Repeal the ACA's Tax on Medical-Device Sales
Friday, October 18, 2013
Source: Rochester Business Journal
Earlier this month, MedTech held its annual conference in Rochester, focused on mapping the road to profitable growth for the bioscience and medical 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 and the nation but also brings hope and solutions to millions of patients. 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 act's 2.3 percent 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.
By harming the economic prospects of medical device manufacturers, the tax will raise national health care costs by more than $18 billion, estimates 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.
Device manufacturers and scientists are motivated to develop new technology to help patients lead healthier and higher-quality lives. 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. 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.
The medical device industry employs 360,000 Americans and pays $21.5 billion in annual wages. And despite rising trade imbalances, the 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 encumbers it with a 55 percent tax burden or higher for some companies. Despite the loyalty many manufacturers have for the United States, its business environment, saddled with taxes such as these, simply cannot compete with the rest of the world.
Cook Group, a major participant in the MedTech 2013 conference, 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-but the tax has forced Cook to consider other options. Cook is hardly the only device manufacturer to struggle with the tax. Industrywide, the Advanced Medical Technology Association projects the tax will cost the United States 43,000 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 health care, reducing patient access to the technologies they depend upon. For the sake of a stronger economy and a healthier nation, repeal this tax.
Jessica Crawford is president of MedTech, a statewide bioscience and medical technology industry association in New York. Dan Peterson is vice president of industry and government affairs at Cook Group and a plenary speaker at MedTech 2013.