Budget deadlock spells trouble for med-tech firms

  • Article by: JIM SPENCER , Star Tribune
  • Updated: March 2, 2013 - 3:35 PM

The head of the trade group for the nation’s medical device makers says the political climate in Congress complicates efforts to repeal the medical device tax.

Stephen Ubl says the federal budget cuts brought on by sequestration will make it more difficult to make the case with individual members of Congress for the repeal of the medical device tax.

Photo: ELIZABETH FLORES • eflores@startribune.com ,

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Stephen Ubl, the Minnesotan who runs the Advanced Medical Technology Association, hears the same refrain from members of the U.S. House and Senate each time he visits Capitol Hill to lobby for the nation’s medical device industry:

We have to work together.

Now Ubl, who directs the world’s largest med-tech trade group, is worried about controlling fallout from mandatory federal budget cuts called sequestration.

Ubl, whose group is better known as AdvaMed, sat down with the Star Tribune last week to discuss the medical device industry’s concerns with gridlock and its impact on his members, including Fridley-based Medtronic and dozens of other companies in the state’s critical medical technology sector.

Chief among Ubl’s worries is that political distractions will draw focus away from his top priority: Repealing a newly imposed tax on medical devices.

 

Q: What impact will the automatic budget cuts have on the medical device industry?

A: The cuts will affect the FDA budget, as well as the fees industry pays. Both will be reduced 5.1 to 5.3 percent. A related issue is the continuing [budget] resolution that allows the government to collect [user] fees at a higher level associated with a new user fee agreement, but only spend at the level of the old user fee agreement. That [difference] is about $40 million. … The other sequester impact is a 2 percent reduction in the Medicare program, which is across the board.

 

Q: Do you have a sense of frustration at what’s happening?

A: Sure. We’re working with a coalition called the Alliance for a Stronger FDA. AdvaMed is partnering with other groups in the life sciences to call attention to the negative effects associated with the sequester.

 

Q: Would your members be better off without automatic budget cuts?

A: Absolutely. If Congress were to revert to regular order, there’d be a budget resolution and the appropriators would fashion individual appropriations bills. That would be a better process. History reflects that FDA does very well when those policymakers are making value judgments about the relative importance of agencies.

 

Q: Have you been on the Hill to say that to folks?

A: Sure. Absolutely.

 

Q: What’s the reaction of people when you say that to them?

A: I think most members of Congress believe that’s the case. But there’s been an inability for whatever reason to move in that direction. It’s frustrating for us. It’s frustrating for members. Why is it happening? I think the fiscal issues the country confronts are controversial whether it’s taxes, spending or entitlement reform. Consequently, you have not had a lot of forward progress in the Congress and you default to these negotiations that occur on a periodic basis.

 

Q: Let’s talk about the medical device tax. Do the budget cuts help or hurt your efforts to get the tax repealed?

A: It clearly makes it harder to focus individual members [of Congress] on the harmful impacts of the tax … [But] I think we’re off to a very strong start this year. If you look at the Paulsen bill [a House measure proposed by Minnesota Republican Rep. Erik Paulsen], it has 200 sponsors, including 24 Democrats. That’s double the number of Democrats who sponsored the legislation last year. In the Senate, Amy [Minnesota Democratic Sen. Amy Klobuchar] has been a tremendous leader on the effort and she for the first time is co-sponsoring legislation with [Utah Republican] Orrin Hatch. It’s the first time in the Senate we’ve had bipartisan legislation. There are three other Democrats on the bill at this point as well. If you assumed all Republicans would vote for repeal, and add the four Democrats, we’re one or two short of having a majority in the Senate supporting repeal.

 

Q: Do you expect it to come to a vote?

A: It’s very rare that a bill moves on a stand-alone basis. Most legislation moves in a broader package. We will be looking for those opportunities to include the medical device tax. … The toxic effects of the tax, now that it’s in effect, are really playing out. … We’re just south of 10,000 jobs that have been lost to the device tax, just in publicly announced layoffs and restructuring.

 

Q: Do you foresee a time that you will have to work on a reduction in the tax as opposed to repeal?

A: We’re not at that point. The entire industry is aligned in support of outright repeal. It’s really a bad policy that can’t be fixed.

 

Jim Spencer • 202-383-6123

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