Real healthcare reform won’t come from high-tech innovation but rather from reforming Americans’ eating and exercise habits, according to former Medtronic Inc. (NYSE:MDT) CEO Bill George.
George, who led the Minnesota medical device monolith from 1991 to 2001, told Minnesota Public Radio that taxing the medical device industry is "counter-productive" because it will stifle the development of innovative medical technologies.
"Basically what happened here is the medical device manufacturers did not go in early to negotiate or lobby for a deal like the pharmaceutical manufacturers did, and there was some resentment on the part of key Senators that they didn’t do that, so there was a decision basically to tax medical innovation," George said.
Big pharma got to the negotiating table early on in the discussions over healthcare reform, pledging $80 billion toward Medicare prescriptions through 2020. The medical device industry, in contrast, proposed taxing hospital purchasing groups instead, which would pass some or all of that tax on to device makers. That apparently rankled lawmakers, who initially proposed a $40 billion levy on the industry over 10 years. That was later scaled back to $20 billion, but a deal with unions to exempt them from a tax on high-end "Cadillac" healthcare plans prompted legislators to propose adding $10 billion back into the tax.
George, now a professor at Harvard Business School with seats on the boards of Exxon Mobil and Goldman Sachs said that although he thinks government will have to raise more money to pay for healthcare, taxing medical devices isn’t the way to do it. Permanent tax credits for research and development would be a better way to foster innovation and improve healthcare, he said.
"I watched Medtronic, since I went there 20 years ago — not because of me — it’s gone from 4,000 employees to over 40,000 employees. Lots of those employees out of the U.S., but guess what, the ratio is still 75 percent Americans, 25 percent non-Americans, and very heavily in Minnesota," he told the MPR. "And those are good jobs. Those are very good jobs. They are sustainable jobs. They’re not jobs that go away when there’s snow on the ground."