USA - House GOP wants to kill medical device tax, but are their arguments tenuous?

The ongoing battle to repeal the medical device tax continues with the latest campaign being led by House GOP freshman Todd Rokita from Indiana.

Rokita, along with 74 co-signors sent a letterMonday to Speaker John Boehner asking him to bring a bill to the floor that would essentially kill the $2.2 billion annual tax to be paid by the device industry starting next year.

Whether it will be an effective strategy remains to be seen.

But the letter appears to link some hard-to-connect dots. It specifically refers to a study called ’Employment Effects of the New Excise Tax on the Medical Device Industry,’ by Hudson Institute senior fellow Diana Furchtgott-Roth and Hudson Institute senior fellow Harold Furchtgott-Roth. The study concludes that “device manufacturers will be more likely to close plants in the U.S. and replace them with plants in foreign countries” if the tax is implemented.

That seems to be a stretch.

Medical device manufacturers have had operations in the Asian nation of Japan for years. No one claimed that jobs were being lost here then. And now medical device manufacturers are ramping up their presence in Asia and other international markets, while slowing down in the U.S. precisely because they are smart business people.

All they have to do each quarter is to take a look at their international sales figure and see how the demand from countries like China, India and Brazil are far outstripping demand in the U.S. No wonder CEOs of major companies like Medtronic and Boston Scientific have a new mantra: Go East.

To suggest that the burden of the device tax is leading them to do this is naive at best, disingenuous at worst.

A successful medical device entrepreneur used that very term – disingenuous – to describeStryker’s claim that it is laying off 5 percent of its workforce and reducing its operating budget by $100 million because of the medical device tax. (The GOP letter also alludes to Stryker.)

But he had this to say about the medical device tax: “You tax something you want less of.”

That sounds reasonable and will likely happen, but it may be hard to measure in the stark terms the device industry and some politicians would have people believe.

Arundhati Parmar

MediCity

Business & Investment Opportunities

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