If you don’t think the impending medical device tax is a big deal, just ask Caroll Neubauer’s cardiologist.
The chairman & CEO of B.Braun’s North American business admits that just talking about the tax, slated to go into effect in 2013, gets his blood pressure up immediately.
“It’s not emotional at all, it’s numbers based” he told MassDevice this week at the annual Advanced Medical Technology Assn. conference in Washington, D.C. “If I don’t have an addition $150 million a year or whatever it is for B.Braun Medical Inc., I’m not going to have it for R&D. I’m not going to have the cash flow for factories. It’s going to have an impact. We didn’t throw that money away before. 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.”
The argument was made over and over at this week’s annual confab of the medical device industry, loud enough for all to hear: The medical device tax will be a jobs-killer. Period.
The message isn’t necessarily new. Earlier this month, AdvaMed released an industry-funded study showing that the 2.3 percent levy puts more than 43,000 U.S. jobs at risk. Boston Scientific Corp. (NYSE:BSX) CEO Ray Elliott called it “an outrage.” But the consistency and tenor of the message this week in Washington was striking.
Stryker Corp. (NYSE:SYK) CEO Stephen MacMillan, who’s on tap to take over as AdvaMed chairman next year, estimated the tab on the medical device tax at $150 million for his company.
"Here we are, one of the greatest industries in the country, and we’re staring down on January 1st, 2013 and the addition of a 2.3 percent excise tax, while meanwhile on the other side all the discussion in Washington is about creating jobs," MacMillan said. "There is no doubt that we’re already starting to think about actions that offset that additional tax."
With a grim jobs picture in the U.S. and President Barack Obama focused on getting his jobs bill through Congress, it’s an issue with legs for the industry’s push for repeal. The Patient Protection & Affordable Care Act Obama signed into law last year contains a provision that would require device makers to fork over 2.3 percent of their gross U.S. revenues beginning in 2013. The levy is designed to help pay for health care reform by raising about $20 billion over 10 years.
To date, the tax has garnered little national outrage. Efforts on Capitol Hill aimed at repeal have support from a mostly Republican slate of legislators, joined by a handful of Democrats who’ve lent their names to a House bill sponsored by Rep. Erik Paulsen (R-Minn.).
Citing an estimate that the federal government borrows $3 billion a day to fund its operations, MacMillan said the imperative for the device industry is getting the ear of more members of Congress.
"One-hundred-fifty million means nothing to people in Washington. That’s a rounding error," he said during the conference. "They look at a tax on our industry like, ‘What’s the big deal?’ We have to make those numbers real, because they’ve become numb to a government that is spending $3 billion in deficits every day."
Although it remains steadfast in its opposition to the tax, there’s an opportunity to frame the issue in the context of overall tax reform, AdvaMed president & CEO Stephen Ubl added.
"We all know that our corporate tax regime in this country is increasingly uncompetitive, made worse by the medical device tax," Ubl said. "We know R&D tax credits slipped dramatically. … As Congress begins to look at tax reform – whether it happens this year, next year or after the next presidential election – we’re going to have an opportunity to revisit the tax in that broader context."