medical devices

The New Billion Dollar Tax

By | Taxation | No Comments

The medical device industry made history this week when they passed the billion dollar mark in excise taxes paid to the IRS since January 1st, 2013. That comes to about $194 million per month. Needless to say, this is nothing to celebrate.  The money thats going to taxes is money medical device manufacturers would have used to invest in R&D, their facilities and most of all – new jobs.

As we’ve said many times before, this tax is not only a threat to innovation but also to the United States’ position as the global industry leader in medical devices. We appreciate the Senates 79-20 vote in March in favor of resolution to repeal the medical device tax and the bipartisan support for, “The Protect Medication Innovation Act” legislation in the House, which currently has 253 co-sponsors, and its related Senate bill, “The Medical Device Access and Innovation Protection Act,” that was introduced on a bipartisan basis by Senators Klobuchar (D-MN.) and Hatch (R-UT) and currently has 34 co-sponsors. We urge Congress to finish the job and get rid of this job-killing tax ASAP.

Manufacturers cannot afford for policy makers to sit back and continue to let the medical device tax take away from job creation, innovation and patient care. We hope that leadership in both the House and Senate understand that time is of the essence and work together to advance the repeal of this onerous tax.

Keeping in Mind the Medical Device Tax as We Move Closer to the Election

By | Taxation | One Comment

In the past two weeks we’ve seen op-eds from Indiana Senator Dan Coats in Politico and former Senator Evan Bayh in the Wall Street Journal emphasizing the devastating effects the medical device tax will have on manufacturers and American competitiveness come January 1st, 2013. To date, the medical device industry employs more than 400,000 employees in the United States and continues to be a global leader in the sector for delivering groundbreaking technology and innovation.

As a result of the health care reform legislation, medical device manufacturers will face a 2.3% excise tax on every medical device sale. Senator Coats states that the device tax is estimated to cost the industry more than $20 billion over next decade. A direct consequence of this tax is that companies have already begun to scale back their workforce and abandon plans for expanding their operations. Senator Bayh mentions that for a typical company, the 2.3% tax on sales amounts to a 15% tax on profits. When combined with the 35% corporate tax and state corporate tax rate, the tax rate for medical device manufacturers would exceed 50% in many jurisdictions. It is clear that the effect of this tax will be particularly devastating for small and medium sized manufacturers.

With only 25 days until the election, we must ensure that Congress repeals the medical device tax when they return to Washington in November to make sure the success this industry has generated continues into the future and that American jobs do not move off-shore.

Texas Gov. Perry: ‘I Don’t Want National Tort Reform’

By | Briefly Legal, General, Health Care | One Comment

During his briefing with bloggers today, Gov. Rick Perry of Texas repeatedly turned to the federalism and the 10th Amendment of the Constitution as core principles informing his approach toward domestic policy issues. Let states like Maryland or California experiment with high taxes or more regulations while Texas does the opposite, he argued. The American people can choose where they prefer to live.

We noted that several conservative Republicans on the U.S. House Judiciary Committee had expressed opposition to H.R. 5, the medical liability reform bill, on just those grounds.

“I don’t want national tort reform,” Perry said forcefully.

Let me tell you why. We have medical tort reform in the state of Texas. It works. We are a haven.  Twenty-six thousand doctors have applied to practice medicine in Texas since 2003 when our tort reform became the law in Texas. Here’s what disturbs me: If they pass a national bill, I would bet you dollars to donuts, it is weaker than what we’ve got in Texas. So our physicians would be in a less favorable position from the standpoint of protection from frivolous lawsuits. …

I don’t ever get confused that this issue’s about doctors. It’s about access to care, because what we’ve seen in Texas – and I don’t want to spend too much time on this — but what we’ve seen in Texas was that because of the proliferation of frivolous lawsuits that occurred in Texas in the ‘90s and the early part of the 2000s, you had particularly high risk for specialties like OBY-Gen, orthopedic surgeons.


In the grand and global sense, anything in the constitution about tort reform? Leave that to the states. Come down and actually put the people on the border. Put the aviation assets in the air so we can have the protection for our citizens, and frankly, the Mexican citizens as well, and stop these drug cartels. That IS a federal responsibility that they are abject failures at, at present.

The first quotes are here as an .mp3 file, and the second cut is here.

The governor’s position, most directly applicable to caps on punitive damages, is not a popular one with House Republicans who view medical liability reform as an important element of their drive to control health care costs.

There are provisions H.R. 5 that clearly involve interstate commerce and are thus appropriate for federal legislation, specifically the treatment of drugs and medical devices that are approved by the Food and Drug Administration. See our post, “Why Medical Liability Reform Matters to Manufacturers.”

Medical Devices, Liability Reform, and Defensive Medicine

By | Briefly Legal, Health Care, Innovation, Regulations | No Comments

The House Energy and Commerce holds a hearing this morning, “Impact of Medical Device Regulation on Jobs and Patients,” to examine the state of the medical device industry and the impact of regulations on job creation and patient access.

It’s a timely topic. Working on H.R. 5, the medical liability reform bill, the House Judiciary Committee rejected an amendment (Amdt. 15) sponsored by Rep. Mike Quiqley (D-IL) to strike the “safe harbor” provisions that would preclude punitive damages in litigation against FDA-approved medical devices and drugs. We discussed the importance of that language in a post Wednesday, “Why Medical Liability Matters to Manufacturers.”

Elsewhere in the world of medical liability, a new study provides further documentation that the threat of lawsuits drives doctors to conduct unnecessary and expensive tests, driving up health care cost. From the American Academy of Orthopaedic Surgeons, “Healthcare Spending: Study Shows High Imaging Costs for Defensive Purposes“:

Nearly 35 percent of all the imaging costs ordered for 2,068 orthopaedic patient encounters in Pennsylvania were ordered for defensive purposes, according to a new study presented today at the 2011 Annual Meeting of the American Academy of Orthopaedic Surgeons (AAOS).

For many years now, some physicians have ordered specific diagnostic procedures that are of little or no benefit to a patient, largely to protect themselves from a lawsuit. Until now, however, efforts to actually measure defensive medicine practices have been limited primarily to surveys sent to physicians. Such surveys would simply ask whether or not that individual actually practiced defensive medicine.

“This is the first study we know of that looked at the actual practice decisions of physicians regarding defensive imaging in real time — prospectively done,” says John Flynn, MD.

And here’s the agenda for the summer convention in New York City of the American Association for Justice, the trial lawyers’ lobby. You’ll see that AAJ’s members are very interested in suing doctors, drug makers and medical device manufacturers.

Impact of Health Care Law: Less Innovation in Medical Devices

By | Health Care, Innovation, Taxation | No Comments

It’s hard to imagine the discussions that went into the writing of the legislation to expand the federal government’s role in health care, the Patient Protection and Affordable Care Act:

But how do we pay for all this?

Well, our medical device industry is the global leader, innovating and really stimulating economic growth.

Good, let’s tax it!

Which leads us to this entry in the new report from Sens. Tom Coburn (R-OK) and John Barrasso (R-WY), both doctors, “Grim Diagnosis – A check-up on the federal health law.”

Companies that innovate, create, and develop life-saving, life-improving devices will likely lose jobs too. Manufacturers of medical devices are reeling from a provision of the law that will levy a $20 billion excise tax on their industry. The Boston Globe reported that the 2.3 percent excise tax on companies that supply medical devices like heart defibrillators and surgical tools to hospitals, health centers and ambulance services, will force industry leaders to lay off workers and curb the research and development of new medical tools. One CEO said the new tax threatens his business‘ sustainability because it has relegated his company‘s profitability to merely a break-even position.

The basic problem with the tax is one of math. Many small to midsize medical device companies will owe more to the federal government in taxes than they make in profits, according to Mark Leahy, head of the Medical Device Manufacturers Association. “We’re talking about a 2.3 percent tax on total sales, irrespective of whether a company is making a profit.” The device tax will hamper innovation, since the amount of money available for a company to reinvest in its business development will be reduced. Some companies are already contemplating moving jobs overseas to avoid losing their competitive edge. Outsourcing is just one of many adverse unintended consequences of the new law.

The news release is, “Drs. Coburn and Barrasso Release New Health Care Report.” Jobs will be lost.

FDA Medical Device Proposal: Undercutting U.S. Success Story

By | Health Care, Regulations | No Comments

The medical device industry is a textbook story of manufacturing success in the United States. This industry, comprising manufacturers of devices and diagnostics, is a sector of the manufacturing where the U.S. leads the world. Medical technology represents the 11th largest manufacturing sector in terms of exports and has consistently maintained a favorable balance of trade. Yet, actions being considered by the Food and Drug Administration with respect to the approval of devices threaten to stifle innovation and cost Americans jobs.

The FDA is considering making changes to the 510(k) approval process, which in its current form, demonstrates an exemplary record of safety and effectiveness. (Federal Register notice.) However, despite significant increases in resources made available to the FDA through user fees and appropriations enacted as part of the Medical Device User Fee Act in 2002 and reauthorized in 2007, performance at the agency has markedly declined since 2003. For example, total review times, number of review cycles, amount of time manufacturers spend answering FDA questions after products are submitted for review or the withdrawal of applications before a final decision have gone up – even with the additional resources afforded the FDA. So what’s the answer from the agency? Notwithstanding an outstanding safety record, they want to make it more difficult and time consuming to get new products to patients.

The proposal under review at the FDA would do the following:

  • Impose arbitrary limits on acceptable predicate devices
  • Redefine the term “substantial equivalence”
  • Eliminate separate classification of intended use and indications for use

As the National Association of Manufacturers argues in a joint comment letter with the U.S. Chamber of Commerce, making these changes will increase approval time and costs with no appreciable benefit to consumer safety or device effectiveness. Indeed, such changes could negatively affect public health by curtailing the availability of needed treatments and cures. The FDA should carefully reconsider these proposals and err on the side of doing no harm to a process and an industry to which many Americans owe their lives and livelihood.

Joe Trauger is vice president of human resources policy at the National Association of Manufacturers (NAM).

Never Letting a Good Deed (Device) Go Unpunished (Unregulated)

By | Briefly Legal, General, Innovation, Regulations, Taxation | One Comment

In a Forbes magazine column, “K Street Capers,” Brian Wingfield reviews some of the lower-profile issues on which business associations lobby, such as the unintended consequences of Iran sanctions, foreign-made plastic flowers and mixed-martial arts.

And lithium batteries. We wrote yesterday how the new health care law taxes one of U.S. industry’s great success stories, medical devices, forcing manufacturers to cut jobs and investment. (“Never Letting a Good Deed (Device) Go Unpunished (Untaxed).”) Federal regulators are also working to make it more expensive and difficult for the industry to operate in the United States.

Batteries. Makers of lithium ion batteries and medical-device producers are fuming about a proposed Department of Transportation rule they claim will drive up the distribution costs to power cellphones, e-readers, pacemakers and insulin pumps by $8.5 billion during the next decade. The regulation would classify all lithium batteries as hazardous materials when transported by cargo plane–requiring special storage easily accessed by pilots in case of fire–and forcing manufacturers to get safety certifications for battery design. A pending transportation bill sponsored by House Transportation Committee Chairman Jim Oberstar (D–Minn.) would impose similar restrictions.

Meanwhile, the trial lawyer lobby is still trying to stimulate more speculative lawsuits against device makers, pushing the Medical Device Safety Act, which would replace consistent federal safety standards under the FDA with a more exploitable regulatory regime under 50 state court systems. (The bills are S. 540, originally introduced by Sen. Edward Kennedy.)

Too many federal officials claim to support U.S. manufacturers but then enact laws and regulations that disadvantage the same manufacturers in global competition. In the case of medical device manufacturers, they have to be wondering, “What’s next?”

Never Letting a Good Deed (Device) Go Unpunished (Untaxed)

By | Health Care, Taxation, Technology | No Comments

NAM President John Engler mentioned the medical device industry in remarks at the Managing Automation Summit in Palm Beach, Fla., yesterday, remarking that it was one of the industries where U.S. industry is an indisputable global leader. And how does Congress treat this center of competitiveness and innovation? By taxing it to pay for an expansion of health care?

Here’s the inevitable response, via The Boston Herald, “Mass. device firms see health law as burden“:

Massachusetts medical-device companies say they’ll cut back on operational costs – and jobs – after a planned 2.3 percent tax on their products is implemented in 2013, according to a new survey.

The Massachusetts Medical Device Industry Council, which held its annual meeting yesterday in Boston, said about 90 percent of the 100 medical-device firms said they would reduce costs due to the new tax tucked into the recently passed health-care reform bill.

The tax – imposed to help pay for the massive health-care industry overhaul and expansion – is “of the greatest concern” to a majority of its members, the survey found.

MassDevice, an online trade publication, also covers the survey, “Survey: Device tax could force job cuts, higher prices.”

Innovative Manufacturers? Tax Them

By | Communications, Health Care, Innovation, Taxation | No Comments

The Business Council of Alabama and the Alabama Technology Network held their annual Manufacturer of the Year awards event Wednesday, with three innovative manufacturers receiving recognition. The National Association of Manufacturers helped sponsor the awards, and NAM President John Engler provided a video salute to the honorees.

Large Manufacturer of the Year: ADTRAN, Inc. is a leading global provider of networking and communications equipment, providing solutions for voice, data, video and Internet communications across a variety of network infrastructures. ADTRAN, Inc. has been recognized by Fortune Magazine as one of the nation’s 200 Best Small Companies, as one of the “40 Best Stocks to Retire On,” and in 2009 was voted one of the Best Places to Work in Huntsville/Madison County.

Medium Manufacturer of the Year: STERIS Corporation, Montgomery is a leading provider of infection prevention and surgical products and services for the health care industry, serving thousands of customers in more than 60 countries. The Montgomery facility’s 260 employees produce a variety of products for the operating room and surgical environment, including surgical tables, lighting systems, scrub sinks, stretchers, warming cabinets, and equipment management systems that provide medical personnel ready access to medical gases, electrical power, and communication services.

Small Manufacturer of the Year: Turner Medical of Athens transitioned from a leading supplier of automated equipment for the automotive and appliance industries to a manufacturer of surgical instruments for the medical industry. Today, Turner Medical is one of the highest quality medical manufacturers in the Southeast and one of the fastest growing facilities in north Alabama. Turner Medical’s 80 employees supply a wide variety of surgical instruments as well different implantable rods, plates and screws to the orthopedic medical history.

Congratulations to all three. Innovation, investment and excellence occur across all sectors of industry, but it’s certainly no surprise to find outstanding examples in telecommunications equipment and medical device manufacturing — areas where the United States remains a global leader.

Congress asks, how can we screw that up?

A tax on medical devices is a good start. From The Boston Herald, via The Daily Caller, “Health-care sales tax could kill thousands of Bay State jobs“:

A dire warning from Bay State medical-device companies that a new sales tax in the federal health-care law could force their plants – and thousands of jobs – out of the country has rattled Gov. Deval Patrick, a staunch backer of the law and pal President Obama.“This bill is a jobs killer,” said Ernie Whiton, chief financial officer of Chelmsford’s Zoll Medical Corp., which employs about 650 people in Massachusetts. Many of those employees work in Zoll’s local manufacturing facility making heart defibrillators.

“We could be forced to (move) manufacturing overseas if we can’t pass along these costs to our customers,” said Whiton.

U.S. Senate Republicans also identified the Medical Device Tax as damaging policy and potentially good politics, proposing amendments during last night’s debate on the reconciliation bill.