Add Zoll Medical (NSDQ:ZOLL) CEO Rick Packer to the growing list of medical device CEOs speaking up in favor of a bill introduced by Sen. Scott Brown (R-Mass.) to recall the medical device tax contained in the Patient Protection & Affordable Care Act.
“To impose a $20 billion tax on medical devices is a threat to our industry’s position of global leadership and the future of America’s economic rebound,” Packer, the chief executive of the Chelmsford, Mass.-based resuscitation device maker, said in a written statement to MassDevice. “We fully support Sen. Brown in his legislation to repeal an unfair tax that would have far-reaching repercussions on so many and in so many ways.”
Brown, who campaigned against the tax as he sought the late Sen. Edward Kennedy’s seat in 2009, introduced the Senate bill late last week. His measure joins other moves already afoot in Washington to repeal the tax. Republicans in the House and Senate, including Sen. Orrin Hatch of Utah, introduced a trio of bills to shoot it down in late January. Brown was a co-signer of the Hatch bill.
It’s not surprising that Packer would speak out in favor of the measure, or the Bay State’s junior senator for that matter. Brown picked up many of his talking points against the tax from a trip to Zoll’s manufacturing facilities last January. It was then that Packer told him that a 2.3 percent excise tax on revenues would wipe out the company’s annual profits, a data point that Brown continues to use as he sells his repeal bill to the public.
A year later, Zoll’s profits have likely outgrown that point. The company more than doubled its earnings in 2010, to nearly $19 million on $444 million in sales. Were the device tax in effect today, the nut Zoll would owe Uncle Sam on the device tax would be less than $7.5 million, based on the company’s North American sales of $328 million during 2010 (exact calculations can’t be made because Zoll doesn’t break out U.S.-only sales figures).
The size of the bite the tax would take isn’t a factor for Brown, who told MassDevice last week that the tax is a levy with no purpose or rationale.
“A 2.3 percent tax just because?" Brown told us after a speech at the Mass. Institute of Technology. "For some of these companies, that’s their entire net profit. That’s jobs, it’s R&D, it’s a whole list of other things. It’s not a necessary tax."
But he hedged when asked to handicap his bill’s chances of passing.
"It’s hard to say right now, but as with other bills I’ve had a tremendous amount of interest from everybody," Brown said.
Should his bid fail, he added, "I’m open to all suggestions, because the bottom line is it’s being used just because. We can do better than that."
It’s not Brown’s first run at overturning the tax. An amendment he introduced last year during the contentious debate over healthcare reform failed to pass muster, but Brown vowed then not to give up the fight.
“Repealing this onerous tax would help the US maintain global leadership in the development, manufacturing and export of medical technology,” Elliott said.