modalities (x-ray, MRI and nuclear medicine).  Purpose: To help diagnose disease as early as possible. Contrast Products Radiopharmaceuticals 2007 Sales by Product Group

Covidien | | Confidential Covidien | June 3, 2016 |8 | Pharmaceutical Products Overview Active Pharmaceutical Ingredients Dosage Pharmaceuticals 2007 Sales by Product Group  2007 Net Sales: $908MM  Products: Dosage Pharmaceuticals (branded and generic), Active Pharmaceutical Ingredients  10 th largest pharmaceutical company in United States based on prescriptions dispensed.

Covidien | | Confidential Covidien | June 3, 2016 |9 | Medical Supplies Overview  2007 Net Sales: $887MM  Leading provider of a broad range of high quality products used to improve patient care, including traditional wound care, incontinence, diagnostic and monitoring electrodes, operating room kits and accessories  #1 or #2 market positions across core product categories Nursing Care Medical Surgical Original Equipment Manufacturer 2007 Sales by Product Group

Covidien | | Confidential Covidien | June 3, 2016 |10 | Strong Line-Up of Well Recognized Brands

Covidien | | Confidential Overview of Covidien Compliance Program  Written Standards –The Covidien Guide to Business Conduct –Covidien Comprehensive Compliance Program  Proactive measures: –Fraud Risk Assessment –Education & Training –Internal Lines of Communication –Integrity Helpline –Ombudsman Office –Auditing & Monitoring  Reactive measures: –Investigate Past & Potential Violations –Corrective Action Procedures

Covidien | | Confidential Education & Training  Mandatory online training modules  FCPA Live training meetings with top management, sales trainees, sales and marketing employees and other personnel  Fraud case studies  Integrity Bulleting  A recent initiative: The Ethics Circle –10-15 work colleagues led by an “integrity champion” –A monthly meeting of 1 hour to discuss business practices & ethical compliance –Provide training and understand employee issues –Helps clarify polices and procedures

Covidien | | Confidential Audit Committee VP of Corporate Audit Forensic Audit Director Executive Audit Director IT Audit Manager Asia Pac Audit Manager Americas Audit Manager (2) EMEA Audit Manager Assistant Corporate Audit Organization Independent Corporate Audit Function Team of approximately 30 people Geographically and Functionally based Dedicated Forensic auditors Use of outside consultants

Covidien | | Confidential Auditing & Monitoring  Audit scope and resources  Customized audit programs to industry/geography risk  Auditors trained on compliance and involved in investigations  Third party due diligence & questionnaires  Categorize Red Flags

Covidien | | Confidential Red Flags for third party agents and distributors  High risk countries  Refusal to represent or certify FCPA policy  Statements that: –FCPA does not apply to them –Anti-Bribery policies are too restrictive  Requests for: –Excessive or unusually high compensation –Large one-time success fees –Marketing funds/slush funds –Increase in compensation during sales campaign –Payments to third countries or third parties –Cash payments  Lack of facilities or qualified staff  Use of shell companies  Negative reputation  Refusal to: –Enter into an agreement –Record a transaction properly in their books and records  Close relationship to government officials  Third party retain anonymous subcontractors/sub distributors  Misrepresentations or inconsistencies in the application or the due diligence process

Covidien | | Confidential How are issues raised? Complaint sources: Integrity Line Direct call to Ombudsman Business Audit/Legal/HR Board of Directors Ombudsman manages flow of complaints Investigators: Forensic Audit HR Legal Security Business Ombudsman reports to the Audit Committee…an objective facilitator

Covidien | | Confidential Types of issues investigated  Accounting irregularities  Asset Misappropriation  T&E/Procurement fraud  Breach of Internal Controls/Policies  Conflict of interest  Improper payments

Covidien | | Confidential Cases per region

Covidien | | Confidential Challenges of a Global Forensic Function  Language  Cultural differences  Understanding FCPA laws and local laws  Third parties  Certain regions/countries

Covidien | | Confidential My key learning One size does not fit all: Flexibility, open mind and local expertise are key to success for effective auditing & monitoring across multi- country operations.

Questions