There's no easier way to get a panel of medical-device innovators riled up than to mention the medical-device tax that's set to take hold in the United States on Jan. 1.
The tax — a 2.3 percent excise tax on most major medical devices — was part of the 2010 federal health-care law, widely known as Obamacare. The tax was repealed May 31 by the House Ways and Means Committee, but that repeal is expected to be overturned by the U.S. Senate's Democratic majority.
A panel of medical-device professionals at Plastics in Medical Devices 2012 — a conference hosted by Plastics News, June 11-13 in Westlake, Ohio — was asked about the medical-device tax. They couldn't criticize it fast enough.
The tax “kills startups,” said Ted Kucklick, president and chief technology officer of Cannuflow Inc., a medical technology firm in San Jose, Calif.
The cost of taxes paid by medical-device makers “will be passed on to the finished product cost — there won't be any savings,” explained Brian Gilbert, CEO of Future Path Medical Holding Co., a medical-device maker in Concord, Ohio. FPM has a lot at stake regarding the tax, since it's about to commercialize its first product — the Urosense-brand urine-monitoring system.
It also “stops people from being creative, and affects jobs,” added Claire Zangerle, president and CEO of the Visiting Nurse Association of Ohio. A recent column in Forbes magazine estimated than the tax could result in the loss of 14,000 U.S. jobs. Industry trade group AdvaMed places that number at 43,000, or about 10 percent of all workers employed by U.S. medical-device makers.
The tax and other similar policies already have caused some Cleveland-area medical companies to move device testing out of the area, said Zangerle, who served as chief nursing officer at the Cleveland Clinic before joining VNA of Ohio, a Cleveland-based nonprofit organization.
On the financial side, FPM's Gilbert said that the tax “hurts our ability to raise cash, particularly with angel investors.” Product development veteran Kevin Harper agreed that the tax would have a negative impact on investment in medical devices.
“There's no level of understanding as to what's coming, so companies aren't going to want to spend money or invest money,” said Harper, president of the Knowvention LLC consulting firm in Mason, Ohio.