Medical Device Makers: Repeal The Tax!

By Corinne Rose

March 8, 2013 Updated Mar 8, 2013 at 7:28 PM EDT

WARSAW, Ind. (www.incnow.tv) -- Medical device makers are feeling the pinch, now that a new tax designed to generate money to pay for Obamacare is cutting into their bottom line.

Warsaw is known as the orthopedic capitol of the world, and Congressman Marlin Stutzman wants to keep it that way.

The third district Indiana congressman co-sponsored a bill introduced by Minnesota Republican Erik Paulsen to repeal the 2.3% tax on medical devices -- a measure designed to generate $3 billion a year to help fund the Affordable Care Act.

"Bad idea. It's a tax on revenue, not on profit, and so we're going to have fewer companies, fewer technologies, that's less innovation. And it not only hurts patients, it hurts jobs," says U.S. Rep. Erik Paulsen (R-MN).

The tax is not in addition to the price, it comes out of the price of the device.

In Warsaw, Stutzman hosted a roundtable for medical device manufacturers who said losing their share of $200 million so far this year means they can't invest it in research and development or other parts of their companies.

"This is basically an excise tax off of our sales. So it truly has an impact when you look at the overall expenses and the cash that goes out for a relatively small company," says David Bailey of OrthoPediatrics.

Beyond that, there is now increased global competition to lure Warsaw's orthopedic cluster to Asia and beyond.

"Ireland is another one. They want these companies to come and do business there. And we heard at the roundtable this morning that they are making it very attractive to do that, and then do imports or sell product there. So we're in a competitive industry and we have the corner on the market. We don't want to lose it," Stutzman says.

The measure to eliminate the tax passed last year in the House, but the Senate didn't vote on it.

This time, Paulsen says there is stronger bi-partisan support in the House and momentum in the Senate to repeal this part of Obamacare.

The long-term projection for the impact of this new tax is still being figured out in places like Warsaw and Minneapolis. And as that's happening, companies are reluctant to spend money on research and development until more is known.

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