MedTech and Cook Group Denounce Medical Device Tax

Monday, October 7, 2013

On October 7th-8th, MedTech will be hosting its annual conference, MEDTECH 2013, focused on mapping the road to profitable growth for the bioscience and medical (bio/med) industry.  The bio/med industry stands at a crossroads between the kind of growth and innovation that would benefit all Americans and the burdens of increasing state and federal taxation and regulation. The bio/med industry not only brings substantial jobs to Rochester, New York State and the nation, but also brings hope and solutions to millions of patients. Think of how many people are alive and active because of stents. Think of how their lives would be different if doctors lacked the tools to prevent heart attacks and many other debilitating conditions. Whether as a patient or an employee, no American can live a full and productive life without the advances of the medical device industry. By sending Americans to work in laboratories, factories, and medical centers every day, we add gainful employment to state and national economies that desperately need it. By delivering the tools that enable doctors to save us from debilitating and deadly illnesses, we make life comfortable and enjoyable against even the longest odds.

Unfortunately, the Affordable Care Act threatens our ability to perform both of these vital roles. Among the largest threats to America's bio/med industry is the Affordable Care Act's 2.3% tax on the sales of medical devices and instruments. Rather than targeting profits, the tax applies to net sales, dealing a major blow to all medical device companies and especially smaller firms with weaker profit margins. Supporters may say the Affordable Care Act counters these losses by covering more patients and increasing demand for medical devices, but this argument is flawed. Even after Massachusetts enacted its universal health care policy, the state's medical device sales did not outpace those of other states, according to Matthew Dolan of Roth Capital Partners. Since the Affordable Care Act is based on the Massachusetts act, the federal program is likely to have a similarly negligible effect on sales.

By harming the economic outlooks of medical device manufacturers, the tax will raise national health care costs by more than $18 billion, according to Richard Foster, Medicare's chief actuary. By siphoning revenue from the medical device industry, this tax will render the industry less able to hire, less attractive to investor-backed innovation, and less capable of providing advanced medical solutions at the prices expected by both patients and providers. Sadly, for some patients, less access could mean the difference between a stent and a life-changing heart attack.

Device manufacturers and scientists are motivated to develop new technology to help patients lead healthier and higher-quality lives. The patient's well-being is what matters. To that end, the medical device industry creates tools and instruments that help doctors save and improve the lives of countless Americans who would otherwise face chronic health problems, surgery, and even death. This tax, combined with a sluggish regulatory environment, prevents the medical device industry from innovating at the level Americans expect and deserve—at least, not on American soil.

The medical device industry employs 360,000 Americans and pays $21.5 billion in annual wages. One job in this industry often creates spin-off jobs that further strengthen the economy. And despite rising trade imbalances, the medical device industry generates $123 billion in annual exports and is one of only a handful of industries with a positive trade balance. But instead of embracing this industry as the economic engine it is, the federal government instead encumbers it with a 55% tax burden or higher for some companies. Little wonder that medical device makers are looking away from American tax hikes and toward foreign tax breaks, expanding in places like Eastern Europe and China and taking vital jobs and economic strength with them. Despite the loyalty many manufacturers have for this country, its business environment, saddled with taxes such as these, simply cannot compete with the rest of the world.

Cook Group, a major participant in MEDTECH 2013, is the world's largest privately-owned medical device company. Cook planned to build five new plants in the United States, creating up to 1,500 jobs – plants that would have been similar to the complex recently built in its founder’s hometown of Canton, Illinois,but the tax has forced Cook to consider other options. Cook is hardly the only device manufacturer to struggle with the tax. Industry-wide, the Advanced Medical Technology Association projects the tax to cost the United States 43,000 jobs.  Put another way, the cost of this tax is the equivalent of eliminating a $43,000 a year job every 10 minutes.  This tax is killing jobs.

By removing jobs from the economy, this tax is threatening the livelihoods of thousands of Americans. By stifling innovation, this tax is preventing doctors from using new tools to alleviate suffering and improve outcomes. And by directly harming the medical device industry's revenues, this tax is driving up the cost of healthcare, reducing patient access to the technologies they depend upon. That's the difference between a life-saving stent and a premature obituary. For the sake of a stronger economy and a healthier nation, repeal this tax.

Jessica Crawford is the President of MedTech, a statewide bioscience and medical technology industry association in New York. MedTech is celebrating its 10th anniversary this year marking a decade of connecting New York State's bioscience and medical technology industry.

Dan Peterson is Vice President of Industry & Government Affairs at Cook Group and a plenary speaker at MEDTECH 2013. Cook Group is dedicated to bold leadership in pioneering innovative medical solutions to enhance patient care worldwide.

View All News »