From absurdity to reality: Medical device tax jolts Invacare CEO Malachi Mixon

January 13, 2010 by MedCity News

Invacare Corp. chairman and CEO A. Malachi Mixon III thought medical device tax was an impossible absurdity. Then it made it into the Senate healthcare reform bill.

By Mary Vanac

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ELYRIA, Ohio — A. Malachi Mixon III shook his head when he first heard about a proposed $4 billion tax on medical device makers as part of the Senate Finance Committee's healthcare reform bill last year.

“To be honest with you, when I first heard about this, I thought it was so absurd, it will never make it” into final reform legislation, said Mixon, chairman and CEO of Invacare Corp. (NYSE:IVC), which makes home healthcare products ranging from rehabilitative wheelchairs to oxygen systems.

But on Dec. 28, a modified version of the proposal did make it into the Senate’s healthcare reform bill. “All of a sudden, this thing passed. I couldn’t believe it. I can’t believe this is happening to our country,” he said.

Some device makers may be taking a wait-and-see approach when it comes to publicly disussing the proposed tax — it might not happen, they reason — but Mixon and Invacare are less reticent.

“We told our shareholders about the risks. I’m openly talking about it,” Mixon said.

Last week, Invacare said it expects to pay between $12 million and $14 million a year on U.S. sales of medical devices. To start saving money this year to pay that nut, Invacare has “already taken steps to suspend matching contributions under its 401(k) retirement plan, suspend merit pay increases for management employees and freeze new hiring,” according to a regulatory filing.

Mixon talked to MedCity News about the proposed tax and what it would mean for Invacare and the industry.

MedCity News: How do you describe the legislation in both the House and Senate that would tax U.S. sales of medical devices?

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