Device tax will cost jobs, and lives

  • Article by: DALE WAHLSTROM
  • Updated: June 14, 2012 - 9:04 PM

Device-tax repeal isn't about special interests or big business. It's about saving lives.

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In 1991, my mother's life was taken by cardiac arrest. In 1996, my father suffered a sudden cardiac arrest, but was lucky to survive. Two days later he was implanted with a defibrillator produced by a Minnesota company. Over the next 12 years, my father's device corrected cardiac events more than 150 times and saved his life twice. Unlike my mom, my dad met both of my children and watched them grow.

Medical devices save and improve lives. Between 1980 and 2000, medical device technology slashed the death rate from heart disease by a stunning 50 percent and cut the death rate from stroke by 30 percent. As a result, life expectancy was extended by more than three years.

I feel proud of the amazing men and women in the medical device industry who continue to provide lifesaving therapies for millions of people like my father.

The medical device industry is one of the few of our country's great industries left with a positive trade balance ($3 billion in 2010). Anchored in Minnesota, it is an innovative industry with opportunities for growth; more than 80 percent of U.S. device companies have fewer than 50 employees; 98 percent have fewer than 500.

It is also one of Minnesota's key economic drivers. The impact of the industry in Minnesota was more than $34 billion in 2009. It directly employs more than 35,000 people, and indirectly employs approximately 160,000 Minnesotans within industry-supporting companies.

Yet despite the public health value and economic impact of the industry, its ability to innovate and operate is under attack.

Our federal government has targeted the industry through the Affordable Care Act by including a 2.3 percent excise tax on medical devices. Estimates predict that this tax will raise about $29 billion over the next 10 years. One-quarter of this tax will come directly from Minnesota companies, extracting $5 billion to $8 billion from our state's economy.

In a recent editorial ("If device tax is lost, special interests win," June 10) the Star Tribune stated that the tax has already been "halved," while in fact the tax going into effect on Jan. 1, 2013, is the same tax approved in the final Affordable Care Act. Further, an April 2010 report from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) confirms that this tax will increase health care costs.

The editorial also suggests that the industry is not being singled out and will benefit from expanded coverage through the Affordable Care Act. This is incorrect, as the majority of patients who receive medical devices are already covered through Medicare or Medicaid.

The "favorable regulatory reforms" the Star Tribune claims the industry has "won" refers to approval of FDA-industry user fee agreements. This year, the industry agreed to provide the FDA with $600 million in fees --more than double the amount in the past five years -- to help the FDA establish more predictable approval timelines without compromising patient safety. The FDA Safety and Innovation Act passed the House and Senate with broad bipartisan support.

The new excise tax is not a tax on profits, but a tax on sales. All entrepreneurial medical device companies developing new therapies will pay this tax, whether they are profitable or not.

This tax will make it more difficult for these companies to raise capital, hire employees and ultimately put lifesaving devices in the hands of patients. Minnesota's economy depends heavily on the emergence and growth of the medical device industry. Simply, this tax will cost Minnesota jobs.

Thankfully, not everyone believes that this tax is good for U.S. health care and for Minnesota. Every member of the U.S. House of Representatives from Minnesota, including four Republicans and four Democrats, voted to repeal the medical device tax last week.

Device-tax repeal isn't about special interests or big business. It's about saving lives and creating jobs in Minnesota. Our congressional delegation gets it. Too bad the Star Tribune doesn't.

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Dale Wahlstrom is president and CEO of LifeScience Alley.

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