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Cook: Tax could kill 1,000 jobs in Bloomington

October 21, 2009

Bloomington-based Cook Group Inc. could find itself cutting as many as 1,000 local jobs if Congress enacts a tax on medical devices to pay for health care reform, company founder Bill Cook said in an interview.

Cook, who also proposed his own plan for health reform this week, didn’t say his medical device company would cut those jobs for sure. But he said automating Cook’s plant in Bloomington would be one of the company’s first responses and could easily cut out 1,000 jobs.

He said the company also might have to scale back on its clinical trials of new products, an effort that employs more than 325 people in West Lafayette and Bloomington.

“It would force us to the end of creativity,” Cook said, adding, “There are so many things we couldn’t do in the style that we do them today.”

The tax that drew Cook’s ire is part of the Senate version of health care reform. It would assess the medical device industry $4 billion a year, divvying up the fees based on each company’s market share of certain classes of devices.

Cook said his company sells about $600 million of those devices. The tax, which would deduct 4 percent from top-line revenue, would cost Cook about $30 million a year, boosting its tax rate from about 38 percent to 68 percent.

The company is the largest maker of aortic and lower-body stents—small metal tubes that prop open arteries. It also makes a variety of other grafts, catheters and other products implanted through minimally invasive procedures. The company has annual sales of $1.5 billion.

Cook’s medical device peers have been equally upset about the tax—including the orthopedic implant makers in Warsaw. Industry groups claim that the $4 billion a year equals half of the medical device industry’s research and development spending.

“It will certainly have an impact on the companies’ ability to deliver innovation to the marketplace,” Cheryl Blanchard, chief scientific officer of Warsaw-based Zimmer Inc., said during the Indiana Life Sciences Forum yesterday in Indianapolis.

Both she and Cook noted that Congress’ proposed expansion of health insurance coverage won’t really help medical device companies because they aren’t paid by health insurers, but by hospitals, who are on the hook whether the patients they serve have insurance or not.

Beyond the tax, Cook said the health care reform efforts aren’t likely to fix the nation’s health care problems anyway. He proposed a network of federally funded clinics.

“As a nation, we have unwittingly increased medical costs by not understanding how to lower costs: treat diseases early through the simple methodology of performing diagnosis, minor surgery, and drug regimens in a small clinic environment,” Cook wrote in a blog post on Monday. “Treating diseases early will save billions.”

When patients need more complex care, clinics could refer them to existing community hospitals or major medical centers. Procedures at those facilities would be paid for by a new federal insurance program.

Cook said Congress should create and staff enough clinics to treat 12 million to 20 million people who are currently uninsured. Existing bills in Congress would cover roughly 30 million of the uninsured, which total about 46 million over the course of each year, according to some estimates.

His inspiration comes from a clinic that Cook Group operates in Bloomington for its employees and their families. That clinic, founded in 1993, serves about 5,000 people.

A similar clinic would cost $2.5 million to build today. It costs $4 million a year to operate. To scale those up to serve 20 million people would cost $10 billion to build and $16 billion a year to operate.

Cook also called for medical-malpractice reform with Indiana-style caps on damage awards, and the freedom to buy health insurance across state lines.

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