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D4PC: A two time supporter of the Obama healthcare law, former Democrat Senator Evan Bayh gives his new opinion of the unintended consequence of the ACA's tax on the medical device indusry.
The Supreme Court decision in June upholding the Affordable Care Act leaves in place a tax on medical devices that threatens thousands of American jobs and our global competitiveness. It will also stifle critical medical innovation in the industry that gave us defibrillators, pacemakers, artificial joints, stents, chemotherapy delivery systems and almost every device we depend on to save lives.
The 2.3% tax will be charged to manufacturers on each sale and takes effect in January. Many U.S. device companies, in response, have already announced layoffs, canceled plans for domestic expansion and slashed research-and-development budgets.
Given the fragile state of the U.S. economy, Congress must move quickly to redress the harm from this tax before it becomes irreversible.
The United States remains the world leader in medical innovation, having produced more than half of the world’s new medicines over the last decade. But our edge is slipping away because of crippling domestic regulatory and tax policies.
In her latest column, Grace-Marie Turner tackles the issue of medical innovation's future. One aspect of ObamaCare includes a significant tax increase on medical innovators. Ms. Turner explains the consequences of this tax:
D4PC surgeon, David Cossman, MD, provides a brilliant analysis of the pitfalls in the government's push for hospitals and physicians to implement the electronic medical record(EMR). As part of the PPACA (Obamacare), all physician practices must be EMR "compliant" by 2014. Advances in technology have greatly improved many aspects of our daily lives, however, the current design and function of the EMR is not being well-received by most physicians. Furthermore, as Dr. Cossman explains, the imposition of this technology is having a significant de-humanizing effect on patient care and is likely to reduce subsequent generations of physicians to mere drone-like data entry clerks.
A year from now, the federal government will start collecting a new tax on medical devices from tongue depressors to imaging machines, thanks to the sweeping health-care overhaul that Democrats enacted in the spring of 2010. People in the industry say it’s already having an effect.
In November, citing the new tax, Stryker Corp. (SYK), whose products include artificial hips and knees, announced that it would let go about 1,000 of its workers. Earlier last year, Covidien Plc (COV), maker of surgical instruments, said it would lay off 200 workers in the U.S. and moveproduction to Costa Rica and Mexico. It, too, cited the tax.
Medical-device companies employ more than 400,000 Americans. Their wages are higher than the national average. The U.S. is a net exporter of medical devices.
The tax will change these numbers for the worse. It will be levied at 2.3 percent of sales; on average, profits make up less than 4 percent of sales in the industry. The AdvaMed study concludes, “The new 2.3 percent excise tax will roughly double their total tax bill and raise the average effective corporate income tax rate to one of the highest effective tax rates faced by any industry in the world.”
Docs 4 Patient Care member, Dr. Milton R. Wolf, has written an important op-ed for The Washington Times about the record number of drug shortages in the United States.
Wolf writes: "The FDA, despite its intentions, drives up the costs of medicines and often dries up the supply chain altogether. America is currently facing a shortage of about 246 drugs - a record high. This doesn’t happen by accident. Consider the alarming conclusions reached, not by the supposedly evil pharmaceutical companies, but by physicians and pharmacists at last year’s Drug Shortages Summit."
And, "A joint report by the American Society of Anesthesiologists, the American Society of Oncology, the American Society of Health-System Pharmacists and the Institute for Safe Medication Practices sounded the alarm: “Several drug shortages have been precipitated by actual or anticipated action by the FDA.” They note that the “cost and complexity” of the FDA’s “regulatory barriers” to providing new and even existing medicines is a “disincentive” to suppliers. Additionally, the “lengthy and unpredictable” approval process limits manufacturer’s ability to develop reliable production schedules." This has caused the drug approval process to increase from 7 months to 7 years!
One reason for this, as John Goodman explains, is that the FDA bureaucracy has a vested interest in inaction. The consequences and public scrutiny that comes to bear on the FDA for approving a drug (action) that eventually proves to be harmful, or has side effects, is high. Conversely, there is little public outrage caused when FDA inaction prevents a new drug from becoming available through bureaucratic delays (inaction), even if the denies a cure of treatment. Goodman writes that "both outcomes are bad for the public, but the consequences for the regulators are very different." Inaction has proven to be the safer course of action for the FDA.