A Nefarious Tax On The Backs Of Job Creators

U.S. HOUSE OF REPRESENTATIVES IS SET TO VOTE ON REPEALING OBAMACARE’S MEDICAL DEVICE TAX

“The House Is Scheduled To Vote This Week On Two Partial Repeal Bills, Including One To Eliminate The Law’s Controversial Tax On Medical Devices.” (Sam Baker And Elise Viebeck, “House Set To Repeal Device Tax,” The Hill’s “ Health Watch,” 6/4/12)

The Tax Will Go Towards Funding ObamaCare

The $28.5 Billion On Medical Device Manufacturers Will Go To Pay For ObamaCare.“The 2.3% levy applies to the sale of everything from cardiac defibrillators to artificial joints to MRI scanners. The device tax is supposed to raise $28.5 billion from 2013 to 2022, and it is especially harmful because it applies to gross sales, not profits.” (Editorial, “Improvised Explosive Device Tax,” The Wall Street Journal, 5/28/12)

IF ALLOWED TO STAND, COMPANIES WILL BE FORCED TO MAKE TOUGH DECISIONS

The Tax Will Negatively Affect Businesses

ObamaCare’s 2.3 Percent Tax On Medical Devices Will Negatively Affect Businesses.“Although the fate of the Obama administration’s health reform law is unclear — a U.S. Supreme Court ruling is at least months away — one aspect of the law, a 2.3 percent excise tax on medical devices, is having an immediate dampening effect. Locally, it’s the medical device startups and early-stage businesses that are affected.” (Tom Tobin, “Health Care: The Everywhere Issue,” The Rochester Democrat And Chronicle , 9/25/11)

• The Columbus Dispatch : ObamaCare’s Medical Device Tax Is Already Having A Negative Impact On The U.S. Economy. “A tax on medical devices and equipment tucked into the 2,400-page 2010 Patient Protection and Affordable Care Act illustrates the negative impact the legislation is already having on the U.S. economy. Quite simply, nothing is free.” (Editorial, “The True Cost,” The Columbus Dispatch, 3/26/12)

“The Tax Likely Will Have Its Greatest Impact On Small And Mid-Size Companies, Particularly Those Developing New Technologies, [Phillip] Seligman [Of Standard & Poor’s] Wrote.” (Ben Sutherly, “Medical-Device Makers Fight Tax,” The Columbus Dispatch, 5/15/12)

• 74 Percent Of Small Business Owners Blame ObamaCare For Hurting Job Creation. “As part of the explanation for the general economic pessimism, 78 percent of small businesses believe that taxation, regulation and legislation from Washington make it harder for businesses to hire more employees — and 74 percent blame the recent health care reforms passed by the Obama administration for creating an impediment to job creation.” (Tim Mak, “Chamber Poll: Small Biz Blames D.C.,” Politico, 1/18/12)

A Report From The Advanced Medical Technology Association Found That The Medical Device Industry Would Have One Of The Highest Tax Rates In The World.“Wednesday’s report says the tax will double the total tax burden on device-makers and ‘raise the average effective corporate income tax rate to one of the highest effective tax rates faced by any industry in the world.’” (Sam Baker, “Device-Makers Say Tax Will Cost 43,000 U.S. Jobs,” The Hill’s “ Health Watch,” 9/7/11)

• Companies Could Owe More In Taxes Than They Generate In Profits. “But typical of Washington, the approach makes foggy assumptions about the marketplace. The tax would be collected on gross sales, not profits, meaning many companies could end up owing more in taxes than they generate in profits.” (Editorial, “Congress Should Rescue Medical Device Makers, Tampa Bay Times, 5/31/12)

• Some Companies Working Within Narrow Margins “Could Be Taxed Out Of Existence.” “Companies at make-or-break margins could be taxed out of existence, especially in an intensely competitive industry where four of five businesses are start-ups or midsized.” (Editorial, “Improvised Explosive Device Tax,”The Wall Street Journal, 5/28/12)

Medical Device Companies Will Be Forced To Cut Costs And Lay Off Workers

In A Recent Survey, Nearly Half Of The Medical Device Company Executives Who Responded Said They Planned To Cut Costs And May Be Forced To Lay Off Workers In Order To Comply With The Tax. “According to the survey of 190 financial executives from the medical device manufacturing industry, 40 percent of respondents said their companies are already contemplating actions such as price increases and cost reductions, including possible layoffs, as a way to stay competitive.” (Chris Reidy, “KPMG Survey: New Tax Could Hit Medical Device Companies Hard,” The Boston Globe , 4/18/12)

• Due To The Tax, “Many Companies Will Owe More In Taxes Than They Generate In Profits, Requiring Companies To Lay Off Employees.” “MDMA is very concerned about the impact a $20B device tax will have on patient care, innovation and small businesses . . . Under the current structure, many companies will owe more in taxes than they generate in profits, requiring companies to lay off employees, cut R&D budgets and slow the development of new therapies that will improve the quality of care for all Americans. Moving forward, these issues must be addressed before the tax takes effect in 2013.” (Medical Device Manufacturers Association, “House Health Care Bill Passes,” MDMA, 3/21/10)

At Least Three Firms Have Already Announced Layoffs In Anticipation Of The Tax. “At least three firms have already announced layoffs in anticipation of the tax, including Michigan-based Stryker Corp, a maker of hip and knee replacements that said it will cut its work force by 5 percent, losing 1,000 jobs.” (N.C. Aizenman, “Medical Device Tax Repeal Bill Gains Some Ground,” The Washington Post , 5/30/12)

The Medical Devices Group: “The Tax Will Stifle Innovation And Cost Thousands Of High-Paying Jobs.” “The tax will stifle innovation and cost thousands of high-paying jobs. It will increase the effective tax rate for many medical technology companies, thereby reducing financial resources that should be used for R&D, clinical trials and investments in manufacturing. The impact will be especially hard on smaller companies whose innovations are not immediately profitable.” (Medical Devices Group, Petition To Congress, 7/18/11)

ObamaCare’s Taxes Such As The Medical Device Tax Is Leading To “Fewer Jobs.”“What is the impact of regulation and the new healthcare law? Fewer jobs. Seventy-eight percent of small businesses surveyed report the taxation, regulation and legislation from Washington makes it harder for their business to hire. And, 74% say the recent health care law makes it more difficult to hire additional employees.” (“Small Business Community Quarterly Survey,” US Chamber Of Commerce, 1/18/12)

• ObamaCare’s Tax On Medical Devices Will Keep Cook Medical, “The World’s Largest Privately Owned Medical Device Company” From Expanding. “It will cost Cook, the world’s largest privately owned medical device company, about $17 million of its $1 billion in annual U.S. sales. [President of Cook Group Inc. Kem]Hawkins said. ‘That’s a plant a year that we’re not able to invest in. Or it’s a large clinical study that we can’t invest in. Or it’s maybe 10 or 12 or 15 new product innovations that we can’t reinvest in,’ Hawkins said. ‘If we can’t build the plants, then we can’t hire the people.’” (Tony Pugh, “Medical Device Makers Push Congress To Repeal Excise Tax,” McClatchy, 9/22/11)
• Adarza Biosystems Inc. CEO Rand Henke: Medical Device Tax Is Keeping Adarza From Expanding. “The company has been sustained to this point by National Institutes of Health grants and some contracts. But Adarza wants to get to the next level, large-scale production, and that will require a major corporate partner. The threat of a medical device excise tax, amid other economic barriers, has kept that critical deal from happening. ‘The money lost from the consequences of that tax exceeds what will be raised,’ Henke said.” (Tom Tobin, “Health Care: The Everywhere Issue,” The Rochester Democrat And Chronicle , 9/25/11)

Medical Device Companies Across The Nation Are In Panic Mode

COLORADO: Fred Perner, CEO Of Colorado-Based Encision Inc, Expects The Tax To Cut Into The Company’s Profitability. “At Encision Inc. in Boulder, the feeling is much the same. Encision’s 61 employees are involved in making and selling devices and monitors used in laparoscopic, or minimally invasive, surgeries, said Fred Perner, the company’s chief executive. While a 2.3 percent tax may not sound like a lot, it’s a significant amount of the company’s profitability, Perner said. To respond, Encision may have to look at personnel costs in sales and marketing, as well as pricing and current research and development costs, he said.” (Beth Potter, “Device Makers Brace For Fed Tax,” Boulder County Business Report, 5/24/12)

• Boulder County Business Report: The Medical Device Tax Passed As Part Of ObamaCare Will Have A “Devastating Impact” On The Medical-Device Sector, Which Represents Thousands Of Jobs In Boulder Valley, Colorado.“But sometimes, Congress so bungles policy that it’s truly staggering. That’s the case with a planned 2.3 percent federal tax on medical devices — part of the Affordable Care Act that narrowly passed Congress in 2010. The tax, slated to go into effect in 2013, will have a devastating impact on the medical-device sector, which represents thousands of jobs in the Boulder Valley.” (Editorial, “Congress Should Rescind Tax On Medical Devices,” Boulder County Business Report, 5/24/12)

FLORIDA: Bill Petty, CEO Of Florida-Based Exactech, Says The Medical Device Tax Could Cost More Than $3 Million And Lead To Fewer New Jobs. “For an established company like Exactech, an excise tax scheduled to start next year on medical devices could cost more than $3 million and lead to fewer new jobs, CEO Bill Petty says.” (Anthony Clark, “Medical Device Makers Fear New Tax Would Cripple Them,” The Gainesville Sun, 6/03/12)

• The Tampa Tribune : “ Members Of Florida’s Congressional Delegation, Republicans And Democrats Alike, Should Kill This Insidiously Unhealthy Tax.” (Editorial, “Congress Should Rescue Medical Device Makers, The Tampa Tribune, 5/31/12)

INDIANA: Zimmer Holdings, An Indiana Medical Device Manufacturer, Plans To Lay Off Workers Due To The Medical Device Tax. “Zimmer Holdings (NYSE:ZMH) announced layoffs at its Warsaw, Ind., headquarters, pointing to the expected burden of the medical device tax as partly responsible for some of the losses. The orthopedics device maker plans to offset the entire burden posed by the impending 2.3% device levy in 2013 through cost-cutting efforts, part of which include layoffs.” (Arezu Sarvestani, “Zimmer Axes Jobs To Cut Costs Ahead Of Med-Tech Tax,” Mass Device, 3/6/12)

MICHIGAN: ObamaCare’s Medical Device Tax Caused Michigan-Based Medical Device Manufacturer Stryker To Cut Five Percent Of Its Workforce – Approximately 1,000 Employees. “Stryker, the Kalamazoo-based maker of artificial hips and knees, will cut 5% of its global workforce by the end of next year to reduce costs in the face of new fees on device makers required by the U.S. health care law. The job cuts will reduce annual pretax operating costs by more than $100 million beginning in 2013, when the medical-device excise tax is scheduled to take effect, Stryker said Thursday in a statement. Stryker had more than 20,000 employees as of Dec. 31, according to Bloomberg News data.” (“Stryker To Cut 5% Of Workforce,” Detroit Free Press, 11/11/11)

• Stephen Rapundalo, CEO Of MichBio, In Ann Arbor, MI: “There’s A Tsunami Coming And You Probably Won’t Know What Hit You Until It’s Too Late. … The Biggest Assault On Our Industry Is The Medical Devices Tax.” (Tom Henderson, “MichBio CEO Says Tax Is An ‘Assault’ On Medical Device Companies,” Crain’s Detroit Business, 4/22/10)

MINNESOTA: CEO Of Minnesota-Based LifeScience Alley Don Gerhardt: “Minnesota Is Going To Take About 25 Percent Of The Hit On The Total Tax Levied Against The Medical Technology Industry …”(Annie Baxter, “Excise Tax Has Local Medical Device Makers Concerned,” Minnesota Public Radio, 3/29/10)

• 69 Companies And Groups In Minnesota Signed A Nationwide Petition To Repeal The Medical Device Tax In ObamaCare. (Medical Devices Group,Petition To Congress, 7/18/11)

OHIO: A. Malachi Mixon III, CEO Of Ohio-Based Invocare, Said That The Medical Device Tax Is Like “Throwing A Hand Grenade” Into Health Care Industry. “The law includes a 2.3% excise tax on the sale of all medical devices except for consumer goods, such as contact lenses and hearing aids. . .Among established medical device companies, Invacare Corp. of Elyria, the world’s largest wheelchair maker, has been a vocal opponent of the tax. Invacare CEO A. Malachi Mixon III in a January interview with Crain’s went so far as to say the tax was the equivalent of ‘throwing a hand grenade in the middle of the health care economy.’” (Chuck Soder, “Tax On Medical Device Manufactuers Could Be Taxing,” Crain’s Cleveland Business, 3/29/10)

• 41 Companies And Groups In Ohio Signed A Nationwide Petition To Repeal The Medical Device Tax In ObamaCare. (Medical Devices Group, Petition To Congress, 7/18/11)

PENNSYLVANIA: Pittsburgh Post-Gazette: “Possible Tax Has Medical Device Firms Up In Arms.” (Daniel Malloy, “Possible Tax Has Medical Device Firms Up In Arms,” Pittsburgh Post-Gazette, 3/16/12)

• 34 Companies And Groups In Pennsylvania Signed A Nationwide Petition To Repeal The Medical Device Tax In ObamaCare. (Medical Devices Group,Petition To Congress, 7/18/11)

VIRGINIA: Wayne Sale, CEO Of Virginia-Based Health First, Says That The Medical Device Tax Will Be Passed On To Him, Eventually Costing Industry Jobs. “The health-care reform bill signed by President Obama last week brings with it new excise taxes on the medical device and pharmaceutical industries. … Wayne Sale, the owner of a Henrico-based medical supply distributor Health Firstwho heads up a national trade group that opposes the tax, says he expects manufacturers to pass the cost to him. ‘It directly affects me because my manufacturers have to take it on to the bottom line,’ said Sale. ‘Now they will sell me what they sell for $25 for $28 to make up the difference.’ … Sale thinks the tax will eventually cost his industry jobs. He does not expect an increase in customers who qualify for Medicare and Medicaid to offset increased costs created by the tax.” (Al Harris, “Health-Care Reform Brings New Taxes,” Richmond BizSense, 3/29/10)

• If The Medical Tax Passes, Sale Expects To Lay Off 40 Employees At His Firm, And Anticipates 100,000 Layoffs Industry-Wide. “ Sale said he might have to let some of his 40 employees go in that case. Industry wide, he expects 100,000 jobs to be lost within three years of the tax going into effect.” (Al Harris, “Health-Care Reform Brings New Taxes,” Richmond BizSense, 3/29/10)

THE MEDICAL DEVICE TAX WILL INCREASE HEALTH CARE COSTS FOR ALL AMERICANS

Medical Device Tax Is Just One Of ObamaCare’s Provisions That Will Affect The Middle Class. “Other provisions indirectly affecting individuals through possible effects on prices of goods and services include the imposition of an annual fee on manufacturers and importers of branded drugs; the imposition of an excise tax on manufacturers and importers of certain medical devices; repeal of the business deduction for federal subsidies for certain retiree prescription drug plans; the imposition of a fee on insured and self-insured health plans for the Patient Centered Outcomes Research Trust Fund; and the imposition of a 10-percent excise tax on indoor tanning services.” (Joint Committee On Taxation, Letter To Senator Tom Coburn, 3/20/12)

• Congressional Joint Committee On Taxation Said That “Increased Taxes Results In Higher Prices For The Products Of The Affected Businesses.”“Furthermore, other tax provisions in the bill that directly affect businesses may ultimately affect individuals and families earning less than $200,000 and $250,000, respectively, to the extent that increased taxes results in higher prices for the products of the affected businesses.” (Joint Committee On Taxation, Letter To Senator Tom Coburn , 3/20/12)

The Medical Devices Group: The Costs From The Tax Will Be Passed On To Consumers. “The tax will increase health care costs as confirmed by a report issued in April 2010 by the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS). In some cases, the 2.3% tax will be passed on to consumers, leading to higher health care costs.” (Medical Devices Group, Petition To Congress, 7/18/11)

• President/CEO Of The BioFlorida Trade Association Says “The Costs Will Be Passed To The Consumer And Defeat The Purpose Of Health Care Reform.”“Proponents of the tax say the expanded pool of insured people will increase demand for devices and ultimately help the manufacturers. Russell Allen, president and CEO of the BioFlorida trade association, said the industry universally disagrees. ‘The costs will be passed to the consumer and defeat the purpose of health care reform,’ he said.” (Anthony Clark, “Medical Device Makers Fear New Tax Would Cripple Them,” The Gainesville Sun, 6/03/12)

Medical Device Manufacturers Will Be Forced To Pass Along The Costs Resulting In Higher Health Care Premiums. “To the extent they can, device makers will pass this tax on to the hospitals and provider purchasing groups that buy their products, which will ultimately show up in insurance premiums.” (Editorial, “Improvised Explosive Device Tax,” The Wall Street Journal, 5/28/12)

THE TAX IS SO ATROCIOUS, THAT EVEN DEMOCRATS ARE COMING OUT AGAINST THE TAX

“Democrats Have Always Been Divided” On The Medical Device Tax. “Democrats have always been divided about whether the tax — crafted to help pay for the law — was a good idea, with strong resistance from lawmakers in states with a population of device makers. Proponents of the tax said it is necessary to raise money to help pay for the health law.” (Jennifer Haberkorn, “Medical Device Tax Questioned,” Politico, 5/30/12)

Several Democrats Have Co-Sponsored Legislation Repealing The Medical Device Tax. “House Republicans could make the tax even more of a wedge issue by forcing members to vote on whether to repeal it. Majority Leader Eric Cantor’s office said in a memo circulated Friday that the House could vote on the repeal legislation, sponsored by Rep. Erik Paulsen (R-Minn.), as soon as the week of June 4. The bill already has 238 co-sponsors, including 10 Democrats.” (Jennifer Haberkorn, “Medical Device Tax Questioned,” Politico, 5/30/12)

• So Far, 12 Democrats Have Signed On To The Legislation That Would Repeal ObamaCare’s Tax On Medical Devices. (H.R. 436, Introduced 1/25/11)
• Even Democrats Who Are Not In Competitive Re-Election Campaigns Have Co-Sponsored The Tax Repeal Legislation. “A handful of other Democrats are co-sponsoring the repeal bill, though they’re not all in competitive races, and at least one — Mike Ross of Arkansas — is retiring. The others include Reps. Michael Capuano of Massachusetts, Susan Davis of California, Larry Kissell and Mike McIntyre of North Carolina and Jim Matheson of Utah.” (Jennifer Haberkorn, “Medical Device Tax Questioned,” Politico, 5/30/12)

“Minnesota’s Two Democratic Senators, Al Franken And Amy Klobuchar, Say They Favor Eliminating The Tax…” (Alan Fram, “GOP Plays Offense In Medical Device Tax Fight,” The Associated Press, 6/4/12)

• Senator Amy Klobuchar (D-MN) Has Taken A Stronger Stance Against ObamaCare’s Medical Device Tax. “Sen. Amy Klobuchar (D-Minn.) was one of the most vocal opponents of the tax during the debate over the health reform bill in 2009 and 2010 and led the Senate effort to cut the tax in half. She told POLITICO last Thursday that she would support repealing the tax, a tougher position than she has previously expressed about repeal.” (Jennifer Haberkorn, “Medical Device Tax Questioned,” Politico, 5/30/12)

• Sen. Klobuchar Would Support Legislation That Would Repeal The Tax. “‘It’s something I’d like to reduce or eliminate,’ she said. When asked if she would support a repeal bill, she said ‘yes.’” (Jennifer Haberkorn, “Medical Device Tax Questioned,” Politico, 5/30/12)

Representative Bill Owens (D-NY) Has Co-Sponsored Legislation That Would Repeal ObamaCare’s Medical Device Tax. “U.S. Rep. Bill Owens, D-Plattsburgh, said he has agreed to cosponsor legislation to repeal a tax on the medical device industry that is set to take effect next year.” (Maury Thompson, “Owens Joins Effort To Repeal Medical Device Tax,”The Post-Star , 5/20/12)

• Representative Bill Owens (D-NY): There Are Better Ways To Pay For ObamaCare. “‘After looking into the issue further and discussing the matter with a constituent, I decided that there were better ways to pay for expanding health coverage,’ Owens said in a statement to POLITICO.” (Jennifer Haberkorn, “Medical Device Tax Questioned,” Politico, 5/30/12)

Both Of The Candidates In Pennsylvania’s 12^th District Democrat Primary Came Out Against The Tax. “The tax was also an issue in the Democratic primary in the 12th Congressional District in Pennsylvania, where Reps. Jason Altmire and Mark Critz faced off. Both ended up co-sponsoring repeal of the tax. The district has a heavy medical device population and could be a harbinger for Democrats in tough races in similarly device-heavy districts.” (Jennifer Haberkorn, “Medical Device Tax Is Questioned,” Politico, 5/30/12)

• Representative Altmire (D-PA) On The Medical Device Tax: “This Is The Worst Possible Outcome Not Only For American Jobs And American Innovation, But Also For The Patients Who Might Not Have Access To A New Medical Device Or A New Technology That Could Save Their Lives.” “After touring many device companies, both large and small, we know that this impending tax may force companies to cut jobs, reduce investment in R&D, move overseas, or even shut down completely. This is the worst possible outcome not only for American jobs and American innovation, but also for the patients who might not have access to a new medical device or a new technology that could save their lives.” (Rep. Erik Paulsen (R-Minn.) And Rep. Jason Altmire (D-Pa.), Op-Ed, “New Tax Will Hurt Medical Device Innovation,” The Hill, 6/6/12)

Representative Altmire (D-PA): “This Tax Is A Ticking Time Bomb That Must Be Stopped.”“This tax is a ticking time bomb that must be stopped. Together, we are leading the bipartisan effort to repeal this tax before it starts. We have 239 bipartisan cosponsors on the bill for repeal that is set to be up for a vote this week. We have an opportunity to vote for innovation and jobs — and ensure that the next great medical breakthrough is developed here in the U.S., not imported from abroad.” (Rep. Erik Paulsen (R-Minn.) And Rep. Jason Altmire (D-Pa.), Op-Ed, “New Tax Will Hurt Medical Device Innovation,” The Hill, 6/6/12)