David Lucchino: The 2.3 percent excise tax on the medical devices sector would hamper innovation, force layoffs and cripple loss-making start-ups. (Alex E. Proimos/flickr)
Passing through Kendall Square one might never get a sense of the medical research and innovation going on here. But when my business partner and I founded Semprus BioSciences, a medical device company, we had an inkling it was the place to be. It turned out to be one of our best decisions.
In Kendall, our neighbors are some of the smartest people in the world — innovative companies that create better disease detection and whose therapies and products help treat cystic fibrosis, cancer, diabetes and many other life threatening diseases.
Dr. Robert Langer’s research lab at the MIT, for example, was the subject of a recent article in The New York Times:
“The Langer Lab is on the front lines of turning discoveries made in the lab into a range of drugs and drug delivery systems. Without this kind of technology transfer, the thinking goes, scientific discoveries might well sit on the shelf, stifling innovation.”
But labs and companies like Langer’s, those that are tackling many of today’s toughest medical problems, face a daunting threat that may well stifle that innovation and technology transfer — the true lifeblood of our industry.
In 2010, Congress passed a tax on medical devices to offset a portion of the $1 trillion cost of the Patient Protection and Affordable Care Act, better known as “Obamacare.”
On Jan. 1, 2013 this 2.3 percent tax will be imposed on the manufacture and importation of medical devices, including a vast range of products — from tongue depressors and ultrasound equipment to artificial hips and yes, the vascular access catheters recently invented by my company.
Though seemingly small, according to the National Center for Policy Analysis the medical device tax would add approximately $3 billion annually to the taxes paid by medical device firms — a 100 percent increase.
The result? For starters, the tax will lead to reductions in research and development that will stifle the search for tomorrow’s treatments and cures, and prevent patients from receiving the life-saving medical devices and care they need.
There is also the potentially devastating impact on employment and the economy to consider. In Massachusetts, medical technology is a pillar of the state economy, employing 82,000 med-tech workers and contributing $17.6 billion to the state coffers annually. Nationwide, the industry creates more than two million jobs directly and indirectly. It’s also one of the few U.S. manufacturing sectors that is a net exporter, and its innovations help reduce the human and economic burden of chronic disease.
However, according to Diana Furchtgott-Roth, former chief Labor Department economist, the coming excise tax will eliminate more than 45,000 high paying med-tech jobs across the country.
While the U.S. is currently the world leader in medical technology, the tax threatens our leadership because it puts an additional burden on medical device innovators already struggling under the weight of an uncompetitive tax system. The new tax will be levied on medical device sales in the U.S. regardless of whether the company is making a profit.
A collaborative effort is afoot in Washington and a bill to repeal the “innovation tax” has strong bipartisan support in Congress.
But our legislators must act swiftly during this lame duck session. There is too much at stake for patients, health care providers, and our economy and to do anything less.
David Lucchino serves on the board of directors Massachusetts Biotechnology Council and the Advanced Medical Technology Association (AdvaMed), the latter of which has spearheaded the move to repeal the medical device tax.
- Elizabeth Warren: A climate for innovation (Massachusetts Medical Devices Journal)
- Um, About That Medical Device Tax… (The New Republic)
- Opinion: Medical device tax would thwart innovation (Politico)
- Medical Start-Ups Challenged by Health-Care Reform (Wall Street Journal)
- 800 Companies, Groups Demand Repeal of Medical Device Tax (Fox Business)
The views and opinions expressed in this piece are solely those of the writer and do not in any way reflect the views of WBUR management or its employees.