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.