Medical device firms hurt by political gridlock

It isn't just bureaucrats and federal programs that will feel the harmful effects from "sequestration" — the automatic, across-the-board cuts kicking in this year because Congress and President Obama can't agree on a better way to balance the nation's budget.

Medical device firms, representing an industry that employs 35,000 people in Minnesota, could also see their growth slowed as sequestration's blunt reductions cut deeply into the resources to fund the U.S. Food and Drug Administration — the regulatory agency tasked with clearing new medical devices for the market.

Nadim Yared, CEO of CVRx in Brooklyn Park, is among the industry leaders sounding the alarm. His firm is developing a pacemaker-like device to treat high blood pressure and heart failure. Delays in the FDA approval process — a likely outcome from an agency with diminished funds — could pose significant, even existential setbacks, especially for young firms surviving on investors' money before products hit the market.

"If a company like ours is spending, let's say, a million dollars in salaries a month and running a clinical trial for one product, any delay, any question that takes a month to answer, costs the company a million dollars. It's simple math,'' Yared said.

When Congress resumes in September, lawmakers are likely to hear complaints about the sequester's unfolding effects and face a plethora of petitions to shield certain programs or agencies from cuts. Just the threat of sequestration was supposed to push Congress into striking a broad deficit-reduction deal after raising the nation's debt ceiling in 2011. No deal was struck, setting the stage for about $85 billion in reductions in 2013 and similar cuts over the next decade.

Returning lawmakers likely will be resistant to pleas for sequestration exemptions — understandably fearing the slippery slope of restoring cuts piecemeal. But if a comprehensive deal can't be reached to replace the sequester with smarter cuts and increased revenue, lawmakers should exempt user fees voluntarily paid by medical device firms and other industries to ensure that regulatory agencies have the resources they need to carry out their oversight mission.

The FDA and the U.S. Patent and Trade Office in particular rely on user fees for staffing and technology. According to a recent Star Tribune story by Jim Spencer, "an estimated $148 million designated to improving the [patent] approval process has disappeared into the caldron of automatic budget cuts."

Again, the user fees are voluntary payments, not tax dollars. The amounts paid, which have grown significantly in recent years, are typically hammered out periodically between industry, Congress and agencies.

Sequestering these fees hurts regulatory agencies and an industry relying on efficient oversight, putting jobs at risk and delaying potentially lifesaving products from getting to market. These pragmatic arrangements also save taxpayer dollars by having industry help pay for government service they rely on. In an age where so little gets done in Washington, the agreements are a reminder that compromise and problem-solving still happen. This collaboration should be rewarded. Instead, the sequester punishes it.

The raid on user fees also comes as the industry faces a new tax to finance the Affordable Care Act. While the Star Tribune Editorial Board does not support the industry's push to repeal that tax, device firms should not in effect be taxed twice by having the user-fee money made unavailable for improved oversight.

Future user-fee agreements will be at risk if lawmakers don't make a fix soon. U.S. Sen. Al Franken of Minnesota is cosponsoring legislation to shield FDA user fees from sequestration. But ongoing gridlock and tense budget negotiations in Congress this fall will make it difficult to pass.