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Medical Device Manufacturers Make Their Case for Tax Repeal

July 10, 2012 by Editor in Featured, Health Reform

Medical device manufacturers met in RTP Monday to make the case to lawmakers for repealing an excise tax contained in the federal health reform law.

By Kelsey Tsipis

For children with insulin-dependent diabetes, needles may be scary but they’re also a regimented part of daily life.

BD_injection invention

A new design for an old problem – BD’s new, smaller needle for giving injections with less pain. Image courtesy of BD.

That’s why Noel Harvey, who works for medical device maker Becton Dickson, has been working with a team of 50 scientists for more than a decade to develop a needle small enough to be barely noticed by a child even as it gets insulin into the blood stream faster.

The needle Harvey and his team developed is the width of a human eyelash, and about 1.5 millimeters long. It was introduced in the US last flu season for administration of flu vaccines.

Harvey’s micro-needle was on display Monday at BD’s Research Triangle Park facility as other medical technology company executives and North Carolina legislators met to discuss the new medical device tax imposed by the Affordable Care Act beginning in 2013. The tax is estimated to cost the medical device industry $20-30 billion over the next decade.

Medical technology company leaders stressed the tremendous economic impact the new tax would have on the industry. At the same time, they complained that the ACA would not create enough newly-insured patients with a need for medical devices to increase industry revenue.

“When we look at our sales in Massachusetts, which has universal health care, we don’t see that at all,” said Stephen Ferguson, leader of Cook Medical, a medical device company based in Winston-Salem. Ferguson was referring to Massachusetts’ health reform law that’s been in effect since 2006. “There’s an allegation that there’s a windfall, but we weren’t able to see evidence of it at all.”

Most of the people getting new insurance through the ACA will be young, and often relatively healthy. Ferguson said instead, the largest users of medical devices tend to be the elderly, people 65-years-old or older, who would have been covered by Medicare anyway.

Cook Medical VP Scott Sewell demonstrates one of his company's catheters for Congresswoman Renee Ellmers (R-2nd District, NC).

Cook Medical VP Scott Sewell demonstrates one of his company’s catheters for Congresswoman Renee Ellmers (R-2nd District, NC). Photo by Rose Hoban.

Ferguson’s company has designed and manufactured medical devices such as coronary artery stents to treat heart disease.

The medical technology industry is not alone in being taxed to help pay for the Affordable Care Act, according to Don Taylor, a health economist from Duke’s Sanford School of Public Policy. Tanning and insurance industries are among others seeing tax increases.

“The medical device folks have a story of how having this tax will slow down innovation, and someone will be harmed because we can’t discover this new thing,” said Taylor. “I guess you can say they’re the group that’s got the best case that could be sold to the public to repeal the tax that’s in the bill.”

On the other hand, the bill has to be paid for somehow, said Taylor.

Already the medical device industry has won a victory in Congress this year with the passage of an updated medical device user fee bill. In exchange for a $595 million raise in user fees over 5 years, medical device makers charged the FDA with new goals, including faster time-frames for approval applications.

“We have competitor nations with more predictable regulatory processes,” said Stephen Ubl, the President and CEO of AdvaMed, the medical device industry trade group. “Today, it’s never been harder in the US to take new technology from the bench to the bedside. Delays at the FDA have increased costs for companies, causing uncertainty that chases away venture dollars.”

Governor Bev Perdue said the new tax on the industry will be particularly harmful to North Carolina, where the medical technology industry has created over 10,000 jobs that each pay around $50,000 annually.

Catheter Demo

Cook Medical VP Scott Sewell demonstrates how a catheter can be used to place a stent in a patient with coronary artery disease. Photo by Rose Hoban.

“Why are we going to bite the hand that feeds us?” Perdue asked a roomful of medical device executives and federal lawmakers, including G.K. Butterfield (D-1st District), Renee Ellmers (R-2nd District) and Larry Kissell (D-8th District).

All of the Congressional representatives present expressed support of the industry.

“I do believe in this industry,” said Kissell. “We need to create an atmosphere where we reward those who manufacture here. And we have to make sure we keep that atmosphere in all regard so that story continues to be repeated.”

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  • We do need to cut taxes especially on medical equipment and technology. The bill that could potentially be put into effect in NC might increase the care that is so desperately needed.

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