Medical Device Tax Has Got to Go

Just how bad is a tax that treats pacemakers and CT scan machines as if they’re alcohol or cigarettes?

Last January 1, medical-device makers had to start paying a new 2.3% excise tax on sales, regardless if they make a profit, to raise $29 billion over the next decade to pay for health reform.

The tax can easily shove medical device companies into posting losses. In fact, these companies must pay the 2.3 % tax even if they post losses, because the tax hits revenues.

Also the federal excise tax is slapped on top of what companies already pay at the federal, state and local level, for an effective tax rate bumping up higher than 50% in many states, heading towards an overall rate of 75%, industry analysts note. Why bother running a company if the government takes three-quarters of your profits?

Zimmer Holdings, Stryker Corp., Medtronic, Smith & Nephew, and Covidien are among the companies already moving to lay off workers, citing the tax. Companies are also pushing jobs offshore.

A letter was sent a year ago to the Senate from executives at more than 800 companies and medical groups demanding the tax be repealed. Click here to read the letter

 The letter writers included companies such Abiomed (ABMD), Allergan (AGN), Baxter Healthcare (BAX), Biomet, C.R. Bard (BCR), GE Healthcare, Sanofi (SNY) and St. Jude Medical, as well as groups including the American Association of Neurological Surgeons.

But the tax is still there, and since then, one of the country’s fastest growing, most innovative industries is buckling, layoffs are rising and reductions in life-saving R&D budgets have been enacted, possibly hurting attempts to save lives. Companies have been canceling plans to build plants to pay for the tax, one of nearly two dozen new or higher taxes in the Affordable Care Act that seeks to raise tens of billions of dollars to pay for health reform.

Is this the way to economic growth in this country? Ask yourself, why push into bankruptcy the companies that are creating bold, new life-saving inventions to, say, ensure safer deliveries of babies, help heart or liver transplants, stop brain aneurysms, or deliver hip replacements, stents or prosthetics (including those needed by our returning soldiers)?

Congressional data show that 34 Democratic Senators voted to repeal the medical device tax a few months ago.

But watch the headlines on this tax that came out yesterday:

* DJ Some House Democrats Back Repealing Medical Device Tax In Budget Debate

* Dow Jones: Sen. Majority Leader Reid Rejects Proposal to Repeal Medical Device Tax

* Dow Jones: Reid Calls Proposal An Action of Desperation

* Dow Jones: "Absolutely not," White House spokesman Jay Carney answered when asked if President Barack Obama would support repealing the tax.