US Device Tax: The no2Point3 Campaign

In short

We may pitch ourselves as a European based news resource, but a quick look at our reader demographic suggests we’ve got global reach with a significant US orientation. We therefore need to be a broad church and talk about the medical devices industry wherever it is. You might have noticed the box over on the right, graphically representing “no2point3”, placed in response to a request from our good friend Joe Hage(pictured), CEO and founder of Medical Marcom, owner of Linked in’s weighty Medical Devices group and as such a spokesman for the interests of the medical devices industry, especially that based in USA.

We’ve no intention, nor need to explain the device tax again presumably. Our educated audience understands it pretty well and has no doubt picked up on the antipathy being expressed towards what many interpret as an unfair attack on a US industrial success story.

To get one thing straight though, medlatest is a news resource rather than a campaigner, and tries to balance its output to reflect all sides of the story. From regulatory reform to compliance, to new product releases we try to report it straight and in a balanced fashion. Rarely do we take sides except to express the other side of a strongly argued case.

That said, we’ve posted the ad in order that our readership can link directly to the campaign and make up its own mind.

To help a little further, we asked Joe a few questions which we thought might help clarify his position as a vocal representative of the views of the medtech industry, at least those folk who are against the tax.

Why do you think the government targeted the medical device industry with the tax? 

I cannot speak on behalf on the Congressmen who added the tax to the Patient Protection & Affordable Care Act (PPACA). They suggest PPACA provisions will raise the fortunes of the medical device companies and therefore medical device companies should contribute proportionally to fund the initiatives. I do not believe an excise tax on sales is proportional. And the logic that PPACA will result in more healthcare which will require more medical devices makes no sense.

Why do you specifically feel the need to campaign against it?
As I have written elsewhere, the most discussed topic in the Medical Devices Group is the 2.3% excise tax on medical device companies signed into law as part of the PPACA.

The tax, to be paid by firms with or without net income, roughly doubles the industry’s total tax bill and raises the average effective corporate income tax rate to 1 of the highest faced by any industry in the world. According to a September 2011 study entitled “Employment Effects of the New Excise Tax on the Medical Device Industry,” the tax could result in job losses in excess of 43,000 and wage losses in excess of $3.5 billion.

I felt a responsibility to act on behalf of the members. I wondered, if we harnessed the energy of the 110,000-member group and tried to effect policy, could it work?

If our industry really must be targeted, could it be done more fairly?
I believe a tax on profits, instead of sales, would be more appropriate. Perhaps – if there were a way to correlate incremental medical device sales to the PPACA (I doubt there is) – then you might argue for a tax on those incremental sales; yes, maybe even an excise tax. But not on every product sold including those in the company’s baseline.

In what ways do you think it will benefit foreign device companies if at all?
Anything that makes it more difficult to run a profitable US-based medical device company would have a benefit to those who can sell at a more competitive price.

Thanks to Joe for his contribution to the debate.