Our products are purchased principally by hospitals, physicians and other healthcare providers around the world that typically bill various third-party payers, including governmentalgovernment programs, authorities or agencies (e.g., Medicare and Medicaid in the United States) and private health plans, for the healthcare services provided to their patients. Governments and payers may also institute changes in health care delivery systems that may reduce funding for services or encourage greater scrutiny of health care costs. The ability of customers to obtain appropriate reimbursement for their products and services from private and governmental third-party payers is critical to the success of medical technology companies because it affects which products customers purchase and the prices they are willing to pay. Reimbursement variesand funding vary by country and can significantly impact the acceptance of new products and technologies and the use of established products and technologies. Even if we develop a promising new product, we may find limited demand for the product unless reimbursement approval is obtained from private and governmental third-party payers. Further legislative or administrative reforms to the reimbursement systems in the United States,U.S., Japan, or other countries in a manner that significantly reduces reimbursement for procedures using our medical devices or denies coverage for those procedures, including price regulation, competitive bidding and tendering, coverage and payment policies, comparative effectiveness of therapies, heightened clinical data requirements, technology assessments and managed-care arrangements, could have a material adverse effect on our business, financial condition or results of operations

In addition, our international operations are subject to other established and developing U.S. and foreign legal and regulatory requirements, including the U.S. Foreign Corrupt Practices Act (FCPA) and/or similar laws in other countries;countries and U.S. and foreign import and export controls and licensing requirements, trade protection and embargo measures and customs laws. Global businesses, including those in the medical device industry, are facing increasing scrutiny of, and heightened enforcement efforts with respect to, their international operations. Any alleged or actual failure to comply with legal and regulatory requirements may subject us to government scrutiny, civil and/or criminal proceedings, sanctions and other liabilities, which may have a material adverse effect on our international operations, financial condition, results of operations and/or liquidity.

FollowingIn a referendum inon June 23, 2016, in which voters inapproved for the United Kingdom (UK) approved anto exit from the EU,EU. As it stands, the UK government is expected to initiate a process to withdraw fromwill depart the EU (often referred to as “Brexit”) and begin negotiatingEuropean Union (EU) on March 30, 2019 but the terms of its withdrawal and the UK’snature of its future relationship with the EU. A withdrawal could, among other outcomes, resultEU are still being decided. Future exit of the UK from the EU will have numerous consequences in all areas of the business, including, economic, regulatory, operational, and the actual impact depends on the ultimate deal reached and is very difficult to assess at this time. Changes in the deteriorationindustry regulations could have an effect on existing CE certificates being renewed and new certificates being issued which would impact the ability to trade; however it is impossible to assess the full impact at this stage.

In December of economic conditions, volatility2017, EU leaders announced an agreement to begin the next phase of negotiations, with talks on a transition period after March 2019 to begin in currency exchange rates,early 2018 and increased regulatory complexities. These outcomes may adversely affect our business, financial condition or resultsdiscussions on the future UK-EU relationship, including trade and security, to begin in March. At this stage, the materiality to us of operations.the Brexit risk factor remains unknown and unquantifiable. 

Any significant changes in the political and economic, financial, competitive, legal and regulatory or reimbursement conditions where we conduct, or plan to expand, our international operations may have a material impact on our business, financial condition or results of operations.

Any potential future acquisitions we consummate may be dilutive to our earnings and may require additional debt or equity financing, depending on their size or nature.

We monitor the dynamics of the economy, the healthcare industry and the markets in which we compete and assess opportunities for improved operational effectiveness and efficiency and to better align expenses with revenues, while preserving our ability to make investments in research and development projects, capital and our people that we believe are important to our long-term success. As a result of these assessments, we have undertaken restructuring and optimization initiatives in order to enhance our growth potential and position us for long-term success. For example, in June 2016, we announced a restructuring initiative (the “20162016 Restructuring Plan”)Plan) intended to develop global commercialization, technology and manufacturing capabilities in key growth markets, build on our Plant Network Optimization (PNO) strategy which is intended to simplify our manufacturing plant structure by transferring certain production lines among facilities and expand operational efficiencies in support of our operating income margin goals. Key activities under the 2016 Restructuring Plan include strengthening global infrastructure through evolving global real estate assets and workplaces, developing global commercial and technical competencies, enhancing manufacturing and distribution expertise in certain regions and continuing implementation of our PNO strategy. Activities under the plan were initiated in the second quarter of 2016 and are expected to be substantially completed by the end of 2018. We revised the original estimate for the costs and savings associated with the program in the first quarter of 2018, as approved by the Board of Directors. The 2016 Restructuring Plan is expected to result in total pre-tax charges of approximately $175$275 million to $225$325 million and reduce gross annual expenses by approximately $115$165 million to $150$175 million by the end of 2020 as program benefits are realized. We expect a substantial portion of the savings to be reinvested in strategic growth initiatives. Expense reduction initiatives under the plan include various cost and efficiency improvement measures, which may include movement of business activities, facility consolidations and closures and the transfer of product lines between manufacturing facilities, which, due to the highly regulated nature of our industry, requires a significant investment in time and cost to create duplicate manufacturing lines, run product validations and seek regulatory approvals. These measures could yield unintended consequences, such as distraction of our management and employees, business disruption, inability to attract or retain key personnel and reduced employee productivity, which could negatively affect our business, sales, financial condition and results of operations. Moreover, our restructuring and

optimization initiatives result in charges and expenses that impact our operating results. We cannot guarantee that the activities under the 2016 Restructuring Plan or other optimization initiatives will result in the desired efficiencies and estimated cost savings.

Uncertainty about global economic conditions, including as a result of credit and sovereign debt issues, has caused and may continue to cause disruption in the financial markets, including diminished liquidity and credit availability. These conditions may adversely affect our suppliers, leading them to experience financial difficulties or to be unable to borrow money to fund their operations, which could cause disruptions in our ability to produce our products. Our customers may experience financial difficulties or be unable to borrow money to fund their operations, which may adversely impact their ability or decision to purchase our products, particularly capital equipment, or to pay for our products they do purchase on a timely basis, if at all. In addition, we have accounts receivable factoring programs in certain European countries. Continued deterioration of the global economy or increase in sovereign debt issues may impact our ability to transfer receivables to third parties in certain of those countries in the future. Third parties such as banks offering factoring programs in these countries are looking to reduce their exposure levels to government owned or supported debt. This could result in terminations of, or changes to the costs or credit limits of our existing factoring programs. Such terminations or changes could have a negative impact on our cash flow and days sales outstanding.

The strength and timing of economic recovery remains uncertain and there can be no assurance that there will not be further deterioration in the global economy. Accordingly, we cannot predict to what extent global economic conditions, including sovereign debt issues and increased focus on healthcare systems and costs in the U.S. and abroad, may continue to negatively impact our average selling prices, net sales and profit margins, procedural volumes and reimbursement rates from third party payers. In addition, conditions in the financial markets and other factors beyond our control may adversely affect our ability to borrow money in the credit markets, access the capital markets and to obtain financing for acquisitions or other general corporate and commercial purposes.

Political, economic and policy influences are leading the healthcare industry to make substantial structural and financial changes that will continue affecting our results of operations. Government and private sector initiatives limiting the growth of healthcare costs (including price regulation), coverage and payment policies, comparative effectiveness of therapies, technology assessments and healthcare delivery structure reforms, are continuing in many countries where we do business. We believe that these changes are causing the marketplace to put increased emphasis on the delivery of more treatments that can reduce costs, improve efficiencies and/or increase patient access. Although we believe our less-invasive products and technologies generate favorable clinical outcomes, value and cost efficiency, the resources necessary and evidence necessary to demonstrate value to our customers, patients, payers and other stakeholders may be significant and it may take a longer period of time to gain widespread adoption. Moreover, there can be no assurance that our strategies will succeed for every product.

The Patient Protection and Affordable Care Act (ACA) and Health Care and Education Affordability Reconciliation Act of 2010 were enacted into law in the U.S. in March 2010. As a U.S. headquartered company with significant domestic sales, in the United States, the medical device tax included in this law has materially affected us. The law imposed on medical device manufacturers a 2.3 percent excise tax on U.S. sales of Class I, II and III medical devices beginning in January 2013. Under the current administration, there may be a permanent repeal or an alteration of some or all elements of the ACA, but at this time it is not definite that a change will be enacted or what new healthcare provisions may be implemented. While the implementation of the medical device tax has been suspended until December 31, 2017,2019, the status of the tax for sales after December 31, 20172019 is not clear. The tax may continue to be suspended, or may be reinstated at the same or at a different level.level effective January 1, 2020. Other provisions of this law, including comparative effectiveness research, pilot programs to evaluate alternative payment methodologies and other changes to the payment systems, could meaningfully changehave started changing the way healthcare is developeddelivered, reimbursed and delivered, andfunded. While the extent to which it has affected our business is not clear, these changes, over the long-term, may adversely affect our business and results of operations.

We cannot predict the specific healthcare programs and regulations that will be ultimately implemented by regional and national governments globally. However, any changes that lower reimbursements for either our products and/or procedures using our products reduce medical procedure volumes and/or increase cost containment pressures on us or others in the healthcare sector could adversely affect our business and results of operations.

 

In addition, exported devices are subject to the regulatory requirements of each country to which the device is exported. Some countries do not have medical device regulations, but in most foreign countries, medical devices are regulated. Frequently, regulatory approval may first be obtained in a foreign country 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 or legal manufacturer first. Most countries outside of the U.S. require that product approvals be renewed or recertified on a regular basis, generally every four to five years. The renewal or recertification process requires that we evaluate any device changes and any new regulations or standards relevant to the device and conduct appropriate testing to document continued compliance. Where renewal or recertification applications are required, they may need to be renewed and/or approved in order to continue selling our products in those countries. There can be no assurance that we will receive the required approvals for new products or modifications to existing products on a timely basis or that any approval will not be subsequently withdrawn or conditioned upon extensive post-market study requirements.

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, as well as the clinical and regulatory costs of supporting those approvals. Several countries that did not have regulatory requirements for medical devices have established such requirements in recent years and other countries have expanded on existing regulations. Certain regulators are exhibiting less flexibility and are requiring local preclinical and clinical data in addition to global data. While harmonization of global regulations has been pursued, requirements continue to differ significantly among countries. We expect this global regulatory environment will continue to evolve, which could impact our ability to obtain future approvals for our products, or could increase the cost and time to obtain such approvals in the future.

The European Union regulatory bodies will finalizefinalized a new Medical Device Regulation (MDR) in 2017, which will replacereplaced the existing Directives and will provideprovided three years for transition and compliance. The MDR will change several aspects of the existing regulatory framework, such as clinical data requirements and introduce new ones, such as Unique Device Identification (UDI). We and the Notified Bodies who will oversee compliance to the new MDR face uncertainties as the MDR is rolled out and enforced by the Commission and EEA Competent Authorities, creating risks in several areas, including the CE Marking process and data transparency, in the upcoming years.

Additionally, certain products or groups of products, in particular new products or enhancements of existing products, may have a disproportionate impact on our business, financial condition and results of operations. Failure to meet growth projections, poor clinical outcomes, increasing regulatory requirements, launch delays and inability to effectively scale manufacturing and achieve targeted margins with respect to any of these products or groups of products in particular may materially adversely impact on our business, financial condition and results of operations.

We anticipate that governmental authorities will continue to scrutinize our industry closely and that additional regulation may increase compliance and legal cost and exposure to litigation and have additional adverse effects on our operations.

We are subject to income taxes as well as non-income based taxes, in both the U.S. and various foreign jurisdictions. We are subject to on-going 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 and have established contingency reserves for material, known tax exposures. However, the calculation of such tax exposures involves the application of complex tax laws and regulations in many jurisdictions, as well as interpretations as to the legality under European Union state aid rules of tax advantages granted in certain jurisdictions. Therefore, there can be no assurance that we will accurately predict the outcomes of these disputes or other tax audits or that issues raised by tax authorities will be resolved at a financial cost that does not exceed our related reserves and the actual outcomes of these disputes and other tax audits could have a material impact on our results of operations or financial condition.

On July 19, 2016, we entered into a Stipulation of Settled Issues with the Internal Revenue Service (IRS) intended to resolve certain transfer pricing issues, as well as certain issues related to our transaction with Abbott Laboratories, for the 2001 through 2007 tax years. The Stipulation of Settled Issues is contingent upon IRS Office of Appeals (IRS Appeals) applying the same basis of settlement to all transfer pricing issues for the Company’s 2008, 2009 and 2010 tax years and if applicable, review by the U.S. Congress Joint Committee on Taxation. In October 2016, we reached an agreement in principle with IRS Office of Appeals as to the resolution of the

Additionally, changesChanges in tax laws and regulations, or their interpretation and application, in the jurisdictions where we are subject to tax could materially impact our effective tax rate. For example, proposals for fundamentalThe U.S. corporate tax reform, if enacted the Tax Cuts and Jobs Act (TCJA) on December 22, 2017 and we expect the U.S. Treasury to issue future notices and regulations under the TCJA. Certain provisions of the TCJA and the regulations issued thereunder could have a significant adverse impact on our future results of operations. operations as could interpretations made by the Company in the absence of regulatory guidance and judicial interpretations.

Additionally, the U.S. Congress, government agencies in non-U.S. jurisdictions where we and our affiliates do business and the Organization for Economic Co-operation and Development (OECD) have recently focused on issues related to the taxation of

multinational corporations. One example is in the area of “base erosion and profit shifting,” where profits are claimed to be earned for tax purposes in low-tax jurisdictions, or payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. The Organization for Economic Co-operation and DevelopmentOECD has released several components of its comprehensive plan to create an agreed set of international rules for fighting base erosion and profit shifting. As a result, the tax laws in the U.S. and other countries in which we and our affiliates do business could change on a prospective or retroactive basis and any such changes could materially adversely affect our business.

Our operations in Puerto Rico and Costa Rica presently benefit from various tax incentives and grants. Unless these incentives and grants are extended, they will expire between 2023 and 2028. If we are unable to renew, extend, or obtain new incentive and grants, the expiration of the existing incentives and grants could have a material impact on our financial results in future periods.

The medical device market in which we primarily participate is largely technology driven. Physician customers have historically moved quickly to new products and new technologies. As a result, intellectual property rights, particularly patents and trade secrets, play a significant role in product development and differentiation. However, intellectual property litigation is inherently complex and unpredictable and appellate courts can overturn lower court decisions. Furthermore, as our business increasingly relies on technology systems and infrastructure, our intellectual property, other proprietary technology and other sensitive data are potentially vulnerable to loss, damage or misappropriation. Finally, our ability to protect novel business models is uncertain.

Competing parties in our industry frequently file multiple suits to leverage patent portfolios across product lines, technologies and geographies and to balance risk and exposure between the parties. In some cases, several competitors are parties in the same proceeding, or in a series of related proceedings, or litigate multiple features of a single class of devices. These forces frequently drive settlement not only of individual cases, but also of a series of pending and potentially related and unrelated cases. In addition, although monetary and injunctive relief is typically sought, remedies and restitution are generally not determined until the conclusion of the trial court proceedings and can be modified on appeal. Accordingly, the outcomes of individual cases are difficult to time, predict or quantify and are often dependent upon the outcomes of other cases in other geographies.

A number of third parties have asserted that our current and former product offerings infringe patents owned or licensed by them. We have similarly asserted that products sold by our competitors infringe patents owned or licensed by us. Adverse outcomes in one or more of the proceedings against us could limit our ability to sell certain products in certain jurisdictions, or reduce our operating margin on the sale of these products and could have a material adverse effect on our financial condition, results of operations or liquidity.

Patents and other proprietary rights are and will continue to be essential to our business and our ability to compete effectively with other companies will be dependent upon the proprietary nature of our technologies. We rely upon trade secrets, know-how, continuing technological innovations, strategic alliances and licensing opportunities to develop, maintain and strengthen our competitive position. We pursue a policy of generally obtaining patent protection in both the U.S. and abroad for patentable subject matter in our proprietary devices and attempt to review third-party patents and patent applications to the extent publicly available in order to develop an effective patent strategy, avoid infringement of third-party patents, identify licensing opportunities and monitor the patent claims of others. We currently own numerous U.S. and foreign patents and have numerous patent applications pending. We also are party to various license agreements pursuant to which patent rights have been obtained or granted in consideration for cash, cross-licensing rights or royalty payments. No assurance can be made that any pending or future patent applications will result in the issuance of patents, that any current or future patents issued to, or licensed by, us will not be challenged or circumvented by our competitors, or that our patents will not be found invalid. In addition, we may have to take legal action in the future to protect our patents, trade secrets or know-how or to assert them against claimed infringement by others. Any legal action of that type could be costly and time consuming and no assurances can be made that any lawsuit will be successful. We are generally involved as both a plaintiff and a defendant in a number of patent infringement and other intellectual property-related actions. The invalidation of key patents or proprietary rights that we own, or an unsuccessful outcome in lawsuits to protect our intellectual property, could have a material adverse effect on our business, financial condition or results of operations.

In addition, the laws of certain countries in which we market and plan on manufacturing some of our products in the near future, do not protect our intellectual property rights to the same extent as the laws of the United States. If we are unable to protect our intellectual property in these countries, it could have a material adverse effect on our business, financial condition or results of operations.

Furthermore, our intellectual property, other proprietary technology and other sensitive data are potentially vulnerable to loss, damage or misappropriation from system malfunction, computer viruses and unauthorized access to our data or misappropriation

or misuse thereof by those with permitted access and other events. While we have invested to protect our intellectual property, products and other data and continue to work diligently in this area, there can be no assurance that our precautionary measures will prevent breakdowns, breaches, cyber-attacks or other events. Such events could have a material adverse effect on our reputation, business, financial condition or results of operations.

The design, manufacturing and marketing of medical devices of the types that we produce entail an inherent risk of product liability claims. Many of the medical devices that we manufacture and sell are designed to be implanted in the human body for long periods of time or indefinitely. A number of factors could result in an unsafe condition or injury to, or death of, a patient with respect to these or other products that we manufacture or sell, including physician technique and experience in performing the surgical

procedure, component failures, manufacturing flaws, design defects, off-label use or inadequate disclosure of product-related risks or product-related information. These factors could result in product liability claims, a recall of one or more of our products or a safety alert relating to one or more of our products. Product liability claims may be brought by individuals or by groups seeking to represent a class.

 

 

In our industry, there is substantial competition for key personnel in the regions in which we operate and we may face increased competition for such employees, particularly in emerging markets as the trend toward globalization continues. Our business depends to a significant extent on the continued service of senior management and other key personnel, the development of additional management personnel and the hiring of new qualified employees. There can be no assurance that we will be successful in retaining and developing existing personnel or recruiting new personnel. The loss of one or more key employees, our ability to attract or develop additional qualified employees or any delay in hiring key personnel could have material adverse effects on our business, financial condition or results of operations.

None.

* Includes our principal manufacturing facilities in Minnesota, Ireland, Puerto Rico and one facility in Costa Rica;Rica, our new manufacturing facility in Malaysia, our customer fulfillment centers in Massachusetts, the Netherlands and Japan;Japan, and our global headquarters location in Marlborough, Massachusetts.

** Includes our principal manufacturing facilities in California, Indiana and one facility in Costa Rica;Rica, and our regional headquarters located in Singapore and Voisins-le-Bretonneux, France.

Our common stock is traded on the New York Stock Exchange (NYSE) under the symbol “BSX.” The following table provides the market range for the closing price of our common stock for each of the last eight quarters based on reported sales prices on the NYSE.

The data above include certain charges (credits)and/or credits recorded in conjunction with amortization, goodwill and other intangible asset impairments, acquisitions divestitures,and divestitures-related activities, restructuring and restructuring-related activities, pension termination charges, litigation-related charges, debt extinguishment charges, amortization, pension termination charges, discreteinvestment impairments and/or certain tax items and/or litigation.items. The data above should be read in conjunction with our consolidated financial statements, including the notes thereto, included in Item 88. Financial Statements and Supplementary Data of thisour Annual Report as well as prior yearon Form 10-K filings.

Our Interventional Cardiology divisionbusiness develops and manufactures technologies for diagnosing and treating coronary artery disease and other cardiovascular disorders including structural heart conditions. Product offerings include coronary stents, including drug-eluting and bare metal stent systems, balloon catheters, rotational atherectomy systems, guide wires, guide catheters, embolic protection devices, crossing and re-entry devices for the treatment of chronically occluded coronary vessels, diagnostic catheters, and intravascular ultrasound (IVUS) imaging systems. Our structural heartbroad, innovative product offerings includehave enabled us to become a device for transcatheter aortic valve replacement and a device designed to closeleader in the left atrial appendage in patients with atrial fibrillation that are at risk for ischemic stroke.global interventional cardiology market.

Our worldwide net sales of Interventional Cardiology products were $2.281of $2.419 billion for 2016, orrepresented approximately 27 percent of our consolidated net sales for the year.in 2017. Our worldwideInterventional Cardiology net sales of Interventional Cardiology products increased $248$138 million, or 126.1 percent, in 2016,2017, as compared to 2015. Excluding the2016. Our operational net sales, which exclude an immaterial impact ofrelated to changes in foreign currency exchange rates, which had a $34 million negative impact on our Interventional Cardiology net sales in 2016,increased 6.1 percent as compared to 2015, net sales of these products increased $282 million, or 13 percent.the prior year. This year-over-year increase was primarily related to sales of our drug-eluting stents, led by our ongoing global launch of the SYNERGY™ Stent, our WATCHMAN™ Device following the U.S. commercial launch during the first quarter of 2015 and our Lotus™ Valve System in the EU, along with operational growth in our PCI Guidance System product offerings.

On December 12, 2016,May 16, 2017, we completed the acquisition of certain manufacturing assets and capabilities of the Neovasc, Inc. (Neovasc) advanced biological tissue business and madeSymetis, a 15 percent equity investment in Neovasc for a total upfront cash payment of $75

Our Peripheral Interventions (PI) product offerings include stents, balloon catheters, wires, peripheral embolization devicesbusiness develops and other devices usedmanufactures products to diagnose and treat peripheral arterial diseases, including a broad line of medical devices used in percutaneous transluminal angioplasty (PTA) and peripheral vascular disease, along withdiseases, as well as products to diagnose, treat diagnose and ease various forms of cancer.

Our worldwide net sales of PIPeripheral Interventions products were $1.011of $1.081 billion for 2016, orrepresented approximately 12 percent of our consolidated net sales for the year.in 2017. Our worldwidePeripheral Interventions net sales of PI products increased $107$69 million or 126.8 percent, in 2016,2017, as compared to 2015. Excluding the2016. Our operational net sales, which exclude a 20 basis point impact fromrelated to changes in foreign currency exchange rates, which had an $11 million negative impact on our worldwide PI net sales in 2016,increased 6.6 percent, as compared to 2015, net sales of these products increased $118 million, or 12 percent.2016. This year-over-year increase was primarily driven by revenues from our Atherectomy and Thrombectomy systems, as well as growth in our core PI franchises, particularly our stent franchise following FDA approval and launch ofportfolio, our Innova™ Vascular self-expanding stent system in the U.S. and Japan, our interventional oncologydrug-eluting product franchise and our drug-eluting product franchise.atherectomy systems.

The following are the components of our CRM net sales:

Our Electrophysiology business develops and manufactures less-invasive medical technologies used in the diagnosis and treatment of rate and rhythm disorders of the heart. Our leading products include the Blazer™ lineheart, including a broad portfolio of ablationtherapeutic and diagnostic catheters designed to deliver enhanced performance and responsiveness, and the Rhythmia™ Mapping System, a next-generation, catheter-based, 3-D cardiac mapping and navigation solution designed to help diagnose and treat a variety of arrhythmias.equipment used in the Electrophysiology lab.

Our Endoscopy divisionbusiness develops and manufactures devices to diagnose and treat a varietybroad range of medical conditions including diseases of the digestivegastrointestinal (GI) and pulmonary systems. conditions with innovative, less invasive technologies.

Our worldwide net sales of Endoscopy products were $1.440of $1.619 billion for 2016, orrepresented approximately 1718 percent of our consolidated net sales for the year.in 2017. Our worldwideEndoscopy net sales of Endoscopy products increased $134$179 million, or 1012.4 percent, in 2016,2017, as compared to 2015. Excluding the2016. Our operational net sales, which exclude a 10 basis point impact fromrelated to changes in foreign currency exchange rates, which had a negative $9 million impact on our Endoscopy net sales in 2016increased 12.3 percent, as compared to 2015, net sales of these products increased $143 million, or 10 percent.2016. This year-over-year increase was primarily driven by growth across several of our key product franchises, including our hemostasis franchise featuring our Resolution 360™ Clips, our biliary device franchise with our SpyGlass™ DS Direct Visualization System and our AXIOS Stentinfection prevention products and Electrocautery-Enhanced Delivery System for endoscopic ultrasound-guided transmural drainagepathology services that were acquired as part of pancreatic pseudocysts; our metal stent franchise driven by our Biliary WallFlex® product family; and our hemostasis franchise, featuring our Resolution™ and Resolution 360™ Clips. This increase also includes revenue of approximately $10 million with no prior year period related net sales, due to the EndoChoice acquisition in November 2016, as described below.acquisition.

On November 22, 2016, we completed our acquisition of EndoChoice. EndoChoice is an Alpharetta, Georgia based company focused on the development and commercialization of infection controlprevention products, pathology services and single-use devices for specialists treating a wide range of gastrointestinal (GI)GI conditions. We beganIn 2017, we substantially completed the process of integrating EndoChoice into our Endoscopy business in the fourth quarter of 2016 and expect to be substantially complete by the end of 2017.

Our Urology and Pelvic Health divisionbusiness develops and manufactures devices to treat various urological and pelvic conditions such asfor both male and female anatomies, including kidney stones, benign prostatic hyperplasia, (BPH), erectile dysfunction, male incontinence, pelvic floor disorders, abnormal uterine bleeding and uterine fibroids and polyps.

Our worldwide net sales of Urology and Pelvic Health products were $1.005of $1.124 billion for 2016, orrepresented approximately 12 percent of our consolidated net sales for the year. Our worldwide net sales ofin 2017. Urology and Pelvic Health productsnet sales increased $312$119 million, or 4511.8 percent, in 2016,2017, as compared to 2015. Excluding the2016. Our operational net sales, which exclude a 20 basis point impact fromrelated to changes in foreign currency exchange rates, which had a negative $18 million impact on our Urology and Pelvic Health net sales in 2016,increased 11.6 percent, as compared to 2015, net sales of these products increased $330 million, or 45 percent.2016. This year-over-year increase was primarily attributable to revenue of approximately $226 million with no prior year period related netgrowth in sales due to the AMS Portfolio Acquisition in August 2015, along with growth across all of our other global franchises,kidney stone products, including our Pelvic Floor franchiseLithoVue™ Digital Flexible Ureteroscope, our pelvic floor products, as a result of market share gains primarily driven by a competitor exiting the market during the first quarter of 2016.

Our Neuromodulation business offers the Precision™, Precision Spectra™, Precision Montage™develops and Precision Novi™ Spinal Cord Stimulator (SCS) Systems, used for the management of chronic pain, and our Vercise™ Deep Brain Stimulation (DBS) System inmanufactures devices to treat various international regions such as Europe, Latin America and Asia Pacific for the treatment of Parkinson's disease, tremor and intractable primary and secondary dystonia, a neurological movement disorder characterized by involuntary muscle contractions. disorders and manage chronic pain.

Our worldwide net sales of Neuromodulation products were $556of $635 million for the year ended December 31, 2016, or approximatelyrepresented seven percent of our consolidated net sales for the year ended December 31, 2016. Our worldwidein 2017. Neuromodulation net sales of Neuromodulation products increased $55$79 million, or 1114.2 percent, in 2016,2017, as compared to 2015. Excluding the2016. Our operational net sales, which exclude a 10 basis point impact fromrelated to changes in foreign currency exchange rates, which had a negative $7 million impact on our Neuromodulation net sales in 2016,increased 14.1 percent, as compared to 2015, net sales of these products increased $62 million, or 12 percent. The2016. This year-over-year increase was primarily driven by share gains from our Montage™ System, continued adoption of theour Precision Montage™ and Precision Spectra™ SCS Systemwith MultiWave™ Technology Spinal Cord Simulator Systems in the U.S. and increased netan increase in international sales, in Europe, driven byincluding sales of our Vercise™ DBS Systems and non-rechargeable Precision Novi™ SCSDeep Brain Stimulation System.

In 2015,2016, we generated net sales of $7.477$8.386 billion, as compared to $7.380$7.477 billion in 2014,2015, an increase of $97$909 million, or one12.1 percent. Our operational net sales, were unfavorably impacted by $505 million fromwhich exclude a 40 basis point impact related to changes in foreign currency fluctuations in 2015 as compared to 2014. Excluding the impact of foreign currency and sales from divested businesses, our net salesexchange rates, increased $606 million,$1.008 billion, or eight12.5 percent, as compared to the prior year. This increase was primarily due primarily to constant currency increases in net sales from our Urology and Pelvic Health business of $193$312 million, primarily due to the AMS Portfolio Acquisition;Acquisition, from our Interventional Cardiology business of $150 million;$248 million, led by sales from our Peripheral Interventions businessSynergy drug-eluting stent and further penetration of $114 million; andthe WATCHMAN™ Device, from our Endoscopy business of $79$134 million and from our Peripheral Intervention business of $107 million.

The primary factor contributing to the increase in our gross profit margin for 2017 and 2016 as compared to 2015,the prior year periods was the positive impactimpacts of cost reductions as a result of our restructuringprocess improvement programs and other process improvementrestructuring programs. Partially offsetting these factors was the net negative impact of foreign currency fluctuations and other inventory charges and period

expenses. The increase in our gross profit margin for 2015, as comparedIn the first quarter of 2017, we recorded charges related to 2014, primarily resultedthe voluntary removal of Lotus Valve Devices from manufacturing cost reductions as a result of our restructuringglobal, commercial and other process improvement programs. Partially offsetting these factors was the net negative impact of pricing declines related primarily to sales of our drug-eluting stent and CRM products. In addition, in connection with the accounting for the AMS Portfolio Acquisition, we adjusted acquired inventory from manufacturing cost to fair value. The step-up in value is amortized through gross profit over an average estimated inventory turnover period. We recorded increased cost of $22 million in 2016 and $36 million in 2015 associated with the step-up.clinical sites.

In 2017, our SG&A expenses increased $195 million, or six percent, as compared to 2016 and were 60 basis points lower as a percentage of net sales. This decrease in SG&A as a percentage of net sales was primarily driven by increased net sales, as well as the benefit of our targeted initiatives focused on reducing SG&A. In 2016, our SG&A expenses increased $226 million, or eight percent, as compared to 2015 and were 140 basis points lower as a percentage of net sales. This decrease in SG&A as a percentage of net sales was primarily driven by the benefit of our targeted initiatives focused on reducing SG&A, as well as the reduction in expenses resulting from the suspension of the Medical Device Excise Tax, which was substantially reinvested into our strategic growth initiatives. The Medical Device Excise Tax was temporarily suspended in December 2015 through December 31, 2017.

We remain committed to advancing medical technologies and investing in meaningful research and development projects across our businesses. In 2017, our R&D expenses increased $77 million, or eight percent, as compared to 2016, yet remained flat as a percentage of net sales at approximately 11.0 percent. In 2016, our R&D expenses increased $44 million, or five percent, as compared to 2015 and were 70 basis points lower as a percentage of net sales. In 2015, our R&D expenses increased $59 million, or seven percent, as compared to 2014, and were 60 basis points higher as a percentage of net sales. The year-over-year increase in expenses was due primarily to investments across all of our businesses in order to maintain a healthy pipeline of new products that we believe will contribute to profitable sales growth and increased cost related to recent acquisitions and alliances, partially offset by the favorable impact of foreign currency fluctuations.growth.

In 2016, our royalty expense increased $9 million, or 13 percent, as compared to 2015 and remained relatively flat at approximately one percent of net sales for both periods. The increase in royalty expense was primarily due to increases in net sales of our drug-eluting coronary stent systems in 2016.

Our amortization expense decreased $41was $565 million or 37 percent,in 2017, as compared to 2014, and was 60 basis points lower as a percentage$545 million in 2016, an increase of net sales. The decrease relates primarily to the renegotiation of a royalty agreement in the second quarter of 2014 that resulted in a lower royalty rate structure.

Restructuring and restructuring-related costs are excluded by management for purposes of evaluating operating performance.

The 2016 Restructuring Plan is expected to result in total pre-tax charges of approximately $175$275 million to $225$325 million and reduce gross annual expenses by approximately $115$165 million to $150$175 million by the end of 2020 as program benefits are realized. The