
When the medical device tax is successfully repealed this week by the House of Representatives, which is pretty much guaranteed given that the bill has more than enough cosponsors to pass (240 at last tally), it won’t just be an important, albeit symbolic, victory for the med-tech industry.
Rather, the vote will be a win for a Rep. Erik Paulsen (R-Minn.), the low-key second-term congressman from Minnesota who has spent the better part of 16 months educating his fellow House members on the ills of the 2.3% medical device excise tax without resorting to the type of saber-rattling or bombastic hyperbole that has come to define the discourse of 112th congress.
MassDevice.com sat down with Paulsen last week in his office on Capitol Hill to discuss how he helped shepherd the issue through the House and what comes next for the repeal efforts.
MassDevice: Your confidence level that this is going to pass has to be pretty high.
Erik Paulsen: Yeah, given the fact that we have 240 co-authors now, which is a significant amount of co-sponsors with bipartisan support, and even in the mark-up 2 Democrats voted for the bill, who are not co-authors themselves.
MD: Is there a level at which the vote goes so far in your favor that it carries momentum into the Senate?
EP: I don’t know what that number is, if there is one. But, I do think it’s significant to point out that this has been a process since January 25, 2011, when the bill was first introduced. We’ve added more co-authors every step of the way. So, it’s been a long march, it’s been a marathon but we gotta run all the way through the tape here, not only in the House but obviously getting attention in the Senate.
In my home state of Minnesota, where I’ve got 2 Democratic senators, they’ve indicated that there’s support for repealing it, in their own context. They’re trying to figure out how to work that but they know it’s a big issue for medical innovation back home. And the same goes for other colleagues who have been educated. This is an industry that is going to face one of the highest tax rates in the world if this goes through.
MD: Do you think for the Democrats who have co-sponsored the bill and who have voiced support that you’ve been successful in uncoupling the medical device tax from the Affordable Care Act in general?
EP: Yes, because this is directly connected to jobs and I think that that message has been pretty loud and clear.
Most of the Democratic co-sponsors who have been aware of this in particular come from states where there is a high concentration of, or a an ecosystem of, med-tech companies, so they understand it and are a little bit more tuned in. That’s not to say that when we do get it to the floor we may pick up more supporters on the vote itself. Even my Democratic colleague Betty McCollum (R-Minn.) tweeted out "Congratulations Eric on passing this." She’s in the Democratic camp, she’s not going to co-sponsor it but she understands that this is an important issue to Minnesota.
Some members are looking for some kind of pay-for tied to it, that’s going to be up to the chairman of the Ways & Means Committee. However, it’s definitely captured the attention of a lot of colleagues because in a tough economy, you have to protect a great American success story.
MD: So, does this now become part of the broader GOP agenda in the presidential race?
EP: I think it’s possible you could see Mitt Romney start talking about this issue, especially coming from a state as governor where he knows this is an important issue. So from that perspective sure it could get elevated. I think going forward jobs and the economy tend to be front and center going into the election.
Now, the Senate is a different animal in how it sets its rules and everything, so I’m not sure what they’re timing is going to be. But, we want to generate enough momentum here to signal to the Senate members that it makes sense to repeal this. It makes sense to stop it before it starts because this is a ticking time bomb, you want to dismantle it before it starts. That’s our best opportunity.
MD: Is there ever a point at which the conversation about the medical device tax should pivot from talking about straight repeal to perhaps altering the tax to protect small companies, given that there’s still such an uphill climb to get the tax wiped out?
EP: I just think it’s such an ill-conceived and wrong-headed tax that it should be stopped in its tracks.
There are others who may go down that road, but from my viewpoint right now it’s such a wrong-headed decision for an industry that’s going to be one of the highest taxed in the world, that it doesn’t make sense. While it’s true a lot of the small companies that start up in the garage become the bigger companies like a Medtronic. But you want the Medtronics of the world to not just do a next generation of their current product, but continue to innovate themselves and have the ability to do that. When they’re cutting R&D to pay for the tax it has an impact.
MD: Looking back on this fight, was there any moment when you gained significant momentum?
EP: There are so many issues going on when you’re one of 435 members. I’ve just been continually pressing our leadership in the House that this is a really significant issue on jobs and the economy for a long time. So, I think the fact we have so many co-sponsors grabbed their attention. In the wake of all the other electoral fights going on there’s a whole bunch of issues going on, but this plays into that because it’s representative of how we can turn the economy around. Helping med-tech is a long term solution.
MD: The industry fumbled around for a while trying to find a way to communicate on this issue but it seems like the jobs impact is a clear winner. Did you find that was the best prism through which to communicate the ills of this tax?
EP: Yes, at a gut level a lot of these elected officials who have signed on to this bill can talk about it in their town hall meetings, they can relate the issue very easily to their constituents.
MD: How much retail politics did you have to do in order to get the support for this in the House?
EP: I spent a lot of time with members on the floor on both sides saying, ‘Hey, I got this bill. Here’s what it does’ and explaining it. I’ve kind of worked it from that standpoint. A lot of legislating is also relationship-building. I take that seriously.
MD: You don’t have much seniority here either.
EP: I’m only second term, but when I’m on the floor I’ll actually go around and sit down with them and talk about it, explain it. If you’re coming from a state that doesn’t have a med-tech presence it’s not like you’re going to sign on the dotted line without learning about it. We’re in a day and age now where members don’t easily sign on to legislation without finding out a lot about it. They really scrutinize it. Given the whole healthcare law and how it was pushed through, members really want to pay attention to it. Often, they’ll say ‘okay, I’ll take a look at it’ and then I have to follow back up with them on it.
MD: You still feel that it’s important that this be a standalone bill?
EP: Yeah, because this is a ticking time bomb and the best chance to stop it is now.
MD: Who was the hardest person to convince? And what objections were the most common?
EP: There’s no single member that pops out as a hard sell on this but a common question were ‘Why is this important to my state?’ Or, if they knew it was part of Obamacare and they don’t like Obamacare well maybe it was easy to sign on to, so there was a little bit of that.
MD: $30 billion is a big hole. How are you going to pay for it if the repeal goes through?
EP: From my perspective it’s a little silly to have to pay for something that hasn’t even started yet. It’s not like we’re repealing a tax that has begun to raise revenue yet. But that’s going to be up to leadership when it comes to a vote. They’ll figure it out.
MD: Is there a chance it gets momentum in the Senate without a pay-for?
EP:The Senate may do a different pay-for too, which is possible. It’s fine though, all part of the process. The bottom line is this is a wrongheaded tax and we should stop it.
MD: Personally, what does this do for your stock here and at home?
EP: From my standpoint, when you’re one of 435, there are big issues here – national debt, tough economy, lot’s of different issues. This is one way to keep my sanity by focusing on something that is meaningful and results-oriented to get stuff done. In the end, to get stuff done you have to be bipartisan
MD: Any advice for Orrin Hatch as he tries to get this through the Senate?
EP: Well, he’s got a lot more experience than I do in this, but any way I can be helpful I will.