Steve Ferguson, the chairman of Cook Group, said a looming 2.3 percent excise tax on U.S. revenues from medical devices sales will kill 15 percent of Cook Medical’s profits.
"For a company like ours, which pays 35 percent of our net earnings in federal corporate taxes and another 4 to 5 percent in state and local corporate taxes, the excise tax translates to another payment that will consume 15 percent more of our earnings," Ferguson told Indiana University’s Health Forum on medical technologies today. "This creates tremendous pressure for us to move manufacturing to Europe and other parts of the world."
Cook Medical was on track to roll out new plants around the U.S. Those plans have been shelved due to the tax, Ferguson said, which is set to take effect in 2013.
"Many companies are being forced to limit investments in R&D in the U.S. and go abroad. Further, many copmpanies are looking to reduce their U.S. capital investment. For Cook, we had planned on making additional investments in U.S. communities. Now, because of the tax, those plans are on hold," he told the panel, which included Reps. Erik Paulsen (R-Minn.) and Marlin Stutzman (R-Ind.), adding that Cook "strongly" supports legislation to repeal the tax.
"Do not wait to until 2013 to pass this repeal," Ferguson urged. "Companies are already making changes and these decisions cannot be easily reversed. Once this industry goes abroad, it will be nearly impossible to get it back."
Cook is at the vanguard of the industry’s push to repeal the device tax. Cook Medical was one of nearly 430 companies and interested parties to petition (PDF) the leaders of both houses of Congress for a repeal over the summer.