WASHINGTON – The medical technology industry stepped up its attack Wednesday on a new excise tax on medical devices with a report that claimed the levy would drive high-paying jobs out of the country and raise the tax rate on manufacturers to unacceptably high levels.
The excise tax, which is set to go into effect in 2013, is expected to generate $20 billion in revenue annually to help pay for the nation’s new health care law. But any gains in revenue would be offset by lost jobs and wages within the med-tech industry, according to researchers at the Manhattan Institute and Hudson Institute.
“Hopefully, this will create more energy around the repeal of the tax before it takes effect,” said Shaye Mandle, vice president for government relations at the Minnesota trade group LifeScience Alley, which represents 650 corporate members, including the state’s biggest med-tech players.
The report was commissioned by AdvaMed, one of the country’s largest medical-technology trade associations.
Rep. Erik Paulsen, R-Minn., has a bill pending that would repeal the tax. The legislation features 187 co-sponsors from both parties. “Since the day this ill-conceived tax on medical innovation was first proposed, I have said it will reduce access to new, life-saving technologies and put American jobs on the line,” Paulsen said.
The medical device excise tax was originally projected to raise $40 billion to pay for health care reform, but Congress cut the rate in half in response to industry resistance. Eliminating the tax could be a more complicated endeavor, experts say, because it involves undoing an existing law.
According to the AdvaMed report, the device tax could cost more than 43,000 job losses nationally, including 2,767 in Minnesota, home to one of the country’s most robust medical-technology sectors. The figures are estimates based on the assumption that 10 percent of jobs will move offshore because of the tax. It also assumes that businesses that buy medical devices are price sensitive and will forego purchases as costs rise.
‘Our foundation industry’
Medical technology provides high-paying jobs that the country can least afford to lose, the report added. It showed the average med-tech job paying $81,422 per year.
Supporters of the medical device tax, including Sen. Max Baucus, D-Mont., believe the medical-device industry should pay for some share of health reform because it will drive more business their way as more Americans get health insurance coverage.
The debate resonates in Minnesota, which is home to med-tech stalwarts Medtronic, St. Jude and Boston Scientific. The state is second only to California in the number of medical-device jobs and the concentration of employees in the sector is higher than any other, Mandle said.
“This is our foundation industry,” Mandle said. “We are more dependent on medical technology than any other state.”