UPDATE: St. Jude drops out of AdvaMed in device tax dispute

November 10, 2009 by MassDevice staff

Medical device-making giant St. Jude Medical Inc. pulled its membership in the Advanced Medical Technology Assn. (AdvaMed) in a dispute over the industry council's handling of a proposed healthcare reform tax on medical device makers.

In a Nov. 2 letter to AdvaMed president Steven Ubl, St. Jude CEO Daniel Starks resigned his seat on AdvaMed's board and canceling his company's membership in the group.

At issue is AdvaMed's stance on the structure of a proposed medical device tax, included in various House and Senate healthcare reform packages. The tax was originally floated as a 10-year, $40 billion fee based on market share in a Senate Finance Committee bill. The House version passed over the weekend cuts that in half and wouldn't begin until 2013.

Ubl, whose support of overall healthcare reform is tempered by his opposition to undue tax burdens that could stifle his industry, has proposed that the tax be differentiated by Food & Drug Administration product class.

That differentiation is necessary to "recognize the diversity of medical device products and the thousands of companies that develop and manufacture them," Ubl wrote in a Nov. 6th statement, adding that "small manufacturers with less than $100 million in annual gross receipts should be exempted from the tax, perhaps through a rebate mechanism."

That didn't sit well with SJM's Starks, according to a letter
Dow Jones news service. Starks wrote that AdvaMed's proposal would put companies that made more complex (and more expensive) devices at a disadvantage.

"We feel it is inappropriate for AdvaMed to advocate for a specific policy that economically advantages a portion of its membership at the expense of other members," Starks wrote.

The AdvaMed proposal, which hasn't been taken up by any legislation, revealed a fissure within AdvaMed's ranks, as larger, more profitable companies would be called upon to carry an undue burden. For SJM< Starks wrote, that means the council can no longer effectively represent St. Jude's interests.

"Regrettably, St. Jude Medical has withdrawn its membership from AdvaMed," AdvaMed spokeswoman Wanda Moebius said in a written statement. "AdvaMed's Board of Directors voted overwhelmingly to approve a set of principles that would guide the association's efforts to address the proposed medical device tax. St. Jude disagreed with one element of those principles and resigned its membership. Our membership is united in its efforts to preserve an environment where medical innovation can thrive and in supporting affordable, quality health reform to improve patient access to life-saving, life-enhancing medical technology."

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