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Flashpoint

August 5, 2013

FLASHPOINT: Tax punishes Hoosier workers

WASHINGTON, D.C. — For years, medical devices have been changing the lives of patients around the world.

Prosthetic legs have enabled wounded soldiers to run again. Cardiac patients have had decades added to their lives because of artificial heart valves and stents.

Indiana is an international leader in the development of these technologies that continue to improve health care every day. Our state is home to more than 300 FDA-registered medical device manufacturers, who employ 20,000 Hoosiers directly and another 28,000 indirectly. These are jobs that on average pay 41 percent higher wages than the median wage rate in Indiana.

Unfortunately, many of these jobs and the continuation of the remarkable innovative advancements made possible by medical devices are in jeopardy. Tucked away in President Obama’s 2,000-page health care law is a 2.3-percent excise tax on total sales of medical devices on manufacturers. While this tax just took effect in January, device manufacturers have already paid over $1.5 billion in additional taxes.

This has denied device manufacturers resources to expand facilities, hire more workers and invest in research and development. Down the road, this costly tax could force many medical device manufacturers to ship good-paying American jobs overseas.

Congress must repeal this damaging tax that unfairly punishes a successful industry providing employment to thousands of Hoosiers and Americans.

Without congressional action, the medical device tax is expected to cost device manufacturers roughly $194 million per month, putting 43,000 American jobs at risk, according to the Advanced Medical Technology Association (AdvaMed). A 2011 study released by AdvaMed estimated 2,124 Hoosiers could lose their jobs as a result of this tax.

Rather than encouraging job creation and innovation, this tax delivers a significant blow to Hoosier success stories like Cook Medical in Bloomington. Founder Bill Cook was a pioneer in the device industry and grew his company from the spare bedroom of his apartment into the world’s largest family-owned medical device manufacturer. Today Cook Medical is a worldwide health care leader that produces technologies used across the globe. And the business Bill Cook built remains an important Hoosier employer with a long history of corporate reinvestment in Indiana.

It is not just large businesses like Cook that are negatively impacted by the medical device tax. I recently heard from a growing company in Warsaw that develops products for the underserved pediatric market. Due to the device tax, this company has shelved two important research and development projects it hoped to start this year. Instead of working on solutions to relieve a wheelchair-bound child’s discomfort, the company has been forced to reallocate its resources to pay this tax.

To protect American device manufacturers and the patients who rely on these life-saving technologies, I am supporting legislation to fully repeal the device tax. I backed identical legislation during the last Congress, but now our bill has gained the support of several Senate Democrats. In fact, earlier this year, the Senate passed an amendment to the budget by a vote of 79-20 supporting a full repeal. While this vote sent a strong bipartisan message to the White House to abandon its tax on medical device manufacturers, the budget amendment was non-binding so Congress must pass separate legislation to repeal the tax.

Congress must build off of this momentum and remove this unnecessary and unfair tax burden on the medical device industry. Both Republicans and Democrats agree that President Obama’s medical device tax jeopardizes jobs, increases costs on consumers and impedes innovation. In these tough economic times, we need to be encouraging job creators like device manufacturers to expand and hire instead of hamstringing them with debilitating taxes that prevent growth.

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