No.

Paul M. Stein I'm not too crazy about tax on sales rather than on profits. Profit margins on, say, the diagnostics sector are pitiful, so they will be hurt most. Still, the Federal Government needs the money, and I'm sort of ashamed of my industry leaders crying so much and even laying off people prior to the tax implementation just to make a point.

The main issue currently at hand, in my mind, is innovation, and how our industry leadership (sic) has been failing horribly in that realm recently. If a CEO cannot come up with definite plans to develop more innovative products to make up a dinky little 2.3% loss, he or she should be fired. Crybabies should go home to their mommies.

Jean Bigoney, RAC, CQE I'm less worried about the industry giants than I am about the smaller startups. What signal does this send about whether the US wants to encourage smaller companies to innovate? The barriers to selling are high - never mind getting the product cleared by the FDA, the REAL hurdle in my mind is getting a reasonable reimbursement rate (assuming you have something other than a "me too" device.

Small companies face years of pumping in costs for devlopment, testing, trials, regulatory hurdles and then no sooner do they start generating revenues, here are the Feds with their hand out and palm up.

Nice link that Joe posted, and I'll quote from it:

"Excise taxes are known to be inefficient. Excise taxes not only distort economic
decisions, but they affect all firms, whether they are profitable or not. Loss-making
firms will still owe the excise tax, so they could be in the peculiar position of paying
taxes to the federal government while not making any profits themselves."

I agree with Paul, if you must tax, tax profits rather than sales, otherwise you lengthen the time it takes to recoup investment. This is not going to be good for investment capital flowing into the industry either IMO.

Robert, thanks for sharing this. The article reads rather one-sidedly.

I'm eager to read the comments from the group on this one. Have you read the 25-page report from AdvaMed (attached below) or found any commentaries in favor of the tax?

http://www.advamed.org/NR/rdonlyres/27ADDF3E-292D-4DFC-B4ED-B01E93E6D5AD/0/090711EmploymentEffectofTaxonMedicalDeviceIndustryFINAL.pdf

Thanks for those good comments, Paul and Jean.

I went digging through past Medical Devices Group discussions and found this nugget from Senator Scott Brown of Massachusetts as written in MassDevice.com:

http://www.massdevice.com/news/exclusive-sen-scott-brown-takes-aim-medical-device-tax

The tax may very well cost jobs and that is a concern. The government however is seeking to cut into the high profits of the overall medical device industry which has operating margins of 22% on average and profit margins of 15%. Still the over riding concern for many will be the job loss and the negative economic impact that may bring. Lower profits, less jobs, seems like a tough one to be a popular.

It really makes you question the motives behind such as tax.

To Jean's and Paul's point, focusing this tax on sales has a direct impact on the margins involved -- inherently serving as a regulatory measure in favor of larger device manaufacturers against smaller manufactuers and those with a strong investment in R&D.

Regualtion in support of safety of device, fine. Regulation in place to favor specific organizations or sectors of an industry are much more questionable.

Nick Woods Paul mentioned the "laying off of people prior to tax implementation, just to make a point", which I do accept feels like what's happening, although if you're going to be pained, might as well take it sooner rather than later, especially as even staff reductions take time to implement. Beneficiaries from the tax (ie folk who might have a good word for it)probably include patients across the OUS world who seem to be suddenly getting a lot of attention as US co's look outside the "domestic" market to countries that previously were only a tiny blip on the radar.

The tax is meant to support the work of FDA review and oversight. Since there is little chance a nascent device can reach the market without a timely and predictable FDA review process, I am philosophically in favor of the tax. However, why the congress won't fund a robust FDA and USPTO is beyond me, they are literally driving innovation off our shores. Colleagues feel congress will only confiscate these funds and divert them into other programs, (akin to current USPTO practice) so I am in favor of rock solid dedication language.

Raymond Kester the short answer is No. The comments above list a variety of reasons, the Bloomberg article is perhaps the most compelling. Definitely worth the time.

http://www.bloomberg.com/news/2012-01-03/tongue-depressor-tax-will-harm-jobs-innovation-ramesh-ponnuru.html

The consensus seems to be decidedly against the tax. No surprise there.

Comments from John and Eric are the first signs I've seen of *anything* positive being said about the proposal at all.

From John, I interpret something approaching justification: "Cut into the high profits of the overall medical device industry which has operating margins of 22% on average and profit margins of 15%."

From Eric: "I am philosophically in favor of the tax" [since it is meant to support FDA work].

Nick Woods Building on my observation from OUS yesterday there's another "positive" for the tax if indeed it is the reason why US co's are relocating manufacturing to places such as Ireland and Costa Rica. It's "positively" good news for Ireland and Costa Rica. However unless I'm mistaken the tax will still apply to goods imported into USA, which suggests the relocations if they are really occurring are not doing so for this reason alone... much more likely to be for reasons of greater opportunity in OUS (esp developing) markets coupled with lower employment costs and (most significantly of all) lower regulatory hurdles. This latter point, difficulty(time, money) of gaining FDA approval, must be far and away the biggest disincentive for SMEs to innovate.

John Eckberg Another thoughtful perspective on a tax that could lift the cumulative tax burden of a U.S. device company to 55 percent. I am the media relations director for Cook Medical, by the way.

http://larrydavidsonspoutsoff.blogspot.com/2011/11/obamacare-jobs-and-global.html

Melanie McCallum No!

Nick Woods Loving the Larry Davidson article John. I'm just not sure about how the arguments are going to work, because it's like asking whether any Turkeys think Christmas is a good thing and then lobbying based on "see, all the Turkeys said Christmas was a bad idea." I do believe constructive proposals such as taxing profit rather than sales are the way forward. the problem I guess is that it's easier to find ways of reducing profit than it is possible to reduce sales.

John Eckberg Thanks, Nick, for your insights. This tax, plain and simple, was punititive because medical device companies did not go into the smoke-filled backroom in D.C. like Big Pharma. We're not getting 30 million to 40 million new customers like Big Pharma, either. There won't be one more difibrillator sold because more individuals will now have insurance. There won't be one more drainage catheter sold because individuals have insurance. We saw no increase when Massachusetts changed its system. I'm the media relations director for Cook Group, parent of Cook Medical, and we have been working long and hard to get this tax repealed. A tax on the medical device industry, which provides solutions? Why not a tax on fatty fast foods, which lead to so many terrible and expensive medical conditions? Why not a tax on vehicles, since vehicle crashes bring about so many blunt trauma injuries - day after day after day, tens of thousands of medical emergencies? Why not a tax on alcohol or tobacco, which bring about cancers and coronary disease? Why a tax on medical device companies? Because we are sitting ducks. I tell people all the time that yes, we are conflicted...but that doesn't mean we are wrong....

John Eckberg By the way, according to the MDMA, the average medical device company has a profit of about 3.4 percent of revenues....so this tax is taking more than 60 percent of the profits of the average medical device company. Once the slowdown hits the supply chain that provides materials for device companies, there will be an economic slump from one end of the country to another. Here's a map locating device companies and their business units that have written to Congress to urge support for the repeal H.R. 436. Note the list after the map. You'll see some familar names on it.

http://batchgeo.com/map/35b8aecb95e2d0d14e1892e94e21eabe

Melanie McCallum Nicely put John! I think tobacco has been taxed to death. How about toothpaste? Or yes, alcohol? Deoderant? Forgive me for saying this but we may want to revisit our neighbors north of the border and see if we can't learn something from them?

John Eckberg Melanie, Don't get me wrong. I'm not saying new taxes are needed, only that if we are going to tax anything, let's not tax the industry that brings us solutions to pressing health care needs. There was no doubt that bringing insurance to uninsured Americans was warranted, noble and important. But a tax that will drive an innovative industry to foreign shorts - a tax that is in fact already sending jobs over seas - is terribly misguided. So far, 225 Congressmembers agree and have signed on to co-sponsor its repeal.

Melanie McCallum John: I'm actually agreeing with you in my own way. I've been speaking at length with a coworker who moved here from Canada where she claims the entire population is taxed at the same percentage across the board and people don't have the stress of whether or not they can get treated for disease or illness. I think that the tax situation here at home has gotten out of control across the board. I heartily agree that we should get back on board and realize that we are killing our own economy and hurting the market that actually makes a difference in quality of life without harboring bias on social status. WE are indeed, killing our own economy! Bring our jobs back home and these nitpicky taxes won't be needed because our families will be working again and their hard earned dollars will be spent here. My little spurt above was the feeling that we will tax the living daylights out of a specific item that is not used by all. So we have a group of people bearing the brunt while we outsource our means to be able to afford to live decently. (Did that make more sense?). I am very much behind you on this one!

John Eckberg Appreciate the support, Melanie. You should write a letter to your local newspaper and letters to your Senators and Governor. Best wishes and good luck, John

Raymond Kester John is right, we have the ability influence. Take a few minutes and make your voice known with appropriate letters to your newspaper, Congressional / Senate legislators and Governor.

Melanie McCallum Consider it done!

Rick W Hogan Our govt. must understand a 2.3% medical device tax equals a 15% reduction in gross profit for medical device manufacturers.

Hello, Washington? You wonder why outsourcing medical device manufacturing to China is growing and being planned for?!

Non-profit thinkers need to stay out of the for-profit game.

Paul M. Stein Rick, just wondering what documentation you have for your assumptions/data are you making with your math?

Rick W Hogan Good question Paul. I would need an easel to map it all out but this article on the CEO of Cook Medical should help: http://www.massdevice.com/news/cook-group-chairman-ferguson-medical-device-tax-will-kill-15-our-med-tech-profits .

Nick Woods John, I completely see your point and agree that the medical devices industry is a soft target. My only point really related to how to manage the PR in order to gain maximum support for the case to repeal. On your point about establishing what else one should tax instead, this becomes a much wider socioeconomic minefield which governments the world over wrestle with. Fatty foods? Yeah but fatty foods are cheap source of calories for the less well off masses so more tax is likely to be a vote loser. Cigarettes?... probably taxed quite heavily already and always a soft target. How about fuel? Well I currently pay $9.81 per gallon in UK, so maybe you'd fancy a bit of that medicine? Then again there's the argument that high fuel bills kill all kinds of areas of commerce so that's a non starter as well. Your point is well made that medtech is the wrong target although I just read somewhere that 8 out of 10 biomedical companies are blaming "burdensome FDA processes" for slow growth so maybe the levy is just rubbing salt in the wound.

Chuck Vivian I've been part of the medical sales world going on 35 years and I have to say that I don't like this tax for a host of reasons. At the same time, arguments against it can evoke a lot of emotions - some chronicled in the replies above. Since just about everything against the tax has been covered, I'll add just one more item. The proceeds from the tax will not be appropriated properly. We'll just screw it up and those dollars will be lost in the abyss that we call congress.

On the other hand I have to agree with an earlier respondent in that our new world will be all about innovation. One could argue that it has always been that way but there are plenty of innovation slackers that anyone would call successful. That is going to change in a hurry.

Additionally, our protests are thinly veiled in light of SG&A topping 35-40% in many cases while R&D comes in under 15%. Armies of sales reps roaming the country trying to "champion sell" is going to go the way of the dinosaur. Legions of reps with innovative products will flourish but relationship selling, as we know it, is dying rapidly. Some strategic thinking companies have already inverted this paradoxical financial reality and others will soon follow. Don't get me wrong. I hate any tax because we never do what we say will be done with the money. But this one is going to especially hurt those that are slow to change long embedded corporate culture.

I would argue that the government needing more money is like an addict needing more dope--they'll both feel better but the sickness is still there. In our case, the sickness is poor use of the funds in place.
There are many here that see the need for better use of funds (i.e through improved or reduced regulations), more funding for the FDA, etc. But in my humble opinion, our governement is not lacking for money.

The loss of jobs in the orthopedic industry is a reality. Though, we can all argue that many factors already mentioned have contributed to the hard times. In Memphis, Medtronic Spinal & Biologics, Wright Medical Technology, and Smith & Nephew (most recent job cuts in December) have contributed to the unemployment lines. By the way, most of these firms have established manufacturing sites in China and you do not need to be a CEO to envision the next step for reducing costs. What a fantastic job creating plan Washington!

Chuck Vivian You're right, Mark. Those job loses have nothing to do with a tax that is going to be levied in 2013.

Nick Woods Chuck, I agree that "armies of sales reps doing the relationship sell" may eventually be a dead model... it will not work when the relationship has to be with so many interested parties. Future sales reps will be superspecialists and most likely PhDs...IMHO.
By the way, the necessary price increase to cover the 2.3% levy is 2.3541453%. If only it was that simple.

Heather Thompson I'd really like to understand more about profit taxing vs. excise taxing. That sounds intriguing and I haven't heard the option before. Any tax experts that can make the case?

If there is data to support it, we may have a better argument to take to congress. Right now, the noise from manufacturers sounds like whining, which Paul pointed out. Am I wrong to think we have more maneuverability if we can offer alternatives?

Melanie: one thing we can all do is support our fellow workers by trying to make the majority of our purchases on products that employ our fellow tax payers! If our neighbors and friends are on the dole we are in affect being taxed by their being out of work. It would be smart to use products built by fellow taxpayers so there are more of them. A larger tax base and a higher standard of living is what we enjoyed say 15 years ago. 50 years ago the tax structure was more evenly distributed and there was more collaboration between the boss and worker, health benefits/retirement/job stability. Now it is all about the shareholder, but we can be smart about where we do spend our money instead of being simply cost focused. Shortsighted purchases of the cheapest option may not be the best overall choice longterm.

I cannot see the "ggod" in any tax that is imposed not on profits but on bare revenue. This is what many refer to as an external diseconomy and just seems to add one more level of uncertainty in product creation. Money that could be used for innovation is now paying tolls so I can't see how much good it can serve. I don not think that in the long run it will serve to stifle ongoing progress though, our industry has overcome much worse things.

Paul M. Stein Mark, the loss of jobs and outsourcing has nothing to do with Washington. It is the lack of Patriotism, myopic thinking, personal greed, soulessness, and cowardice that is driving the current stock of CEO's. Newt Gingrich yesterday called it "Capitalism gone wrong." I agree.

John Eckberg A 2.3 percent tax may not seem like much; after all, sales taxes are triple that amount. But sales taxes are paid by consumers, not producers. Also, a top line tax of 2.3 percent yields a 15 percent tax rate when applied to earnings. Add to that the 35 percent corporate tax already paid and a 5 percent state corporate tax, and the combined tax rate for a medical device company would top out at 55 percent. Imagine if your household – your company - had to pay a 55 percent tax. You couldn’t make it. This tax is more akin to piracy than sound public policy.

Jason Cichy One justification for this additional tax burden had to do with the anticipation of more medical devices being sold.

Let’s assume sales do go up. Medical Device Manufacturers currently pay taxes. It stands to reason if they increase sales they will generate more tax revenue, regardless of a tax increase. Heck, they might even have to hire more people to keep up with demand, who will in turn earn a salary and (you guessed it) also pay more taxes.

I am confused as to why additional taxing is required for the government to benefit from higher sales in the Medical Device industry. Apparently I'm too good at math to be a politician.

I am also waiting for Congress to explain what happens in the likely event that their policy has no effect on the sale of medical devices. If we're supposed to be able to afford these taxes based on higher forecasted sales, do we get a rebate if sales are lower/flat? If the answer is no, how can additional taxing be rationalized?

I do have to admit, I have found one good thing this tax offers the Medical Device Industry. Those from the industry who find themselves unemployed because of this legislation can look forward to government healthcare. So, we’ve got that going for us…

Chuck Vivian Jason; device companies are going to experience a very significant increase in sales as 32.5 million people gain access to coverage in 2014. BUT, prices are free-falling right now. Doctors are becoming less energetic when it comes to defending product brands and personal relationships. Again, champion selling is a weak strategy going forward. Innovative companies are going to eat the collective lunches of competitors who cling to champion selling as a primary strategy. And don't worry about those people who you think will lose their jobs. They'll go to work for the innovative companies and do just fine. Think about it. The great companies out there won't miss a beat because of provisions in the law. On the contrary, they are planning strategies to innovate product and re-engineer their field efforts to align with the new realities and buy out the losers.

Jason Cichy Chuck - Successful people always see opportunity, it's reasonable to believe there may be increased sales, I appreciate your optimism. Your comments support my initial point, if the administration is confident in increase in sales the additional tax is not required.

The issue we have lays in the politics involved. I don’t think anyone can definitively answer the question of how many people truly do not have access to coverage that will actually have coverage in 2014.

One side says 40 million without coverage the other says 8, subtract the two and we end up close to what you estimate. How could have any legislation been passed without having a real number?

The other side of that coin is that we are relying on the government to implement this. To quote one of your earlier comments, “The proceeds from the tax will not be appropriated properly. We'll just screw it up and those dollars will be lost in the abyss that we call congress.”

If the administration does what it says it’s going to do, and they have openly and honestly reported all the statistics, we will have opportunity. I just don’t have that kind of faith in this administration. In absence of that faith, I'd like to see a self-sustaining plan that funds itself based on the increased tax revenue from existing tax structures.

John Eckberg Look, whoever thinks sales will rise as a result of ACA needs to think it through a little better. It's wishful thinking but not clear thinking. Consider this: not one more debribrillator will be sold as a result of this tax, not one more drainage catheter, not one more intubation device. When, say, somebody is harmed in a vehicle accident, they get treatment whether they have insurance or not. They get the drainage catheter or the IV line. Having insurance coverage or not having insurance coverage does not matter in life-threatening situations. When Massachusetts changed its coverage, there was no tsunami of new patients for device companies and no resulting increase in revenues. If the governor's emails hard not been trashed, an enterprising journalist might have been able to figure that out and not just take my word for it. There will be no crush of new patients because 8 million to 40 million (whatever the number is) now have coverage. It's another story for Pharmaceutical companies as many many more people will now have access to prescriptions but for Class III device companies...it's not going to happen. Some will think, well, medical device companies are conflicted, of course they are going to make this claim. And it's true that I am conflicted...but that doesn't mean I'm wrong.

Jean Bigoney, RAC, CQE Ah so the big device companies have already established manufacturing sites in China? I'm curious what their plans are to prevent cheesy knockoffs of their products appearing on the grey market. It's happened with industrial components and consumer products, what makes them think it won't happen to them? They've jumped from the frying pan into the fire for my money.

Chuck Vivian John: I think that sales will increase because of ACA. Not because of the tax. CEOs of medical device companies are bracing for an increase in volume and an all out attack on prices. My issue with all of this is that the attack on profits is in full swing while the additional volume doesn't kick in until 2014.

Like all taxes, it will guarantee a decrease the amount of the taxed activity.

Michael Stoia The only good will be if the populace wakes up and sees that this a planned agenda by the current administration against business in general and boots them out of office. One only has to see this in context of the gulf moratorium followed by the push against Boeing to build a new plant in South Carolina, followed by push back on the pipeline project stretching from Canada to Texas followed by the refusal of foreign visa's to skilled technical workers from India. All of the above results in loss of jobs domestically and the advancement of this Country's best interests.

Nicol Rae Orr With all the bad news I find if I focus on my business each day and be thankful for the wonderful opportunities I have in the USA these issues will take care of themselves. Taxes are a way of life up and down lets share a little good news today. Cheers

Todd Snowden I am a little confused about the constant connection of profits to jobs. I do not think any reasonable business person hires people just because they are profitable? You hire becuase you have a need for a resource in your business that is driven by demand for your product or service. Profitable or not, if you do not need the resource you do not hire. Regarding the tax, if it helps improve the regulatory process, which I am more than a bit skeptical about, I am not opposed to it. Just like any other change in the business environment it is managements job to figure out how to deal with it in a way that benefits their company beyond those that are just complaining about it and cutting jobs.

Todd Snowden I agree with Nic as well, onward and upward. I am thankful for the companies that will let this handcuff them, makes the competitive environment that much better for the rest.

Nicol Rae Orr Why do we make everything a political issue. When it goes our way we take the credit when not we blame the current administration. Republicans, Democrates, don't forget we owned the White House for 8 years under Bush and he did noting to correct the same problems your blaming democrates for today. I a independant and if you think a change in the White House is going to fix any of these problems well your wrong. We lost jobs in this country more through Greed than we have through goverment policy. Look at Mitt he can run not once but twice and spend millions on his election bid why the great American opportunity to have capital at his disposial where he could buy sell and dispurse of good American job with a view to fattening his own pocket and now I am suppose to trust his to look after my interests.. " I love this country" BS he love the cash as do I so it's all self serving. A little less bitching by Republicans and a little more doing we would not be in this mess. I don't like Obama but the poor guy never had a chance of success. One last thing in Obama care why instead of scrapping everything don't we keet the prior conditions clause and the one where either my son or daughter can stay on my insurance until they finish school? Both seem reasonable to me; we build we tear down we are republicans or democrats, I am an American and all I want is whats best for American and Republicans certainlly have shown over the year not to be the party of or for the people so non of the problem mentioned above will be resolved without cooperation period. lets play nice or we will all go home to bed without dinner.

Ed Arkans The tax has it's good sides. It will make the Occupy Wall Street folks very happy that the Man is paying his fair share. That is, until they apply for a job at a medical device firm and are politely told they are not hiring. As the owner of an innovative medical device company, this tax has me thinking of innovating in other areas of industry. Maybe there are too many of us in the medical field and this is an efficient way to get some of us out.

Al Toman I'm an oral cancer survivor of 2007. Chronic dry mouth is a result of the radiation therapy treatment that is administered. It will remain with me for life. Funny. There wasn't a solution Worldwide for this condition. The market in the U.S. alone is 36,000/yr and growing. The market in China is 4 times that.

Considering, I developed a solution in 2008, the XEROS Dry Mouth Pump. It IS the ONLY world-wide solution for chronic dry mouth caused by radiation/chemo therapy treatment on the market today. It is FDA cleared for marketing as a medical device as of April 8, 2011.

The thing is, I have yet to make a bloody nickel off the device, yet the U.S. government has profited by thousands and thousands of dollars off my blood, sweat, and tears.

I have clients who are cancer survivors who would love to stop suffering and start living with this device however the U.S. government has made the device non-reachable for these people. Both Medicare and the pvt health insurances have told them to "eat cake".

I develop medical devices for medical professionals. They have good ideas but they are watching me, my progress fighting these welfare people, the Democrats and Republicans on the Hill.

These medical professionals are scared to death and some have dropped out. They are saying screw it. It isn't worth it. Hence, I cannot make a living either by selling a device that would help patients or by developing medical devices for others.

The patient being the last person of concern via our U.S. health system is extremely disturbing.

I created another version of our device that can possibly be sold at retail as a NON-medical device in Walgreens, CVS and the like. I can price it accordingly because I do not have to attach all these FEES to it.

I'm going to give that a go and see what happens.

When TAXES (fees, beer money, etc) are discussed have you EVER heard a Democrat or Republican EVER mention MANAGING TAXES rather than the samo-samo "cut taxes" or "raise taxes"!?!

Worse, do you keep on voting these jack wagons back into office?

Nicol Rae Orr Some great comments but keep in mind more money to the goverment never has nor will deliver better healthcare to the ones they preport to help and who needs it the most.. Please don't tax all the pro-bona my Dr does for the patients that can't afford his services. My taxes on the street I live on went up 18% in two year and they promised to fix the pot hole at the end of my street;; "dam it hit it again" you get my point

Jean Bigoney, RAC, CQE Al it sounds like you are fighting a different battle, namely getting a HCPCS reimbursement code? If that is the case then you are by no means alone. Getting permission to sell your device from the FDA is one thing. Getting a favorable reimbursement rate is another.

Or possibly it is a matter of getting a distributor on board who know how to fight the battle you need to fight to get your device into the hands of patients.

At any rate I agree wholeheartedly that it is difficult enough for small startups and this additional tax is only going to make things worse.

Paul M. Stein Like all taxes, laws, fees, etc., this excise tax is literally an experiment. Currently, no one can predict what will happen before it is implemented. It needs to be played out. Then, depending on the experimental results, the experiment should be kept, modified, or thrown out.

John Eckberg http://batchgeo.com/map/35b8aecb95e2d0d14e1892e94e21eabe


Anybody who thinks this tax on revenues is dinky needs a refresher in Finance 101. It's a one-year 43 percent increase in the federal tax bill for most device companies. Study the link to this map and multiply the numbers in each pod by at least 10 for the true number of companies in each market that will be impacted by it. Multiply each number by 20 if you want a sense of how this tax will ripple through local economies.

Al Toman Hi Jean,

You would think HCPCS but now I am told NOT!

I've been told so many stories by the Medicare personnel that I have no idea who is and who isn't anymore.

I've submitted 2 of them since June 27, 2011. Medicare lost the first one :O( They rejected the second one, sent me somewhere else, who told me that I need to do the HCPCS every year but I need to do "this" first. So, I submitted "this". See what happens.

Congressman Walter P. Jones sent me a letter that he will do whatever he can to help. That resulted in sending me an 800 number .... duh!

Once again the patient is on Medicare's schedule, definitely NOT in the eyes of Congressman Jones!

This is really disturbing not only for the medical, medical device industry but for U.S. as a nation. We need either some REALLY SMART people with integrity (not referencing the Democrats or Republicans here) or people with REALLY BIG GUNS! I'd go either way at this point.

Paul M. Stein Al, very funny. I hate when people place inappropriate promotions in the middle of important discussions, and then stupidly repeat them.

John, please provide a more complete reasoning for your numbers as I, personally, cannot see them. No offense, but I always question numbers that I simply cannot readily fathom (2.3% being an additional 43%) or when orders of magnitude or greater (10, 20) are thrown out there.

You all won't be hearing from Amin again (not here, anyway). His inappropriate promotional comment got him kicked out of the group for good.

Carry on. ;-)

Sitting ducks we are

Leonard Ginsburg, P.E. Does anyone see anything GOOD about starving the government so it can't effectively regulate the health care industry? This tax or that tax may seem difficult or unfair, but somehow the important functions of government must be paid for. I'd like to see suggestions for what might be a popular source of revenue from the very profitable health care industry.

John Eckberg http://larrydavidsonspoutsoff.blogspot.com/search?updated-max=2011-12-06T09:34:00-05:00&max-results=7

Scroll to Nov. 22 from Larry Davidson, economist, for great look at finances behind this tax from an unbiased observer. The Medical Device Manufacturers of America indicates that most device companies have profits of 3.4 percent of total revenues. This tax is going to reduce that significantly.

Paul, The 2.3 percent topline tax, when applied to earnings equals 15 percent. Another 15 percent tax on top of the 35 percent corporate tax rate, second highest in the world, is a 43 percent increase in just one year.

Yes, I am conflicted but just because somebody has a conflict of interest does not mean they are wrong.

Nick Woods John, it's clear that the tax on sales is intended to pick up everyone, from the highly profitable to the loss making newco, thereby unduly disincentivising innovation at newco level. Strikes me a sales tax is hardest on the loss maker, driving them to make effectively a bigger loss.

It's still painful, but less hard on the highly profitable. I presume that taxing profits doesn't work for govt (at least at the 15% equivalent rate you mention) because it would lose all the 2.3%'s from the less/non profitable.

So if anyone was advocating a profit-based tax, govt would ensure it would be way above 15%. Does that rambling make any sense? Sorry, its getting a little late.

This is the usual government response at just the wrong time. The entire medical device industry has already gone off in the direction of being more cost conscious relative to their customers. The medical industry is very competitive and I agree with others that this is all about big company advantage.

So government starts taxing as costs are already under pressure. Reminds me of the luxury tax implemented by Carter that hit right in the middle of a recession and killed thousands of jobs in the boating industry. Also, the medical device industry is a huge exporter for the US. Why tax an industry that is poised to be world leader? Just go to a more flat corporate tax without all kinds of distorting advantages heaped on specific industries.


This tax likely makes no difference for designers as we will just need to reduce the costs and be more efficient, while still innovating. We will design for automation, more efficient assembly and distribution, and just eliminate more jobs with more efficient products. The design industry is a change agent and change is good for the creative class.

Michael Santalucia Profits fuel innovation which results in better products which results in lower costs. Let's look at cataract surgery as an example. This is one of the most common surgical procedures in the US. 40 years ago, cataract removal was dangerous, involved a long hospital stay and the patients were fitted with thick glasses that were adequate at best to provide vision. 20 years ago, innovation had resulted in a procedure that allowed for shorter hospital stays and the use of intraocular lenses that could be implanted as a replacement for the lens that was removed. However, this was a complicated procedure, involved hospital care and vision at 20/40 was probably the best that could be expected and glasses were again needed to correct for astigmatism and other visual problems. Fast forward to today where cataract surgery is an outpatient procedure, and usually patients do not need any other spectacle correction with resultant vision that is equal to if not better than with their natural lens. This outcome, is safer, provides a better quality of life, there are fewer accidents (such as falls and broken bones) due to poor vision which leads to lower health care costs and at a cost that is well below prior years and gets lower each year. Without being able to put profits into innovation improvements, this type of progress would be stifled.

As for helping to pay for government regulation, the US device industry pays user fees as a means to bridge the gap between congressional funding and FDA operations. The current User Fee rate provides about $254 Million to FDA over 5 years. Negotiations are underway for the reauthorization of this funding and it will go up. In my opinion, the 2.3% tax will only result in moving innovation off shore and eliminating jobs in the USA.

Al Toman The FDA collected a facility fee and NOT once showed their face! That money should be credited or rolled-over. It ended up in someone's pocket, beer money. That someone is most likely a 6-figure income stealer. The FDA is a sham and severely lacks management and integrity. It is an UNDUE expense on the U.S. Citizen and there isn't anyone doing anything about it. Very disturbing!

Well, I simply no longer pay facility fees.

Heather Thompson Michael, love that example. A friend of mine is writing an LA weekly story about how we should be spending more money to improve condom technology and other prevention options, instead of billions of dollars to find cures for STDs.

Your example of how improving cataract surgery also helped reduce a profusion of other expensive health problems is exactly the direction industry needs to go.

Sorry to go OT with the thread. It just struck a chord and I wanted to share.

Our country has been in the tax raising business for a while now. Each time we’re given a very passionate argument about why this tax will be the tax that finally fixes everything. Seems to me that the cumulative tax burden hasn’t done much more than redirect wealth and we’re left holding the tab.

We don’t have a tax problem, we have a spending problem, including in healthcare. For example, dealing with obesity now consumes about 10% of our total cost of healthcare. Should we tax food companies, or the people who consume the food?

I think its a one-two punch. Tax us if we get a product on the market and make it nearly impossible to get one on with new FDA attitude and regs. Sorry but I think the industry is being run out of business by short sighted, knee jerk politicians.

Nick Woods I've listened to the State Of The Union address and read the transcript twice now, mainly because I couldn't believe the minimal reference to healthcare. PPACA didn't get one mention. Does this mean it's in line for repeal or (more likely) that it's deemed better not to provoke a sleeping tiger? It would be unheard of for what is I suppose our UK equivalent vehicle The Q Q Q Queen's S S S Speech (sorry, wrong monarch) to not discuss health, given the sacred cow nature of the NHS. Just an observation.

Melanie McCallum Nicely put Jack!

Raising business taxes of any kind have a negative effect on the consumer, the business, economic growth and the health of the nation in general.

Leonard Ginsburg, P.E. Of course, Gregg, all the seller's costs and then some are paid by the buyers, but I don't really get your point. The consumer has no interest in assuring that the products he/she buys are safe and effective? Do you really trust the pharmaceutical companies to make sure of that on their own? People pay taxes because there are important services that only the government can provide.

MD+DI did a nice job talking about the need for medical device tax repeal at http://bit.ly/MDDIsotu in response to the President's State of the Union Address.

Won't the tax just force manufacturers to increase prices and therefore defeat the purpose of gettting medical costs under control? No one is going to let their profits go down. A company needs at least 35% GM in order maintain and grow.

The "Affordable Care Act" what a bunch of bull! It won't fix anything, it will only make things worse becasue it doesn't get at the root of the problem which is gov't intervention in the free market. Insurance was never meant to pay for all of your expenses from craddle to grave. Medical care cost should be market based, you should be able walk into a doctors office and be able to afford an office visit without insurance. Your doctor should have a price list on the wall, just like McDonalds. If you don't like the prices, you go down the block.

I challenge you, the next time you need some treatment, ask the provider what the cash price is, and then shop around. Then try to submit the expense to your insurance company and see how they treat you.

One good thing? More ammunition to relieve the current obliarchy from it's post.

In addition to all the comments about why we don't need a tax, and how it will impact the industry and country, a couple of related issues. Not many recall that when the ACA (affordable care act - Obamacare) was being debated there was a tax on pharma and the original tax on Medical Device companies was set at 4%. After much pushback by opponents to the tax, the bill that passed has no pharma tax. Too bad Med-tech didn't hire the same or equally proficient lobbyists.
In addition, most people in Med-Tech may not even be aware that this tax is coming. At a recent Biomedical Engineering Conference, a C-Level panel started discussing the tax. The moderator asked why they were discussing it, didn't the audience know about it? Since he and the panel were unsure, he asked the audience of a couple of hundred Med-Tech professionals if they were aware of the tax. My estimate was that maybe 20% were knowledgable.
When the tax was originally being debated a speaker at a Med--Tech seminar then asked attendees if they knew about the tax debate as part of the bill. Few knew. I was surprised then and less so at the more recent event. The speaker that evening said "YOU MAY NOT BE INTERESTED IN POLITICS, BUT POLITICS IS INTERESTED IN YOU"!! (meaning Med-Tech with our perceived great profits ).
What Can We do? I suggest we spread this information to those we work with and meet. Ask if they are aware and try to get people to write to their Represenatatives, Senators and President. Many will have plenty of time to write after C-Level leaders (such as those on the recent panel discussed) cut jobs here and in some cases send them overseas.

John Eckberg Hello Mr. Thacher, Thanks for the response. You're wrong about the corporate tax rates, however. The U.S. has the second highest corporate tax rate in the world, second only to Japan. The Nordic rates, I'm sure, are personal tax rates - not corporate tax rates. This tax on revenues, by the way, in addition to the existing corporate rates, will take the rate for U.S. medical device companies to 55 percent of earnings.

Paul M. Stein John, valid point regarding corporate tax rates. However, I never caught the reasoning for this often cited 55% or earnings number. I have a feeling that it is actually based on any one company's profits, and cannot be applied across the board.

John Eckberg Feelings and facts are two different things. Take 2.3 percent of the top line, float that number down to the net, that is, past wages and other costs, then compare it to what's left, the earnings. It's true I don't know what it's going to mean to other companies but for us, it will represent 15 percent of our earnings. Applied across the spectrum of device companies, it will probably represent a range: 15 percent to, well, 100 percent of earnings in some cases and for companies that don't have any earnings or profits yet, well, it's going to take everything. This is something that only a couple of Senators with next-to-no medical device companies in their states could dream up: Nevada and Montana, Baucus and Reid. Although what's truly staggering is their first version would have taken 4.6 percent of the top line - this in a space where about 3.5 percent of revenues is the average profit, according to an MDMA report. This tax is a mess and the consequences are going to be even worse than I have been describing, believe it or not.

Ed Arkans My answer is NO. I've been making medical devices since 1975, prior to the Medical Device amendment of 1976. Initially, FDA was supposed to respond to your 510(k) within 90 days or you were free to market the product. That didn't work so they would ask a silly question or two to restart the 90 day clock. Then they asked for user fees and promised better response times. That worked for a while then increased user fees well beyond any inflation rate and still need more money. Fool me once... Early in my career, I worked for a federal government agency. Suffice to say I am not shocked to see how the GSA has been wasting tax money. I am shocked that it's taking so long for us to realize how bloated, inefficient and institutionally mindless is the federal bureaucracy. They deserve no more funds. Getting the money from the general tax fund is bad enough but taking money from the societal elements that innovate, manufacture and distribute products and services that improves lives is the worst way to do it. And if a company has a bad year some day with close to zero profit (or a loss from R&D investments), good luck coming up with the 2.3% of revenue.

Ed, as I understand it, that company with the "bad year with close to zero profit" you describe will still be responsible for the 2.3% of top-line revenue.

That, more than any other factor, makes the tax punitive and excessive in my judgment.

Friends, in case you missed, today I launched http://no2point3.com to support the issues you raised in this thread.

Good luck and spread the word!

Frederick Thacher My work is in the EU, Middle East, Russian Federation and Africa and it is the FDA they defer to in making quality and purchasing decisions. An improved FDA operation in response to the flood of product review requests is in everyone's best interest. The tax should not be a competitive problem unless one is competing against non-FDA approved products from countries that subsidize manufacturers. Getting products to market is a genuine concern. We in the industry can focus on keeping the FDA feet to the fire with this tax in place.

John Eckberg Hello Mr. Thacher, So you're not going to pay the tax on your company revenues because you're not a manufacturer, right?

Frederick Thacher Indeed I am a manufacturer. I am also a distributor and work with many
other manufacturers. The word "tax" has a long and provocative history. In
the US we are fortunate to have such low tax rates. You may find lower
rates in undeveloped countries but not in developed countries. My work
takes me to the EU including Nordic countries where they do quite well and
are competitive with taxes that are considerably higher then in the USA.

Ed Arkans Right, Joe. We had some profitable years and used those profits for making a new device (for preventing amputations) with rather high R&D and clinical testing and regulatory expenses. We couldn't do that under the 2.3% revenue tax and I suspect others will have the same constraint. How many amputations or other unsolved medical problems is this tax worth?

Paul M. Stein John, you verified my "feeling". Based on actual estimates that I have seen, for a Medtronic or St. Jude Medical, it certainly is not going to be 15+% of earnings. Hence, the effect, and percentage, will vary from company to company.

Frederick Thacher Good Morning. You are correct regarding the tax rate. However the tax rate is seldom what the effective tax is. The tax rate is subject to so many deductions and other considerations that the effective tax is quite low. We do desperately need a more simple tax code which would likely mean a lower tax rate.
In my company we spend inordinately on accounting and legal fees just to comply with the tax code. We could reallocate resources to more productive use and investment for certain.
The FDA tax is for a specific purpose and will easier for the tax payer to influence.

Jerry Robinson I have a dumb question...

If there is a TAX here - then why not sell it out of the US and see what happens?

For those with certain devices... there are a lot of countries. Build it and SELL it out of the US.. if you can, work with Canada or Mexico...

why (Just asking...) are you tied to the US???

-just wondering...

(( if you made it Canada... :> and people from the US could cross the border and work there... may be good for Detroit, right?? ))

Ron Ellsworth Even if the tax on imported devices were set at double the rate don't think for a second the tax won't be added to the sales price. No business absorbs "sales" tax unless they're running a "Labor Day no tax" special. Just means the consumer and the least able to afford it will foot the bill, just like we're doing now for everything else.

John Eckberg No, Ron, I disagree. Device prices are often negotiated for 18 month, 24 month or 36 month durations. It's not like consumer goods at all. We are in a highly competitive space and the marketplace where medical device companies compete is global. All it takes is for one over-seas company to have a lower price (some will have an immense competitve edge because their tax base, say, in Ireland, is more than half the U.S. rate) and GPOs and IDNs will have little choice but take the low price.

Ron Ellsworth The tax isn't necessary but the corporate "tax rate" is a joke 'cause no international pays taxes to the US. What is needed is a crack down on offshore tax shelters and ending tax loopholes, breaks, and subsidies to level the playing field.

Andrea Niccoli Excuse my ignorance of this tax....Our company purchases many components from manufacturers, (disposable instruments, dressings, drapes, etc.) for assembly into procedure kits. We are required to follow the GMP rules and register as a manufacturer with the FDA. Who will pay the tax on the OEM products we use? If the original manufacturer is taxed - then we will be taxed again when selling our product? What about our private labeled products?

Thank you all for sharing excellent and informative comments on this very important question. My opinon remains unchanged that this tax, as it is currently structured, is just one reason that the term "Affordable Healthcare Act" is an oxy-moron. Inevitably and eventually the increased cost will trickle down to the device consumer and then to the patient. Meanwhile it is a clear barrier to domestic growth and innovation and an open invitation to cheaper foreign competitors. Those who suggest a tax on profit rather than revenue may be on to a pallatable compromise but I think a full repeal is the real solution.

Jerry Robinson Profit Tax would not work... Simple observations show that....

Build offshore - and then THERE IS NO PROFIT... that the ON SHORE entitiy can show...

so... If you tax, then tax MUCH LESS - On-Shore. That way... US Mfrs do not subsidize Off-Shore companies... as happens so much now....

"You sell - you PAY....." will raise $$... just the absurd part where the gov't is often the payer - and will end up paying it's self for a large part of the "tax"

Perry Mykleby Yes,...if I worked abroad and wanted to attract med device companies to relocate from the US.

Bailey Tucker If one were to wrongfully assume that any tax revenues would be used responsibly, then it could be argued that some good could come from it. However, the reality is that you don't enable an addict by blindly giving them money. This will just be more money thrown down a rat hole under the guise of doing something positive with this new revenue stream. Just like social security has no lock box, neither will this. The industry should fight this tooth and nail and every American should demand fiscal responsibility before giving any new taxes to the government. Just my .02 worth.

The 2.3% tax is on the gross, not the net. If a small company grosses 1 million dollars the 2.3% is $23,000. Let's assume the net is $100,000 so the corporate tax is 36% or $36,000, add the $23,000 and the total is $59,000 so the true tax ate ris 59% on net income or a 23% TAX INCREASE.
Thank you Mr.President for stimulating the economy. I now have 23% less so will I hire & invest or move off shore?

Jerry Robinson Bailey and Robert....

If pursued by Alligators - then it would make sense to be concerned about the biggest and fastest Alligator - first....

Even a 2.3% tax on the gross is a small Alligator - when compared to the others out to take a bite out of you...

I think you know this - if you build products and deal with the finances - I KNOW you have to deal with the issue.

You also know that the "net billings" of 1M will rise - to pay for the 2.3%... It's how the system works...

No more taxes, especially on the small businesses that need every dime to start up. Are there any ways to lobby? To get the combined smaller voices heard by Washington. I am so tired of sending Representatives to Washington, and them making laws about for instance toy guns or women's healthcare and new taxes on anything that promotes business commerce is just plain wrong. Let these companies grow so that they can grow into Corporations. I am for tax credits to hire people and bring the money home from oversea investments that large businesses do and shelters.

Jerry Robinson Ceasing to subsidize the "off shoring" of US companies and plants would be a good start... That's not so much a "tax matter" - but it is a "subsidy" matter...

Bailey Tucker Jerry-

Why is it that the American tax payer is always the one to take it on the chin and tighten their belt? Why is it that Washington NEVER has time time to find the waste in their spending? Why is it that when you point out the waste in their spending their stupid little eyes glaze over and then you are called names like "racist", "bigot", "tea party whacko" for suggesting that they live a little leaner and cut some programs...basically give up a little of their vote purchasing money? That's all it is...VOTE money. They don't give a flying crap about the little guy or changing anyone's condition. They just want to buy someone's vote.

Our politicians and beaurocrats have about as much common sense as a two year old (maybe less) they don't recognize departments for saving money or spending less than they are budgeted. NOOOOO...they punsh them by cutting future resources. Please don't tell me that's just the way it is or that's just how the system works when the system is fundamentally flawed. We have trillion dollar deficits as far as the eye can see.

When the "little alligators" can easily inflict a wound that will cause you to bleed to death, what the hell difference does it make about the big alligators? They just kill you quicker. And when both alligators are being handled by the same keeper (the IRS) who is content to hold you down while those alligators feed on you, what the hell difference does the size of the alligator make?

Sorry for the cursing but I am fed up with the stupidity and inefficiency of Washington and I am sick and tired of being told to give even more of what little I bring home only to watch them flush it down the toilet and then angrily tell me I'm not giving enough.

Frederick Thacher It would be good to know why the tax was voted in by Congress. Does anyone know the reason behind the law? How will it be collected? Seems a great deal of the discussion is vague and rather undirected and factually questionable. Sure tax rates may be 36% but how many actually pay that rate? Does anyone know? There is an argument that the tax will reduce the time and therefore the cost of getting quality and safer products to market? Is that really possible?

John Eckberg Hello Mr. Thacher, The tax was voted by Congress willynilly. First, they wanted 4.6 percent of revenues. Then they figured out that would claim 100 percent of the profits of the average medical device company. So it was cut in half, which now only claims some 60 percent of the profit of an average medical device company. It will be collected when companies send in payments, about every two weeks. As for the tax rate, there are credits of two percent and three percent for job creation and research and development. Generally, excluding one-time events, taxes for device companies are about 35 percent. I've never heard an argument that a tax will reduce time and cost of getting quality products to market. In any event, that argument is not true. Companies will slash R&D to come up with the money to pay this tax. They might also lay off employees (Welch Allyn and Covidien come to mind) and try to raise prices. But when 40 percent of the hospitals in the U.S. lost money, raising prices is not exactly viable. I'm the media relations director for Cook Group, parent of Cook Medical, which is the nation's largest privately owned medical device company.

Large and small companies will be negatively impacted by this action. Larger companies are already positioning themselves to move some operations off shore to mitigate risk. Smaller companies will also need to explore ways to minimize the tax impact, although their options will be limited. This has serious implications for competitiveness and innovation as coveted manufacturing jobs are moved offshore. I fail to understand this move as it will create undesired outcomes.

Robert Trinka, MBA Great comments, what an active discussion!! Thanks. I spoke to someone the other day who said 'If [Republican] is elected, we won't have the tax'...Unfortunately, I don't think that it's that easy! This tax starting Jan 1, also in recent weeks big swings in the USD:Euro exchange rates & we are collecting state sales tax in many states (range 5-8%), so, many added costs to contend with, without increasing the value of our product to the customer - should be our primary mission Challenging times.

I like it because it helps defray costs for some.

Frederick Thacher John,

Thank you for the thoughtful comments. Most helpful. Will the tax be levied on imported medical devices?
Fred

Keith Kretchmer Here is an article I read that provides a primer of sorts for information about this excise tax.

http://www.mddionline.com/article/medical-device-tax-101

Robert Trinka, MBA Paul, Interesting article, thanks. I noted the sentence: “Devices manufactured that are ultimately destined for export outside the United States” [are exempted]. Most of the products that we manufacture in the US are sold both in the US and outside of the US. This tax is only on products sold in the US. Extra work for our accounting department.

Thanks to all, I am writing an article on this tax and your conversation has proven excellent food for thought. (Don't worry I shant go quoting anybody) unless you say I can of course.

John Eckberg Hello Damien, This tax is the best economic development policy for Ireland, the UK, Costa Rica and Canada in recent memory....

Steve Levers The only good from this tax is the cover excuse it provides companies with plans to move operations out of the US --- when in reality the tax, no matter its lack of merit except as a source of funding for PPACA, has no material financial role in decisions to offshore.

Jerry Robinson John...

I just do not believe your "2000 job loss" statement.. It may be that the tax is a "cover story" - but compared to the ECONOMIC advantage gained by OFFSHORING, it is minor.

If you want to summarize all costs - HERE and what you "think" is offshore.. then compare.. by all means do..

--jr

John Eckberg http://www.humanevents.com/2012/09/24/sen-hatch-fights-to-repeal-medical-device-tax-as-companies-move-overseas/

The Senate is showing incredible arrogance in not debating the merits of a tax that is killing jobs, companies and, soon, patients....I am the media relations director at Cook Group and already this autumn more than 2,000 jobs have been lost or will be lost, according to MassDevice.com

Raymond Kester Once again the 2.3 Tax discussion has gathered energy here and rightly so. Preserving innovations and progress in health care is worth taking those few minutes to communicate to those that make the laws.

Real impact can be gained by clear and concise letters and/calls to your elected officials (Congress, Senate and Governor). Make your voice heard where it actually counts. It costs nothing more than a few minutes of time and has long term value.

John Eckberg Hello Raymond, Right you are about the need to reach out to state and federal elected officials. Not sure this string is still 'alive' however, beyond reaching folks who have already posted, so, I think, it's sort of like a conversation between ourselves with 20 percent or maybe 10 percent believing that this tax won't harm companies very much at all. Commissioner Joe might fill us in on whether this string is still blasted out far and wide via the LinkedIN Group that spawned it....Joe?

Martin Padget Hey John, I am going to go ahead and disagree with you on several points. However, being a former right winger myself, I do understand your position. I am not exactly pro tax here either (maybe regrettably pro tax? maybe). I just don't like to see one with a tall soap box go unchallenged. Glad you have the huevos to grab a box though. Cheers.

I think your estimate of only 10 or 20% of med device folks that disagree with you is flat out wrong. Of course, I can offer about as much proof as you can on this one. That said, this stat matters little.

I don't think a good argument can be made that the 2.3% tax <em>should</em> mean more moves to CR or wherever. My understanding is that this is more like a FCC tax on telecom, a sales tax or a material cost increase will not be avoiding by offshoring. Besides, these usually get pushed back on consumers at the end of it and I am sure that will happen here to. Will that dent demand, maybe a little, but they still sell lots and lots of cell phones.

Now, is a straw on the back, sure. However, if a company is interested in offshoring, I think this is more of an excuse to do so rather than a reason. I don't really buy the final straw argument here unless a company completely absorbs the tax, which, as stated, I doubt will be the case in the end.

Second, what stories and lines of thinking that conclude with 2000 jobs lost fail to note is that that there are jobs found too. These monies from taxes are not going to 'disappear' (well, some might, maybe no more than would have anyway) but rather are going to be spent on doctors and nurses. Looks sorta job neutralish to me after the wash.

At its base, your position is founded on the 'we made this money, it is ours" - and I get that. In this case however, I would remind readers that this industry makes money off of suffering. Now, I don't mean that the bad way, but it does require a different view of things from other industries. I think it means that a responsibility exisits, just like docs, to put other things in front of our own interests from time to time. In this case, the argument is that the money is needed to spread medical service to more of the population. I think that gets forgotten in all of this.

Is broader coverage a good goal to have? I am interested in hearing your response on this.

As far as overall corporate tax rates, well, I consider that a separate issue. That said, we can always get into it if you like, but I think it is overdone.

Michael Stoia Okay, have to weigh in here on a few errors. Vendors (corporations) will not respond to this with increased costs to hospitals and thus consumers because hospitals and surgery centers are actually decreasing their costs per procedure, especially with implants. So vendors with market share are actually getting inundated with requests for lower pricing. Secondly, all of this stupid talk that obama care will expand the pie of patients and thus vendors will make up for this tax on the other end or that more hospital employees will be hired is so false. These same people who now have insurance under obama care, used to get treated in the past but only as indigents. So vendors will still sell the same amount of goods for the same total pool of consumers. Hospitals will not hire more employees (nurses-doctors) to treat them because they were treated in the past ! Additionally, with reduced reimbursements coming from the insurance monopolies, hospitals are getting less ROI even though overall revenue may increase. So the hospitals are not benefiting either. 5 companies have inacted lay-offs and more will follow. You simply are seeing the more organized responding inititally and the poorer run businesses will respond later when they see the sudden impact on their bottom line. Also, realize that this is not only about lay-offs, know of several friends @ med device companies that have already been advised of upcoming salary and commissions cuts effective January 2103. That is the "hidden" cost of this tax that will not be published but will be all too real !

Steve Levers Hi John, Just as a preface... the 2.3% med device tax is in my opinion an ill-conceived source of funding for the PPACA costs but that's another topic. I simply doubt that this tax is the driver behind decisions being announced to move or establish jobs/plants overseas. Wouldn't a reasonable business person with high labor content in their product costs (i.e. 7-15% of revenue), and//or profits low enough that their viability is threatened by this tax not already have enough incentive to make the same decision with or without this tax? The alternatives, benefits and costs of these decisions (i.e. Ireland and Costa Rica tax advantages) are not changed by the tax, nor does the tax introduce a new competitive advantage for foreign based competitors as they are subject to the tax on an equal basis.

Leonard Ginsburg, P.E. So interesting. I'm betting the same people who are dead against any revenue being generated from the health care industry are also wishing the regulatory processes could move along faster. The FDA has more demands on it every year. If we're not willing to fund its activities, we're not going to get what we as manufacturers want, and sooner or later we'll have the equivalent of a banking collapse, a BP oil spill, a New Orleans flood or a PG&E gas main explosion in health care. All those were regulatory failures, and more symptoms of the anti-regulatory disease are pending. We can't keep taking money out of the agencies which protect public safety and not expect a continuing, ever-growing stream of disasters. Why shouldn't the industry help pay the cost of its regulation?

All costs of production and distribution, including taxes, of medical devices, are paid for by the consumer. If a tax is applied across the board, no one gains an advantage. Companies can charge as much or as little as they please, but they compete for business against all other suppliers of the same device, all of whom pay the same tax.

What is the more rational way, then, to support FDA's activities?

John Eckberg Hello Steve, Depends on the industry but when labor as a cost is between 7 percent of revenues to 15 percent of revenues then you better believe a cumulative tax rate that approaches or surpasses 50 percent of earnings figures into where companies locate plants - particularly when Ireland has a 12.5 percent rate and Costa Rica offers a 100 percent corporate tax credit.

As for Jerry's notion that this tax has not claimed 2,000 jobs (existing lay-offs or announced lay-offs) tell that to the journalists at MassDevice.com who figured it out and wrote about the 2,000 jobs lost in a story last or this week.

By the way, I wouldn't mind sharing the opportunity to be a chat string pinata so if any of you other tax critics want to jump in here with a comment, please feel free to do so. And to satisfy corporate counsel and others, yes, I remain the media relations director at Cook Group, the nation's largest family-owned medical device company.

Jerry Robinson John....

Let's identify the journalist (right word?) at mass.com and ask them. Perhaps they can explain the methodology.

I believe that raising taxes hurts companies.. That's likely true with this tax, too. What I sincerely doubt is that - when compared to all of the other factors - that this tax is "causing" job layoffs... It's easy to raise the issue - when the facts "could be" that this is only a small reason - in proportion - that jobs are lost...

I certainly feel that the CONTINUED effect of raising Telecom Wired Phone taxes helped lead to the collapse and huge job loss of traditional phone carriers... companies like MCI, World-com, Ericsson, etc, etc. I drive by empty offices that once housed these companies.. every day!!!

But there were more factors that led to collapse of US Telecom companies - and the decline of regional "wired" telephone companies..

***********************

An upfront "Tax" is easy to point at. Quiet things in the background - like subsidized off shoring by our government - are far more important culprits in loss of US jobs and technology. Make no mistake, either... there is continuous and serious erosion of jobs and technology.

*****************

Yep.. I think we should quiz the writer about the basis of the article...

John Eckberg Hello Mr. Ginsburg and Mr. Robinson, This isn't about debating FDA fees, which have skyrocketed, I might add, regulation, deregulation or anything else but a supremely dumb top line tax. There's a chart around somewhere on the FDA fee increase over time (the more that is taken the fewer number of products ensue, basically). No, this debate is about a tax that is giving multi-national publicly traded companies no choice but to pick up and move factories and jobs to low-tax nations like Costa Rica, Ireland and just about any place other than the U.S., really...And it's not a question of raising taxes, either, because this tax is new. And it takes the tiotal U.S. tax rate for some companies in this space to more than 50 percent of every dollar earned. An unlucky few companies will pay a 100 percent rate. That's the nature of top line taxes.

And with 40 percent of U.S. hospitals losing money last year and the profitable ones happy with a 2 percent return, the simple fact of the matter is that companies are not going to be able to pass along this price hike to hospitals, Group Purchasing Organizations or Independent Delivery Networks. Just isn't going to happen.

And, finally, just because this tax is going to be applied to all products sold in the U.S., that there is a leveling of the playing field and no advantage to any company. That, too, is wrong and here's why. Companies with factories in low-tax nations but sell in the U.S. have a tremendous advantage. Take Ireland and that nation's 12.5 percent tax rate on earnings. When the widget comes to the U.S. and is sold, there will be a 2.3 percent tax on the price. When that 2.3 percent tax is dropped down the income statement to earnings, it will represent in the case of Cook, where I am the media relations director, a 15 percent tax on earnings.

So, as you can see, a product made in Ireland has a cumulative rate of about 27.5 percent. Here's how it goes with a U.S. rate: the 2.3 percent tax or about 15 percent, added to the U.S. corporate rate of 35 percent (nobody pays 35 percent some whine but those whiners don't know what they're talking about) or if you create jobs and R&D like we do there's a 5% tax credit, so call it 30 percent, then 7 percent in local/state taxes and viola - the same device made in the U.S. is taxed at the total rate of 15% + 30% + 7% = 52% rate. Imagine if you had to pay a 52 percent tax rate.

You'd move to Costa Rica and that's exactly what major medical device companies are doing.

Ask me about St. Jude Medical's 2012 10K filing with the SEC...or go find it and see for yourself...

Jerry Robinson Your numbers make some sense...

But I do not think that 40 percent of hospitals "loose money" - from last year. Hospitals are not, consistently, run as "business entities". That is not the topic here, of couse....

I think if costs rise - they get passed along... just a fact of life and cost accounting. You are right about the cost advantages of off-shoring - and our rule makers have created this problem.

Getting rid of your US operations is tantamount to just "throwing in the towel" and getting out of business in the long run. Some companies have done and are doing that. It's a shame, really. The next generation of company leaders, innovators, inventors, and more will not exist within the company.

You did not point out an absurdity in all this either... Tax is levied on the products - and hospitals will have to pay more. Costs get passed along... a HIGH PROPORTION of that cost increase - gets paid for by state/federal/local governments... thus increasing the cost of health care....

How would small startups feel about acquisitions in European emerging economies? Existing manufacturers in need of fresh capital for equipment updating - while strong technological and know-how capacity already in house!!!

Reply: cherepnalkoski@euniqcapital.com

ZC

See Evan Bayh's article this morning in the WSJ. Indiana harbors Zimmer, Cook, Hill-Rom, et al.

Keith Kretchmer Perhaps people who understand tax systems in different world markets can answer this question of mine. Is the VAT in Europe different than this excise tax will be here?

All European countries have differemt VAT rates.
Luxembourg having the lowest (15%) and Hungary the highest (27%)
For those interested, a list of European VAT rates can be found here --> http://www.tmf-vat.com/vat/eu-vat-rates.html
International VAT rates --> http://www.tmf-vat.com/international-vat-rates.html

Jerry Robinson So one valid comparison is that the 2.3% tax would work as a "VAT" tax kind of comparison...

I can see a lot of differences, though...

This is not just a 2.3% tax. It's a 10-15%tax on profits. Add that to the 35% corporate tax and it's cumulatively a 50% tax. This is not good for our industry. Expect layoffs.

Jerry Robinson The math is off....

For the top 10 or 50 med product suppliers, what do they "actually" pay in taxes? where are they making the products?

Would ANY OF THEM actually pay - (ie, which one....?) the "50% numbers?

If they don't - or would not - then your statement would be false..

Accounting makes decisions on real numbers...

--jr

Steve Levers Mr Eckberg, What's been the impact of Ireland's VAT tax increase from 2% in 2011 to 23% in 2012 on the gap between total taxes in Ireland vs. the US. Without knowing the cost/procurement details for a given company, it appears this would close most, if not all, of the tax gap between the US and Ireland as a % of earnings.

Kevin O'Neill In talking about this new tax, many references are made to the 10-15% negative impact on the net line for the 'typical' med device company.
This is simply not true. 80% of med device manufacturers employ less than 50 people.
So the real 'typical' med device company is a small business - and is actually taking an average 32% hit on profits.
Now anyone who runs a small company knows that you cannot take a 32% reduction in profits without considering ALL options. That includes jobs, new hires, new investments, price increases etc. This is reality.
Joe, its essential that you do all you can to encourage everyone to keep this subject at the top of their priority list.

John Eckberg Hello Mr. Levers, I've asked our tax guys about this but frankly don't expect an answer any time soon as they are scratching their heads on the immensely obtuse and confusing dogma from the IRS on how to deal with this tax.

My seat-of-the-pants reply to your question is that a VAT tax of any level in Ireland, a nation that is about the size of Greater Cleveland and maybe Cincinnati, too, has little in common with a topline tax on a homegrown company's sales to GPOs, IDNs and hospital chains in the U.S., a nation of 300 million. It's comparing Apples to Zebras.

And yes, Mr. O'Neill, you're right. While we at Cook expect a negative impact on earnings of 10% to 15% it's true that for some companies it is going to be far far worse - even claiming all profit.

In fact, for the average company, if there is such a thing, it is likely to be, as you say, a government grab of 1/3 of last year's profits. About the only similar move by a government that I can recall is when Manley nationalized various industries in Jamaica. This tax, essentially, is confiscation of earnings/profits/property without due process.

I agree with you, too, that Joe needs to keep this topic alive - and folks need to write to their Senators to demand debate and vote on this repeal during the upcoming lame duck session.

And, in the interest of disclosure, I remain the media relations director at Cook Group, the largest family owned medical device company in the world.

John Eckberg Hello Mr. Levers - Here's what I have found out. The increase in the Irish VAT from 21% to 23% has a negligible impact. VAT is charged on the vast majority of inputs, including raw materials, production supplies, office supplies, and research and development items, but it would be recoverable by an entity manufacturing in Ireland.

Thus, the increase in the VAT rate is effectively borne by the Irish consumer unlike the medical device excise tax which is imposed on the manufacturer or importer.

Therefore, the increase in the VAT does not even begin to close the tax gap between Ireland and the United States. Excluding the medical device excise tax, the United States has the highest corporate tax rate in the world. It is a full ten percentage points higher than the average OECD rate.

Adding to the uncompetitive corporate tax landscape is that the United States is one of the few remaining developed nations that still employs a worldwide tax system.

Jerry Robinson What historical basis do you have for the comment - that the 2.3% tax will be borne by manufacturers - and not the end customer?

Have you bought gas recently? The government tax on Gas is quite high. But it is passed on to the consumer.

You don't pay "tax" on "tax" either - at least in this case... (Unlike Social Security).

Charging more to your company in tax is not really effective - if you consider how much the Gov't is underwriting of medical expenses.. Still - the real problem would be if YOU were paying it - and your COMPETITOR was not.. as is so often the case these days....

Rather than write - VOTE..

John Eckberg Jerry, You're an argumentative soul. Anybody ever tell you that? Facts are facts. This tax is borne by the manufacturer and it's borne by the manufacturer like every two weeks. Every two weeks!

The end customer (and it's not patients) are GPOs, IDNs and the like, often have three year contracts with us and there are no clawback clauses so we can renegotiate.

And that's three years if we're lucky. Many have a five-year duration.

Comparing this tax on a company revenues to a gas tax is like comparing gnats to tigers: both bite. One bite has more serious consequences.

Voting doesn't matter half as much as a letter to your Senator with a straight-up depiction of how this tax is going to harm your company. Right now it's critical that Senators from New York, Michigan, Illinois, California and Florida hear from job-providers that this tax is going to harm companies, workers and patients.

Jerry Robinson Yes John, I have heard such a thing...

I am not suggesting that you "clawback"... but when a hurricane hits you in LA or TX, you have a reasonable complaint that "things have changed" - deliveries and costs will also change.

I have had contracts for lots of things. Still does not mean that vendors have not: (a) surcharged me when fuel went wacko on cost, (b) voided the agreement due to "unexpected consequences", and (c) applied any of a number of other tools and tricks when adverse conditions hit.

I am not an accountant or tax weasel - but there are such folks around.. since everyone is hit, then what is the consensus of other companies? are they going to "eat" this tax, too? or pass it on.

John Eckberg Hello Jerry,

Look, I'm just a guy walking down the road.

I'd much rather be pestering reporters to write about more important issues, topics like antibiotic-impregnated catheters, catheters impregnated with antibiotics rifampin and minocycline because every day in our hospitals there is unnecessary pain and suffering from unnecessary catheter related bloodstream infections. The toll of these sorts of sepsises is terrible.

Every night, a busload of people goes off a cliff and everybody on board, all 50 die and 75 percent, according to studies, die what should be a preventable death. A catheter produced by our company (The Spectrum) would cut that mortality fourfold or more. I'd much rather be pitching stories to healthcare reporters about the life-saving capabilities of the Spectrum catheter because, well, because nothing else is as important as that.

Instead, I spend most of my time waging battle over this strange and debilitating tax on revenues. I do that because I know that research and development spending is going to get slashed when this tax goes into effect. No pass along. You can't pass along a price hike when 40 percent of the hospitals last year lost money.

And when research and development in the medical device space is slashed, that means future medical advances, which occur at an exponential rate, just won't happen.

As for your points about "things have changed." That holds no water with GPOs and IDNs. They shop for lowest and best price. Simple as that. And it's understandable, too. Nobody is going to be able to pass this tax along. Companies are going to have to eat it - and then move production overseas to low tax nations. Look up Hill-Rom's 10-k, look up St. Jude's most recent 10-K. Click to the paragraphs that list "Properties." See where the new factories are being built. It's not a pretty picture.

Martin Padget Effective US corporate taxes are a good bit less that 20%. From the Federal Reserve...
http://en.wikipedia.org/wiki/File:US_Effective_Corporate_Tax_Rate_1947-2011_v2.jpg

The US also has a lower effective corporate tax rate that most developed countries. From the Treasury Department...
http://en.wikipedia.org/wiki/File:Effective_Corporate_Tax_Rate_OECD_Countries,_2000-2005_Average.jpg

Both come from...
http://en.wikipedia.org/wiki/Corporate_tax_in_the_United_States

Highest rate, sure. But the effective rate is what actually matters.

Part of the reason that hospitals are losing money is because of people without insurance show up at the emergency room where and when treatment costs many times what it would have otherwise - and this is not trivial as 15% or more of the population has no insurance. This is almost all loss to the hospital. In the larger picture, part of what is being attempted here is to minimize these events. Deal with the problem earlier when it is cheap to fix, make things predictable.

As has been asked, I would also like to see an example where a tax such as this didn't get passed on. I can name many industries in which it did, but know of none where it didn't - contracts not withstanding.

John Eckberg Hello Mr. Padget, I have never heard of a tax applied to gross sales that must be paid by a manufacturer because I'm not a tax expert and I doubt that such a tax exists until now. Oh, maybe in communist China or some socialist country it exists. Or maybe if you own a cigarette company, gun company or tire company. Are there excise taxes on tires?

You can point at coroporate tax rates on Wikipedia all the day long but when I walk down the hall to our tax guy and go, hey, what's our tax rate this year and he'll look at me and mutter 35 percent, (unless we get a 2 percent credit for job creation (we actually create new jobs and build new factories in the U.S. or at least used to do that) and 3 percent for R&D, which is usually a euphemism for hiring engineers right out of college.)

(Insert wry comment from some WAG about how we need a new tax guy if we're paying 35 percent....)

And, really, the answer to your question doesn't matter anyhow. What is it about price contracts that are long-term, three and five years, with GPOs and IDNs that you don't get? In this space, prices are negotiated and pretty much fixed for years and years.

And your point about emergency rooms is exactly this industry's point. These devices are already being placed. There will be no flood of new patients for device companies - unlike Big Pharma, which filled the Obama campaign coffers and in return got about 30 million new customers at three scripts each AND kept low-cost drugs from Canada out of the U.S.

And what does contracts notwithstanding mean? That's what I want to know.

Martin Padget Yes, the highest tax rate is absolutely 35% or whatever. Thing is, Federal Reserve data (not Wikipedia) says that only half that actually gets paid on average and the Treasury (not Wikipedia) says that the effective rate is actually fairly low compared to other developed countries. Unless we are talking about how the tax system works, the 35% figure has little meaning and your tax guy knows that too.

No wry comment, not my style. But I will say that when you do something like substitute the top tax rate for effective tax rate, calculate based on that substitution and then base part your public argument on that, then I have to question what is the rest of your argument built on.

I am not sure why I used the 'not withstanding line' now that I reread it. What I will say is that unless your contracts are very specific, I would bet you have some room on this depending on how you handle it. I know in my own work, when 'something comes up', I work it out with other party. It is just good business.

That said, this tax passed in 2010 and is not due to start being collected until 2013. Shouldn't your three year contracts be up by then? (and even 60% of your fives) Haven't you been able to work this into contracts negotiated since 2010?

I am pretty sure I get it.

Leonard Ginsburg, P.E. I'm pretty sure you get it, too, Martin. All very well said. It is always a surprise to me to see so many people whose livelihood depends on the government doing its job trying to deny it the funds to do that job. I haven't seen a suggestion yet in this discussion for an alternate way of providing the needed financing. Without sufficient regulation, our healthcare industry would be a complete disaster. Do we really have to wait for a meltdown like we saw in the financial sector before folks will understand the need for regulation?

Jerry Robinson well...

Weird pricing and costs do describe these products...

This movie is getting released .... just about now.

http://vimeo.com/36848237
http://www.indiegogo.com/EscapeFire
http://www.traileraddict.com/trailer/escape-fire-fight-to-rescue-american-healthcare/featurette-meet-the-artists

the movie is on theme with this discussion... I have not seen - and have no opinion - but it sure seems on topic....

dinky 2.3%? on revenue and not profit? that's in no way an insignificant business adjustment. I understand healthcare is a huge cost for this country, but i'm not impressed with this tax, because i know who gets screwed. It's not politicians, hospitals, insurance companies, or my CEO, but me. Shi+ rolls downhill and this is a prime example. I already see a trend away from advancing actual patient benefit and just how to make things cheaper as a commodity. This won't help.

John Eckberg Good morning Mr. Padget,
While this, I'm sure you will agree, is starting to feel like a tedious argument of insidious intent, I would like to respond and make a few of my own. Average tax rates are just that: averages. Perhaps our company is on the wrong end of that bell curve. What I do know is that we will pay next year, assuming the medical device tax is imposed, a U.S. tax rate of about 55 percent of every dollar earned. So that 35 percent tax rate, believe it or not and you have clearly indicated you don't believe it, has a lot of meaning to us. Companies, particularly publicly traded companies, will have no choice but to seek low tax nations for their factories.

That's why, according to their last 10-K SEC filing from February 2011 St. Jude is building a 400,000 square foot plant in Costa Rica. Odd, isn't it, how construction started in 2010, when the tax passed. Hill-Rom Holdings pointed out in its 10-K
that the impact of the tax, coupled with reform-associated payment reductions to Medicare and Medicaid reimbursement, could have "a materially adverse affect on our business, results of operations and cash flows." That can't be good. Further, Hill-Rom pointed out that its adjusted effective tax rates were 29.8 and 35.3 percent for fiscal years 2011 and 2010. The lower rate in 2011 was due primarily to the benefit of "increased earnings in lower tax rate jurisdictions." Medtronic has a building in Ireland that could house all of its U.S. manufacturing, I'm told.

I could pull up another half dozen companies to show how this tax is chasing firms off-shore but I think the point has been made.

You can bet all you want on how much room we have on committed prices and you'd still be wrong. The fact is that GPOs and IDNs don't enable wiggle room. Maybe in your field there is such a thing. Not so in ours.

And while it's true the tax was passed in 2010 (initially, remember, the Senate wanted a 4.6 percent tax...they got on their unicycles and started back-pedaling back behind closed doors and came up with 2.3 percent once they realized that first rate would have claimed all the profits of the average medical device company, margins that are about 3 percent to 5 percent, according to an Ernst & Young study commissioned by the Medical Device Manufacturers' Association). But, frankly, we have never accepted this tax as a done deal because, well, it's dumb and Democracy sometimes works, which is why we've been fighting to repeal it.

That's also why a strong bi-partisan majority of Congress voted 270-146 to repeal it - 37 Democrats siding with the repealers.

As for Mr. Ginsburg's cheap shot about people whose livelihoods depending upon the government doing its job should be a bit more gracious or something, I'd like to point out that from 2004-2009, FDA fees paid by industry nearly tripled from $21.9 million to $61.8 million while 510K approvals went from 3,343 to 2,991. During the same time frame PMA approvals went from 46 to 15. So the higher the fees, the fewer approvals. At this rate, pretty soon there will be no new device approvals.

As for your alternate way of "providing the needed financing" I can think of a half-dozen taxes that would be better than this one. I'll start with three, although I don't expect any of these to be approved because it would take legislative backbones: how about a tax on fast food, which clogs arteries and kills people, how about a tax on vehicles, since accidents kills tens of thousands of people annually, maim tens of thousands more and care is provided at the most expensive clinics in the system (emergency rooms), or maybe a tax on wheat, which also leads to obesity and diabetes, or what about a tax on use of life-claiming tobacco but why go on? You get my drift and I'm not going to change your regulatory-prone mind.

The reason for this untested and onerous tax on medical devices is because this industry was a sitting duck. Simple as that. Taxes have consequences.

Jerry Robinson Kevin...

I think it likely that people are more concerned with OTHER issues - much more. And therefore this issues won't get the attention and consideration needed - pro or con...

If you are a company guy, and the up/down "Obama Care issue" is on the table for voters, then that gets more attention. Consider the measurement as being made with "add dollars" - and you can see why.

I think that's what's going on....

John Eckberg Hello Kevin,
I, too, was a bit discouraged by the few thousand at http://www.no2point3.com until I thought of this - a numbers game that might play out this way in the mind of a Senator who is hiding from having to vote:

While just 389 of the signers are from Florida, that means those 389 signers probably work at, say, 200 different companies. And if those 200 companies employ 80 workers each, that means 16,000 people (voters) are potential opponents of this tax and want it repealed. If they each have a close relative who also votes, say, three people per, then that's 48,000 potential votes.

Senators pay attention to potential voters who are worried about harm to the company that employs them, harm to their earning power and harm to patients who benefit from breakthrough devices. Yes, 9,000 is a comparatively small number but look at how 6,000 charted out when placed on a map:

https://www.batchgeo.com/map/8e2bca544a3de76aff8664789bd0443d

And if the above ratio/scenario means that 238 signatures translates into 20,000 potential voters in, say, Tennesse, my guess is that Senators are probably not going to ignore the message that is being sent .

Kevin O'Neill Its seems clear to me that those business leaders who are directly involved with the impact of this tax are the only ones who understand its consequences.
As a small med device business owner, I am acutely aware of the negative impact on our company. Others can believe whatever they like.

But here is a major concern that i have.
Although some individuals and companies are very motivated to repeal this tax, i worry that the industry is acknowledging that it will just have to accept it.
Take, for example, the website www.no2point3.com - the petition carries less that 9,000 signatures. That doesn't seem very many!!!
I have actually seen this website and its lack of support referenced in some articles supporting the tax. Basically saying "even the industry is not really complaining"
Here are some of the really low numbers of signers on the petition: Kimberley Clark 6, Synthes 7 and Medline, just 5 signers.
What is going on here? Is this petition considered a major vehicle for the industry's voice?
Or are people just not really that motivated anymore?

Robert Edelstein Our company sells surgical instruments and are mostly concerned about the administration of the tax. I have not seen any detail which says the MDET will help with the issues at the FDA and think this may put additional burdens on the FDA.
Please see a recently published article about the MDET.
There has been a good amount of press about this but no coverage at all on the provider side.

http://www.surgicalinstruments.com/MDET-A-New-Acronym-to-Learn-1008-54.html