Text of Klobuchar/Franken letter opposing medical device tax

  • Article by: JILL BURCUM
  • Updated: September 15, 2009 - 4:22 PM

Minnesota’s pair of Democratic U.S. Senators formalized their objections Tuesday to a proposal that would levy a $4 billion a year tax on medical device makers.

The influential Senate Finance Committee health care reform bill calls for the tax on the industry’s revenue as a way to fund its estimated $800-900 billion price tag; a similar sales tax approach is called for on health insurers, medical laboratories and drug companies. Klobuchar were joined by Indiana’s two senators, Republican Richard Lugar and Democrat Evan Bayh. Lugar is the Senate’s most senior Republican.

Here’s the text of the letter sent to Baucus:

 

"Dear Senator Baucus,
 
As Senators from states with vibrant medical technology industries, we write to express our support for health reform efforts that better align incentives and reduce inefficiencies in the current health care system. However, we do not believe that the proposed "fee" on medical device manufacturers would help achieve these generally agreed upon goals. As you have heard from us over the past few days, the proposed fee will seriously threaten thousands of American jobs and deter innovation in the industry.
At a time when every effort is being made to promote small business and growth industries of the future, the proposed medical device tax would harm economic development and health care innovation nationally and in our states. It is our understanding that the proposed tax would be levied upon all manufacturers of medical device and diagnostics products as defined by the Food Drug and Cosmetic Act. Rather than specifying a tax rate, this proposal would assess all manufacturers at a rate based upon their U.S. sales. Recent independent estimates indicate that this tax could translate into an annual income tax surcharge of between 10-30% on medical device manufacturers.  The amount of capital that these companies would have available to reinvest in product development and innovation would be threatened, dramatically reducing both the number of jobs in the industry and the types of devices available to patients.  

Even without the proposed tax, the medical device industry will be impacted by health reform proposals. The overwhelming majority of medical products are reimbursed through hospitals, which are scheduled to see a reduction in reimbursements as a part of health care reform. These hospital cuts will translate into $15-$17 billion in estimated cuts to the medical device industry over 10 years. While we support efforts to ensure that any health care reform bill does not add to our country’s deficit, this industry should not be forced to pay more than its fair share.We believe that the medical device industry contributes to improved quality and choice for patients, and we are concerned that this tax will stifle technological innovations that can improve patient outcomes and lower health care costs. We respectfully request that you reconsider including this provision as a part of the Finance Committee’s proposal."
 

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