Don’t Tax the Medical Device Manufacturers to Pay for Health Care Reform

Health care reform is a great thing.  While the numbers of uninsured Americans are debatable – most say overinflated as a result of people that choose to “self-insure”, it is clear that there are too many people in this country that do not have access to basic and essential medical care.  In addition, the overwhelming number of uninsured people that show up in urgent need of medical care are shouldered by the increasing premiums of those that can and do pay for health care.  We need broader access to health care in this country and a better system of providing it.

That being said, it makes no sense to tax the medical device manufacturers to help in paying for broader health care.  This is an ill thought out solution that will have a disproportionate negative impact to the State of California and the global competitiveness of our nation’s medical device industry.

Max Bacchus (D-MT), the Chairman of the Senate Finance Committee, has suggested a $4B per year tax on medical device manufacturers. Since the majority of medical device companies are located in California, this tax will have a disproportionate impact on Californians.  Companies faced with this burdensome tax will be forced to reduce their expenditures on research and development, with an ultimate impact of reducing innovation, and a loss of jobs.  In addition, the job loss of medical device manufacturer’s R&D organizations will have a 2-3 fold trickle down effect on service  providers that support these R&D organizations.  Most notably, the R&D spending reductions will impact the national state of innovation in an industry where the US has held a global competitive advantage for a long time.

We’ve all seen the impact of the automobile industry, the steel industry, and the computer industry moving off shore.  We can not afford to allow this to happen to the medical device industry as well.  Expanded health care coverage is a great thing and I am totally supportive of President Obama’s goal to reform this system.  However, complex problems require thoughtful solutions, and the problems we face with our health care system will not be easily solved by taxing the innovators.

The Sum of the Parts

In business, in sports, in education, we always look for the synergies that make the proverbial “whole greater than the sum of the parts”.  You see it a lot in professional sports – the dysfunctional team full of superstars overthrown by a group of average -  but synchronized – teammates.  In business, we try to orchestrate teams of individuals that work well together and accomplish more than we expect – ahead of schedule and under budget.  In the University setting we are frequently amazed by researchers that stand on the shoulders of giants who have come before them to make incredible breakthroughs.

Synchronistic additive gains are also accomplished by individuals with portfolios of collective experiences.  Individual contributors can easily teach a task and managers can often coordinate the activities of multiple people – but leaders combine collective experiences, digest, and find new ways of accomplishing goals and objectives.  For 25 years I have been fortunate to have worked with truly exemplary individuals, and have learned from several visionary leaders.  I feel as though my collective professional experience is one of my greatest assets – and one of the things in my business life that I am most proud of.

I have been working with the team at OCTANe for four months, and, in all sincerity, I am becoming a better business person because the depth of my experience is increasing.  This is a result of people that I have met, and the corresponding exponential ability to draw not only from them, but also their networks.

Before OCTANe, I knew most of the big law firms in So Cal.  I understood their strengths and weaknesses, and maybe even knew a partner from one or two.  In the last four months I have met and worked with three or four partners and associates from each firm.  In so doing, I have a deeper understanding of their capabilities and their cultures, and my ability to deal with complex legal issues has increased dramatically.  Similarly, I was familiar with the Big 4 accounting firms and three or four smaller firms that were also very skilled.  In the last four months I’ve learned the respective foci of their consulting practices as well as met most of the local managing directors and general partners.  My knowledge of financial planning and analysis has not changed significantly, but  my ability to get things done has grown by leaps and bounds.

I’ve similarly met entrepreneurs that have taught me about digital advertising, manufacturers that have taught me about building quality products for oil exploration, and consultants that have shared their expertise in internet marketing, conducting clinical trials in Switzerland, and building hydrogen fuel cells to power next generation automobiles.  It’s unlikely that I will ever be able to personally do any of these things, but in four short months, my ability to get any of them done has increased significantly.

Prior to joining OCTANe, I vastly underestimated the true power of networking.  And in the last four months, I have gained a true appreciation for how meaningful a business network really is, how easily it can be cultivated, and how impactful it can be as a business leader.  My network has not grown as a result of my position, but rather as a result of my involvement with OCTANe – and, at the risk of sounding promotional, it is readily available to all OCTANe members.

OCTANe’s mission is to catalyze the development of innovation through networking and education.  All of our weekly events, as well as our LaunchPad accelerator, are designed with these objectives in mind.  Our goal is to exceed expectations for quality, professionalism, and support.  And we do this because we believe in what we do, that Orange County is a great place to live and work with the potential to be even better, and that two plus two can equal five.