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Senators Klobuchar, Bayh, Lugar, Franken Push to Remove Proposed Fee on Medical Device Makers

In bipartisan letter to Chairman Baucus, Senators say jobs and innovation would be threatened

September 15, 2009

Washington, D.C. – U.S. Senators Amy Klobuchar (D-MN), Evan Bayh (D-IN), Dick Lugar (R-IN) and Al Franken (D-MN) today called on Senate Finance Committee Chairman Max Baucus to reconsider the proposed fee on medical device manufacturers in his Committee’s health care reform bill. 

In the letter, the Senators say that the provision would harm economic development and health care innovation nationwide as well as in states like Minnesota and Indiana.  They also point out that even without the proposed tax, the medical device industry will be impacted by health reform proposals.

“While we support efforts to ensure that any health care reform bill does not add to our country’s deficit, this industry should not be forced to pay more than its fair share,” said the Senators in today’s letter.

Full text of the letter is below:

September 15, 2009

Senator Max Baucus
Chairman
Senate Finance Committee
219 Dirksen Senate Office Building
Washington, DC 20510-6200


Dear Senator Baucus,

As Senators from states with vibrant medical technology industries, we write to express our support for health reform efforts that better align incentives and reduce inefficiencies in the current health care system. However, we do not believe that the proposed "fee" on medical device manufacturers would help achieve these generally agreed upon goals. As you have heard from us over the past few days, the proposed fee will seriously threaten thousands of American jobs and deter innovation in the industry.

At a time when every effort is being made to promote small business and growth industries of the future, the proposed medical device tax would harm economic development and health care innovation nationally and in our states. It is our understanding that the proposed tax would be levied upon all manufacturers of medical device and diagnostics products as defined by the Food Drug and Cosmetic Act. Rather than specifying a tax rate, this proposal would assess all manufacturers at a rate based upon their U.S. sales. Recent independent estimates indicate that this tax could translate into an annual income tax surcharge of between 10-30% on medical device manufacturers.  The amount of capital that these companies would have available to reinvest in product development and innovation would be threatened, dramatically reducing both the number of jobs in the industry and the types of devices available to patients. 

Even without the proposed tax, the medical device industry will be impacted by health reform proposals. The overwhelming majority of medical products are reimbursed through hospitals, which are scheduled to see a reduction in reimbursements as a part of health care reform. These hospital cuts will translate into $15-$17 billion in estimated cuts to the medical device industry over 10 years. While we support efforts to ensure that any health care reform bill does not add to our country’s deficit, this industry should not be forced to pay more than its fair share.We believe that the medical device industry contributes to improved quality and choice for patients, and we are concerned that this tax will stifle technological innovations that can improve patient outcomes and lower health care costs. We respectfully request that you reconsider including this provision as a part of the Finance Committee’s proposal.
Sincerely,



_______________________            _______________________   
Senator Amy Klobuchar            Senator Evan Bayh



_______________________            _______________________   
Senator Richard G. Lugar            Senator Al Franken


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