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Medical-Device Firms Criticize Tax Proposal
Industry Warns It Will Hurt Innovation

By Mike Musgrove
Washington Post Staff Writer
Wednesday, October 14, 2009

As it turns out, the day the Senate Finance Committee voted to approve its health-care reform bill was the same day that about 1,400 workers and executives in the medical-device industry convened in Washington to talk shop.

Under the bill approved on Tuesday, the medical-device industry would pay a total of $40 billion over 10 years. Players big and small in the industry, which makes items from tongue depressors to artificial hearts, warned that the tax would harm their ability to innovate.

"This is a really devastating proposal for a large number of our membership," said Stephen J. Ubl, president and chief executive of the Advanced Medical Technology Association, the organization hosting this week's AdvaMed 2009 conference at the Walter E. Washington Convention Center. "It's bad for patients, bad for jobs and bad for research and development."

By AdvaMed's tally, the medical-device industry is worth $130 billion annually. The industry encompasses 6,000 companies in the United States, the vast majority of which make less than $100 million per year in revenues, the organization said.

Mark B. Leahey, president and chief executive of the Washington-based Medical Device Manufacturers Association, said many companies could go under if the proposed tax is enacted.

"This is not an industry like the pharmaceutical industry," where innovation often comes from deep-pocketed conglomerates, Leahey said. "The real research and development in this industry comes from small players who are just struggling to get by."

Indeed, by paying his company's share of the tax, Caroll H. Neubauer, chairman and chief executive of B. Braun Medical, a company that specializes in intravenous therapy and pain-control products, said, "I would exceed my research and development budget."

"My European competitors are sitting on the sidelines smiling," he said. "We're one of the few industries in the U.S. that is still growing. How many of those do you have left?"

In the hours leading up to the Senate's vote, attendees at the AdvaMed show heard from one senator who would not be voting. Sen. Ben Nelson (D-Neb.) won the crowd over by giving assurance that, regardless of the day's outcome, there would be more work ahead before any new health-care system is approved.

"There's still a lot of time in the game," he said. "It's more important that we get this right than we do this quickly."

The senator's main applause line: "I don't see the wisdom of embedding further cost in the delivery of care."

During a panel discussion that kicked off the conference Tuesday morning, titled "Pulse of the Industry: Global Medical Technology Report 2009," one executive said that he regularly is asked how well he sleeps at night, given the difficult economic environment, and the uncertainty brought by the nation's moves towards health-care reform.

"I sleep like a baby," cracked David Johnson, chief executive of ConvaTec. "I wake up every hour and cry."

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