The Medical Device Tax: Repeal it for the sake of innovators and patients

As industry leaders we all need to stay in the loop on key issues that affect our industry and our state.  One of those issues is the 2.3% Medical Device Tax.  When we were out in DC last April,  AZBio leadership met with all of our Congressional teams to share information on how this tax impacts our industry and our state .  In addition to sharing with them what is happening here in Arizona, we asked them if they would keep us “in the loop” on what is happening at our nation’s capitol. 

On Thursday, June 7, 2012 we got some important news from Capitol Hill. 

Read on for a special “In the Loop” guest post by Congressman Paul Gosar, R-AZ

Congressman Gosar meets with health care leaders at Phoenix Children’s Hospital

Dear Friends,

I am happy to share with you some exciting news from D.C. this afternoon. The House of Representatives, with my support, passed the Health Care Cost Reduction Act (H.R. 436) to repeal the medical device tax. As many of you know, the President’s health care law states that beginning in 2013, a 2.3% tax will be imposed on the sale of medical devices by manufacturers or importers. No matter your views on the health care law as a whole, the biomedical industry in Arizona knows that raising taxes will force companies to move operations overseas, increase consumer costs, or cut back on critical research and development projects. As our nation faces one of the most trying economic times in history, I stand appalled that this administration is attempting to raise taxes now.

Taxing job creators is never the way to improve the quality of life for our citizens—and in Arizona, the medical technology industry (MTI) is a phenomenal example of a sector creating economic growth. According to a study by the Lewin Group, Arizona’s MTI led the nation by contributing over $12 billion in earnings to the state’s economy. This robust industry contributes immensely to the state’s economic future and also offers great employment opportunities. The MTI is a national leader in offering its employees high wages and upward mobility. In fact, the Lewin Group study shows that the MTI in Arizona offers its employees an average wage over 50% higher than the statewide average. At a time when too many are out of work or living paycheck to paycheck, Congress needs to do everything possible to encourage job growth, not  stifle it with additional tax burdens.

The threat of this tax is already showing negative effects on job growth and innovation nationwide. Studies have estimated that the tax will result in the loss of 43,000 American jobs. In Arizona, over 7,000 people are currently working in the biomedical industry and it is clear that a good deal of those jobs will be at risk. Examples of these negative effects are already happening in Michigan where the Stryker Corporation has just enacted 1,000 layoffs as a result of this looming tax. Another example is Medtronic, which expects to suffer a yearly $175 million tax.  We can assume that once this tax hits their books they will also be forced to go through layoffs. Biotechnology executives across the country are warning us that this tax will force them to shed jobs, increase retail prices for consumers, or cut back on critical research and development work which will also result in the loss of high-wage jobs.

While this medical device tax needs to be undone for the sake of a successful American industry, it must also be undone for the sake of sick patients who rely on medical devices to manage and improve their quality of life. No less credible a source than the Chief Medicare Actuary predicted in 2010 that this tax would result in higher insurance premiums and higher prices for consumers. As you may know, before my service in Congress, I worked as a dentist in Arizona for 25 years. Therefore I am particularly concerned at reports that this tax will increase the cost of dental care by $160 million annually.

A broad coalition of diverse industries and parties has called for this tax to be repealed—and so I was proud to stand with 269 of my colleagues and vote to do so. Let’s work together and encourage the Senate, and in turn the President, to do the same.


“AZBio thanks Congressman Gosar and all of our elected leaders for their service to our industry and our state and especially for their leadership and diligence in addressing key issues like this one on behalf of Arizona Bioscience Innovators and  the Arizona patients who are the reason that our members do what they do.”   — Joan Koerber-Walker, President and CEO, AZBio

Posted in AZBio News, Government Affairs Blog, In the Loop, Inside the Belt Way and tagged , , , , .