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Pence continues to seek repeal of medical device tax

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Indiana Gov. Mike Pence sent a letter to President Barack Obama on Monday asking him to work with Congress to repeal a 2.3-percent excise tax on medical devices that is helping to pay for the federal health care law.

Pence said the law – which took effect Jan. 1, 2013 – has had a negative impact on the economy and jobs in Indiana and across the country.

“Repealing the medical device tax will allow companies to expand and grow jobs, not only in Indiana but across our great nation,” Pence said in his letter. “This thriving industry should be allowed to innovate and grow, rather than be hampered by an industry-specific tax.”

The tax is expected to generate about $29 billion over 10 years, according to the Joint Committee on Taxation. That money is being used to pay for subsidies to help lower- and middle-income Americans buy health insurance.

The tax is levied on equipment, stents, pacemakers and other devices manufacturers sell to hospitals and other health care providers. But it doesn’t apply to medical equipment – such as hearing aids – that are sold directly to the public.

A number of Indiana lawmakers – including both of the state’s U.S. senators – have advocated for the elimination of the tax, in part because the state is home to several key medical device manufacturers.

U.S. Sen. Joe Donnelly, D-Ind., sponsored legislation to eliminate the tax and said last year that he supports repeal “because it makes sense for Hoosier businesses, workers, and the patients who use their products.”

But Obama previously threatened to veto bills to eliminate the tax. The White House has said the health care industry – including medical device makers – will benefit from additional customers as millions more Americans get insurance through the Affordable Care Act.

But according to Pence, the state’s medical device companies are moving work overseas or cutting costs.

“I have heard from many Indiana-based medical device companies – small and large, start-ups and well-established – that have reduced research and development at their facilities or reduced wages for their employees,” Pence wrote in his letter to the president.

The letter also said that Indiana is second in the nation in exports of life sciences products at a value of more than $9.7 billion. The industry employs more than 55,000 Hoosiers – with 20,000 of them employed directly in medical device-related jobs.

But supporters of the tax say it should not drive companies overseas. According to the left-leaning Center on Budget and Policy Priorities, the tax applies equally to imported and domestically produced devices. That means devices produced in the United States for export are tax-exempt.

“The excise tax is sound,” the center says in a report, “and the arguments against the tax don’t withstand scrutiny.”

Pence tried before to convince Obama and Congress to repeal the medical device tax but legislation has never made it to the president’s desk.

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  • Lap dogs and Pence
    In the Interest of full disgusting-ness Governor Pence goes to bat for the billionaires once again. http://www.forbes.com/profile/gayle-cook/
  • Tax harms patients
    In the interest of full disclosure, I am the media relations director of Cook Medical, the world's largest family-owned medical device company so everything I write here should be weighed against that implied conflict of interest. But just because I'm conflicted does not mean I am wrong. Most prestigious Progressive lawmakers are backing the repeal of the tax: Sen. Durbin, Sen. Hagan, Sen. Whitehouse, Sen. Warren, of course, and several more. And they are doing that because it’s terrible policy, killing jobs and harming patients. About 80 percent of the estimated 15,000 companies in this space have fewer than 50 employees. What do those company owners have to say about a tax on companies that have no profits? Cuts to R&D? Uncreated jobs? Lay-offs? Capital expenditures curtailed? That is how they are dealing with this tax. At the IRS estimate of $194 million a month, this tax is bleeding the equivalent of a $90,000 a year job from the balance sheet of a U.S. company in this space each and every 40 minutes since January 2013. That’s the trauma of a topline tax. Though it seems small at 2.3 percent, it is actually a 30 percent tax surcharge on our nation’s most innovative industry. That 30 percent is the average. For low-profit-margin firms, it is far more, confiscating all of 2012 profits for some unfortunate firms. Global companies have no choice in order to to stay competitive but to shift production to low-tax locales like Costa Rica, Ireland and Singapore. Sure, products from those plants will still be taxed but because the base tax rate in places like Costa Rica is so low (zero), shifting factories to far flung nations offers a measure of relief or in some cases the prospect of survival. Finally, there is no windfall of new consumers, either, even though there may ultimately be 30 million newly insured Americans. Here’s why: most of those folks are already entitled to life-saving medical devices. No EMT at a car wreck will fish through a purse for an insurance card before they place a life-saving drainage catheter. Our products are already being placed on uninsured patients. What’s more, huge companies like J&J get a majority of revenues from pharmaceutical sale, which will get 30 million new customers at four prescriptions a piece under the ACA. They’re still high-fiving in the hallways at J&J over the passage of the ACA. This tax needs to be repealed before one more job is lost to Costa Rica, Ireland or Singapore. Four of five Senators (and three of five Democrat Senattors) want this tax to be repealed. It's time to do it.
  • poor excuse
    Annual growth in the healthcare industry exceeds 2.3%. While a company may use this tax as an excuse to justify moving jobs overseas, those jobs would have been moved anyway.
  • Resume'
    More from our "shut it down" gov. The industry even blackmails the hospitals in to signing confidentiality agreements on cost. Only transparency here is Pence who is following the tea party roadmap.
  • Profit protection
    Apparently the profit margin on these items is huge, also as the article states, many more will be eligible for surgeries. It seems all these companies have to do is threaten to move jobs to get what they want.

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