6 min reading time

No, not the Seahawks versus the Patriots.

At http://medgroup.biz/repeal-can-happen, you can help get the medical device tax repealed.

We’ve never been closer. Sen. Orrin Hatch (R-Utah) and 10 U.S. Senators (on both sides of the aisle) filed another bill to repeal the 2.3% medical device excise tax.

Emails and calls to your senator DO make a difference, a Congressional staffer told me. “Senators say, “If no one in my constituency is talking about it, it’s hard to make it a top priority.'”

So give your Senator real-life examples how you’ve been affected at http://medgroup.biz/repeal-can-happen.

There are three ways you can take action.

ONE: Write your Senator. There are links to all 100 Senators. Click on your Senators’ links to go to their Contact page to send them a message.

TWO: Go on Record. There’s a place to send your story to me if you’re willing to go “on record.” In fact, I was called just yesterday for a quote on a radio program. The topic is hot again – let’s get your story out there.

THREE: Watch and Share. Senator Klobuchar and Rep. Erik Paulsen shot a video message for the Medical Devices Group. Give it a listen and share it on social media.

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Ideas for your contributions:

• Ask your Senator to include tax repeal in all forthcoming tax reform initiatives.

• Have you laid anyone off? Held off on hiring? Lost your job?

• Have you cut back on research and development? Delayed a new product introduction?

• Are you aware of a new facility that didn’t happen or production that was moved outside the United States?

It’s time to MAKE SOME NOISE!

http://medgroup.biz/repeal-can-happen

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PUBLIC EVISCERATION

I was fully and publicly gutted when I first discussed this issue in April 2012.

See http://medgroup.biz/public-evisceration if you like pain.

As before, some will say, “This isn’t a political forum!” and leave the group.

Others will say, “You can’t blame job losses on this tax,” or “Here’s a link that says the tax is good.”

And others (mostly those outside the United States) will say the tax is good for their business.

In anticipation of these comments, to explain why I’m writing about the tax again, I’ll use group member Lev Melinyshyn’s (http://medgroup.biz/lev) words from his 2013 letter to the Chicago Tribune,

“This tax on gross sales, whether a company is profitable or not, takes the cumulative tax rate for our 50-person medical device company to nearly 70% of every dollar earned.

We are now paying this tax every two weeks. It’s like having 7 more employees on the payroll – employees who do nothing and do not contribute to production, sales, or marketing.”

In sum, I can *at least understand* a tax on profits. But an excise tax on SALES? That hurts innovation and strikes me as wrong.

If you agree, visit http://medgroup.biz/repeal-can-happen and take action.

If not, stick with us. We will return to our normal, apolitical commentary next Tuesday.

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Make it a great week.

Joe Hage
Medical Devices Group Leader

P.S. The free webinar, “12 Steps for UDI Submissions to the FDA GUDID,” will be held tomorrow, Jan 21 at 12 pm EST.

See http://medgroup.biz/UDI-in-2015 to register.

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John Eckberg
Media Relations
I’m no tax expert but I do know this. A tax that claims $1.8 billion annually is peeling that money from the balance sheets of companies. Companies in this space depend upon R&D and new product pipelines. R&D and new product pipeline are both euphemisms for newly hired engineers and med-tech developers thinking engineering and med-tech development thoughts while on some company’s payroll.

If this tax had been left on the books of US companies, chances are 1/3 to 1/2 to maybe most of it would have gone toward job creation or R&D. So, that means $1.8 billion is actually $900 million since half the tax comes from companies based in the U.S. So instead of a tax, this cash could have been 15,000 new jobs that might have paid $60,000 each – annually. Factor in the industry multiplier because these would have been value-added jobs that create – conservative estimate here – 2 others jobs in local economies. Grand total job loss/impact? Potentially 90,000 jobs during the two years this tax has been in place.

Who knows how many cures might have been developed or new treatments discovered – countless, no doubt.

Paul offers a good point: what’s the pay-for? The easiest and most justifiable tax is on fast food (clogs arteries leading to morbidities) or tobacco (cancer/costly end life treatments) or vehicles because wrecks lead to much unnecessary trauma/treatment or alcohol for the same reasons tobacco is already taxed, death/social costs. I think a 15 percent increase in local and federal tobacco taxes would have raised the same amount of jack as this tax.

This isn’t a political issue, either. It’s a policy/funding issue and once again we can all be thankful that Joe has the backbone to toss this out there for debate.

Paul M. Stein
Chief Scientist, Inventor, and Entrepreneur – Dedicated to the Treatment of Critical Unmet Medical Needs
Everyone and his brother has a please-make-this-go-away “wish” for Congress. If that’s all it took to get things done, I don’t know where we’d be, but it doesn’t work that way. The only way to get the tax repealed is to come up with ways to balance the loss of revenue when the tax goes away. So, to help with your arguments to your lawmakers to repeal the tax, make sure you yourself come up with concrete solutions to balance the books. With more ideas, the more palatable the idea comes, to both political parties.

Gretchen Benko
Marketing / Health Economics
Couldn’t agree with you more. The tax should be repealed, esp. as it was established on revenue, not profit. It hurts small, non profitable companies, and larger companies will simply pass the tax on through the cost of goods. No savings to end users in the healthcare system, just more control in DC.
The way I explained it to a colleague was this, Who know better where to put that money, where to invest that money, Washington? or the start up? The tax was sold to the people by saying that Washington would invest it in medical technology, I think those in the medical device business know far better how, where and when to invest it. Thanks for the update and I’m hopeful the repeal will be successful.

Ellen Dolores
Corporate Recruiter
Please leave football out of this – not sure why a medical device group should contain comments about a barbaric sport that requires head injuries.

Eric Eggers
Principal of Digital Health Consult® and 510konsult LLC; Founder/CEO of kBLASTER®
While I can respect Thomas’ desire to relegate the medical device excise tax as a political event, the reality is it has hit the medical device industry hard and continues to drag down growth and innovation, stifle hiring and encourage lay-offs. Start-ups bear a particular amount of pain, since their path the any type of profit is often long, so a gross revenue tax is a big hit.

Frankly, I wish there was another way to fund ACA like Fred suggested, but I don’t see our Congress being at that point yet. I am by no means pro-tax for industry, but looking to where we are as a country, If the US House, Senate and President want to be realistic about a funding mechanism for ACA, they should discuss spreading this tax across the ENTIRE health care deployment infrastructure (pharma, health insurance, medical device, hospitals/clinics, possibly providers but that would depend), as the argument that medical device should shoulder this burden was unrealistic to begin with, and now that its real effects are known, are terribly real now. If this excise was leveled across the entire ecosystem, it would probably level a tax below 1%, maybe closer to 0.75% or lower, which would easier for all involved participants to stomach.

While this would be a longer proposition trying to involve the entire medical ecosystem for an excise tax, I think the appropriate thing to do now is to push for the medical device excise tax repeal. This forces the conversation on how we can fund ACA realistically and sustainably, without targeting a single industry which is frankly bringing in much less gross revenue and is much less profitable that some of its brethern in pharma and health insurance companies. This may though get us to a different vehicle of funding altogether by taxing gross revenues on individuals.

Matthew J. Doyle, P.E.
System Verification SQE Lead at Varian Medical Systems
“Sen. Orrin Hatch (R-Utah) and 10 U.S. Senators (on both sides of the aisle) filed another bill to repeal the 2.3% medical device excise tax.”

It’s hard not to have any sentence with Orrin Hatch and both sides of the aisle be construed as anything other than an attempt at being jocular.

That’s like calling Tom Coburn a real cost-cutter when it comes to his obstruction of the Clay Hunt bill – a joke at best, a somber rouse at worst.

Fred Adler
President and CEO at Innominata dba GenBio
Kudos Joe for getting on board since I remember your response to me in 2012. This excise tax is camouflage for the fact that Obamacare did nothing to reduce apple to apples comparison costs of health care (sure lower premiums for less coverage did happen) and the device tax does not generate enough money to cover a few percent of the Obamacare health care give away just increasing our debt as a country. A real piece of legislation would address health care cost, not just add another tax and spend. My European distributors have all told me their “health tax” for socialized medicine is 18-20% of all gross revenue for individuals. You pay for what you get. Until people get the idea of “free” or “reduced price” health care (a non-taxable benefit started by FDR) out of their heads and understand the real prices, will we not fix this.

Paul Ellsworth
Territory Manager at HORIBA Automotive Test Systems
Time to make our voices heard. This device tax has been slowing the development of new products which can improve patient outcomes.

Thomas Schultze
Software Architect at Level7 Analytics, Inc.
Please don’t make this a political forum!

Martin (Marty) Wynkoop
Entrepreneur & Mentor
Joe, this is not political, it is survival for the small & start up ortho company. I encourage everyone to voice their opinion and if you believe ACA’s burden is too heavy, then speak to your elected officials.