Politics & Policy

Obamacare’s Medical-Device Tax

Higher taxes, lower research spending, and pink slips for scientists.

Obamacare promises to make medicine cheaper by making it costlier. Case in point: The Senate Finance Committee proposes a brand-new tax on medical devices.

Manufacturers of pacemakers, stents, heart valves, artificial hips, motorized wheelchairs, and other therapeutic instruments may have lobbied this tax in half. But whether they endure the $40 billion now in the Finance Committee’s bill or a $20 billion backroom bargain, Obamacare foolishly would hike taxes on companies that generate health-advancing, life-saving mechanisms.

This Senate measure would slap a ten-year, $4 billion annual tax on medical implements that retail for $100 or more. “The $4 billion excise tax works out to a surcharge equal to $11,000 per year for every American worker employed by our industry,” Braun Medical CEO Carroll Neubauer wrote in October 22’s Huffington Post.

This $4 billion yearly tax exceeds the industry’s $3.7 billion in venture-capital receipts for 2007 and is more than 40 percent of that year’s sector-wide research-and-development outlay of $9.6 billion.

This tax approximates one-sixth of annual industry profits. How exactly will those who make hearing aids, extended-wear contact lenses, and more manufacture today’s products, pay current staffers, hire new employees, and invent tomorrow’s cures — all while this tax devours nearly 17 percent of profits?

“The bill that came out of the committee last week makes absolutely no sense and would be very damaging to Boston Scientific, and the medical device industry as a whole,” Boston Scientific CEO Ray Elliott told journalists October 20. He predicted: “In a nutshell, it would raise costs and lead to significant job losses. It does not address the quality of care, but the political scorecard of savings.” Elliott foresees Boston Scientific’s tax liability doubling — between $150 million and $200 million — triggering layoffs of 1,000 to 2,000 employees.

Money aside, this new tax would jeopardize patients’ health and threaten their lives.

“Many of our therapies reduce procedure time, decrease hospitalizations, and empower patients to manage their diseases themselves (insulin pumps, for example) which provides significant cost savings to the system,” Medtronic spokesman Steve Cragle tells me.

Insulin pumps offer diabetics major flexibility in what they eat and when. They can exercise without doubling down on carbohydrates. They also inject themselves one tenth as often as those who use old-fashioned needles. In one recent European study, 100 percent of pump users recommended that apparatus, while only 63 percent of syringe-using diabetics endorsed that approach.

Implantable defibrillators are a 98-percent-effective treatment for ventricular arrhythmias that can cause Sudden Cardiac Death, an ailment that kills 233,000 individuals annually. Obamacare’s tax will make defibrillators and pacemakers pricier to acquire and also to refine over time. At the margins, this stupidity increases cardiac deaths.

America and Earth need more such inventions, plus continuous improvements after introduction. Why can’t diabetics enjoy pumps that automatically monitor blood sugars and inject insulin — essentially artificial pancreases? Every dollar this proposed tax whisks to Washington is one less dollar available for the research and development needed to make such medical dreams come true.

“Clearly, the Democrats are looking for any way to offset the cost of their proposed health-care plan,” says New York financier Brett A. Shisler, a member of the Manhattan Institute’s Young Leaders Circle. “However, they may have neglected the fact that these devices not only save lives, but cut overall health-care costs. As a diabetic who uses a Deltec CoZmo insulin pump to manage my glucose levels, I visit the doctor half as often, eliminated my annual hospital visits, and likely reduced any future diabetes-related complications, as compared to when I was administering insulin through daily injections.”

“The situation all comes down to shared responsibility,” Senate Finance Committee chairman Max Baucus (D., Mont.) told journalists on October 19. “We’re all in this together as Americans. That means individuals, providers, hospitals, the pharmaceutical industry — and medical device manufacturers.”

Baucus is correct. Medical-gear makers should underwrite their fair share of whatever health-care reform might become law. They should do this by paying their corporate taxes, just like any other company. Period. Taxing this industry to overhaul health care is as boneheaded as charging police-car manufacturers a dedicated anti-crime tax.

These enterprises help Americans enjoy longer, happier, healthier lives. Why do Democrats want to give them 40 billion lashes, rather than applaud their priceless work?

Obama, Baucus, and too many Democrats have an almost touching naïveté about how the world works. Pounding this industry with punitive taxes will yield fewer — not more — life-extending and life-enhancing innovations.

Higher taxes, lower research spending, and pink slips for scientists: Democrat beatings will continue until medicine improves.

— Deroy Murdock is a New York-based columnist with the Scripps Howard News Service and a media fellow with the Hoover Institution. 

Deroy Murdock is a Manhattan-based Fox News contributor and a contributing editor of National Review Online, and a senior fellow with the London Center for Policy Research.

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