Feb 02, 2015 - 3:15pm

New York Times Avoids Mentioning the Damage Caused by the Medical Device Tax

Senior Editor, Digital Content


Instruments used to perform bariatric surgery.
Photographer: David Maxwell/Bloomberg.

The New York Times editorial board calls repealing Obamacare’s medical device tax a “terrible” idea. It claims the tax has had minimal negative job effects.

But did they bother looking at how the tax actually affected the medical device industry? No.

The report the Times relies upon for its conclusion “simply ignores the facts of what is happening in the industry," according to AdvaMed, a medical device trade association.

In fact, the medical device tax harms job creation and medical device innovation.

“I see firsthand every day the impact the medical device tax has on investing in new jobs and developing new technologies that improve patient care,” said Scott Huennekens, President & CEO, Volcano Corporation and Chairman of the Medical Device Manufacturers Association (MDMA).

A survey of 100 industry executives by MDMA found that 72% “slowed or halted job creation” to pay for the tax. 85% said they would hire more workers if the tax were repealed.

A 2014 AdvaMed study found that 33,000 jobs were lost the first year the medical device tax was in effect.

Since the tax applies to revenue, medical device startups that haven’t seen profits yet are most vulnerable to its effects.

The editorial cites a recent Kaiser Health News story about Warsaw, IN, the “Orthopedic Capital of the World” as evidence that the tax hasn’t been harmful. However, the story quotes Mark Throdahl, president and CEO of OrthoPediatrics, a small company focusing on children’s orthopedic devices in Warsaw, who said the tax “has definitely had a chilling effect on our ability to grow head count.”

The tax has also delivered a hit to investing in medical device innovations.

In 2014, Throdahl told The Daily Caller that because of the medical device tax, “We have had to reduce our development budget. We’re developing less products than we otherwise would.”

Similarly, Dr. Tom Fogarty, inventor of the balloon catheter, wrote in USA Today:

There is no way I could have had the same impact if the tax on medical devices was in place when I got started over 50 years ago.

Simply put, the medical device tax is destroying job creation and innovation, and as a result, patient care is suffering.

Fogarty told the Silicon Valley Business Journal, “It's become extremely difficult to raise money for a medical startup.”

If the tax were repealed, the MDMA survey found that 80% of executives said they would increase R&D spending immediately. New technologies to help patients would come to fruition sooner rather than later.

At least the Washington Post editorial board—while also wrong for opposing the tax’s repeal—understands that it “isn’t particularly elegant policy.”

To borrow Senator Amy Klobuchar’s (D-MN) words: The 2.3% tax on medical device revenue “is a tax on manufacturing” as well as on jobs and medical innovation.

The only “terrible” idea was imposing the medical device tax in the first place. It is impeding investment in future innovation and hurting job creation at the same time.

It should be repealed.

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About the Author

About the Author

Sean Hackbarth
Senior Editor, Digital Content

Sean writes about public policies affecting businesses including energy, health care, and regulations. When not battling those making it harder for free enterprise to succeed, he raves about all things Wisconsin (his home state) and religiously follows the Green Bay Packers.