As House Republicans push forward with a measure to repeal the impending 2.3% medical device levy, Cook Group chairman Stephen Ferguson warns that U.S. patients and workers have the most to lose should the tax be allowed to take effect in 2013.
"You know, Cook can survive anything," Ferguson told MassDevice. "We can deal with these issues, but the people who are manufacturing the devices and the patients who are looking at access to the latest technology, I think, are the 2 groups who will be the most impacted by this."
Ferguson and Cook Medical have been vocal opponents of the med-tech tax, calling it a "bad idea that will only get worse with time," and saying it will result in a 15% cut in Cook’s bottom line.
"I hope that we have enough common sense in this country and we can lay aside partisan politics to correct this situation," Ferguson told us this morning, "and there are a lot of members of Congress who feel that way."
The med-tech tax repeal movement has been gaining momentum in the House over the past year and will likely go to a vote in the Spring, Minnesota Public Radio reported.
While Covidien plc (NYSE:COV) CFO Charles Dockendorff recently called the tax "just another business issue that we will deal with," Ferguson calls the measure an unwelcome burden on an industry that is already under pressure.
Between a complicated and slow-moving regulatory process and constraints in foreign markets, device makers will have to find new strategies to stay afloat – and that may mean shifting more manufacturing overseas, he said.
"If you want to drive an industry outside of the U.S., that’s the perfect storm to do it," Ferguson told us. "It’s like you just threw another stone into the ship and it’s now sinking."
The device industry’s stance is that the tax threatens jobs, investment, patient access and overall U.S. prominence in med-tech.
Carroll Neubauer, chairman & CEO of B. Braun’s North American business, told MassDevice last September that just thinking about the tax gets his blood pressure rising.
"We didn’t throw that money away before," he told us. "We’ve reinvested it and we won’t have that money to reinvest either in people or in machines or buildings or R&D activities like we did in the past."
Ferguson noted that manufacturing outside of the U.S. will become a more alluring alternative as Cook looks to recoup some of the hit to its bottom line.
"Of course, as a manufacturer, it’s pretty easy to shift manufacturing locations because you’re manufacturing the same product and to the same specifications throughout the world, so all you have to do is expand at another spot," he explained. "At this point, we manufacture about 85% of our devices in the U.S. and our sales are about 47% in the U.S. and 53% outside, so we’re still a U.S. manufacturer primarily. But what we see as we bring new products to market, that will probably be located outside the U.S."