B. Braun Medical is spiking its plan to expand its Pennsylvania headquarters due to the medical device tax, CEO Caroll Neubauer told MassDevice.com last week.
The medical device tax, a 2.3% levy on U.S. sales, cost B. Braun $13 million in each of the last 2 years. Neubauer told us that’s too much to absorb and be able to fund the $40 million construction of a new HQ, Neubauer said at DeviceTalks West last week.
In October 2013 Braun announced the purchase of nearly 22 acres in Upper Saucon Township, Pa., that it planned to use as the site for a new HQ and training facility. But the impact of the medical device tax means that plan is tabled, Neubauer told us.
"We didn’t invest in a major new headquarters, which was going to have an academy educational facility for salesforce, for physicians, nurses and hospital administration, state-of-the-art. I just couldn’t build it. I didn’t have the cash. That was probably a $40 million project," he said. "I just stopped it in its tracks at that moment and said, ‘The cash is going to go somewhere else. I can’t do this right now.’"
Unlike other medical device companies, however, B. Braun was able to avoid laying off workers and cutting its R&D budget, Neubauer added.
"I didn’t let anybody go. I didn’t cut my R&D budgets. Nope, didn’t do that. Everybody said that is what they will do and I didn’t," he said. "I know most of the CEOs, if not all of the larger medical device companies, all of us have taken some sort of action. You can’t just take away millions, 10s of millions from the bottom line and not think that we can’t react. We have to and that’s what we did."
Braun did, however, freeze salaries during 2013, the 1st year the tax went into effect, Neubauer told us, but reinstated pay raises this year.
"The first year we didn’t increase their salary," he explained. "We kind of caught up last year a little bit with the increase for the employees. I wanted to send a signal, but I didn’t want to hurt my people. Once we saw we could shift through it and capitalize, everything was okay and we kind of made up for it, not completely."
We also asked Neubauer whether Braun would go ahead with its plans for the new HQ if the 114th Congress repeals the device tax and President Barack Obama doesn’t veto the measure.
"The answer is yes, we would," he said. "You know what, those are 100s of jobs, a $40 million project. I haven’t done 1 for quite a time, at least not an administration building. That’s a lot of bodies too, building over a couple of years. Those are jobs that are not directly associated with the medical device industry that have also gone away, at least for the time being."
