Among the five new ObamaCare tax hikes that kicked in Jan. 1, one in particular is attracting opposition from both Republicans and Democrats: the tax on medical devices. Last month, 18 Democratic senators and senators-elect (including New York’s own Sens. Charles Schumer and Kirsten Gillibrand) wrote Majority Leader Harry Reid, asking him to delay implementation of this 2.3 percent excise tax on the sales of everything from pacemakers to tongue depressors. The House already voted to repeal the tax, which is projected to extract as much as $29 billion from medical-device firms.
Reply 1 - Posted by:
Mass Minority, 1/8/2013 5:48:11 AM (No. 9104377)
If you wanted to design a tax to destroy small tech firms you could not come up with a better scheme than this. Here is why.
Say you own a small company developing a fast home test for Salmonella, or a more accurate over the counter drug test kit for parents. These are medical devices as defined by the FDA. Your burn rate is 7 million dollars a year through 3 years development and approval. After launch your burn rate increases from 7 million to 8 million a year to cover manufacturing (and all the regulatory compliance that comes with it). Your tests are succesful at $20 a pop and your profit margin is a healthy 60%, you clear$12 for each test.
Sales ramp ncely $1,250,00 1st year, $3,500,000 second year, $6.5 million third year and 9 million each year after that. You can confidently tell investors in 4 years you will show $1,000,000 profit and have a second or third product on line.
You will have spent $21Million through launch and $32million through the first 4 years on the market.
Normally you would not have any taxable income until you had recouped the investment costs, ie $53million, give or take. so after 7 Years you have made $20.5million so your tax bill is still $0.
But in this new world your tax bill over those last three years is $471,000. Thats a half dozen full time workers at good salaries with good benefits. You have two choices, fire 6 people or raise your selling price to $21.
Taxes raise revenue ONLY by taking it away from the private sector, why is this a concept the hogs at the trough cannot seem to ever grasp?
Reply 2 - Posted by:
Country Boy, 1/8/2013 6:42:04 AM (No. 9104415)
Medical devices is one of the few bastions of capitalism left in the U.S. It is comparable to the auto industry of 100 years ago. The Key to it, the common denominator is INNOVATION (genius + hard work.) This is something completely impossible for socialist like obama to understand, much less do.
For same reason, his Keynesian cr@p (180 degress opposite to capitalism) is crashing and burning at every step.
If Med Device tax gets rolled back, (along with Keystone Pipeline being approved?) obama is definitely getting some huge pushback. His power is getting drained.
Reply 4 - Posted by:
Mass Minority, 1/8/2013 7:56:44 AM (No. 9104502)
#2, and everyone else as well, did you note the throw away line about cost to market?I´ll paraphrase, the average cost of bringing a medical device to market is $31million. Of that cost $24million is spent on regulatory compliance.
Get that? 75% of the cost of bringing a device to market goes to satisfying the FDA, some of that creates jobs in support labs and contract research but a big chunk of it goes to simply generating reams of reports no one will ever read and submitting them to multilpe beurocrats who will decide how much more you will spend until this private sector dropout with a bachelors degree in Womyns Studies can decide your cutting edge medical breakthrough is "safe" to market.
The average cost of bringing a Drug to market is now over $1Billion (with a B. 15 years ago when I was working in the Big Pharma R&D world that number was closer to $100Million. What has caused the average cost of drug development to go up 1000% in 15 years. Heres a hint, the R&D time to trials has gone down.
Regulation is killing us, we have gone FAR FAR beyond what is needed to keep us "safe". We are deep into the realm of make work to keep useless beurocrats employed.
The medical device tax is the beginning of a long list of specific elements of Obamacare that people will dislike. If the GOP had any sense they would start tallying up the offensive affects of the legislation in order to get many of them repealed.
FTA: Michigan-based Stryker plans to eliminate 1,170 jobs. More than 100 of those cuts will come at the company’s Orchard Park and West Seneca facilities in western New York.
pat stryker, heir to the stryker fortune is a far left Colorado activist. Wonder what pat thinks of the medical device tax component of state run health care? Perhaps she obtained enough stimulas money kickbacks from zippy to make it all better.
NY state is one of the handful with a thriving medical device industry. Why did the great brains Schumer and Gillibrand vote for the tax?? Oh yeah, they had to pass the bill to find out what was in it. We are being led by morons...we are so screwed.
Plus the fact that the FDA has established an annual fee for all medical device mfg, importers, retail etc..for us about 3500. My partner and I invented a device to extract loose baby teeth. It´s hard to argue with the FDA that our product is NOT a medical device, rather an "enhanced" close pin for gripping, the bureacrats disagree. If this fee isn´t rolled back, our little gatorgripper company is done.
Last year Al Franken (MN) visited the Minneapolis offices of Boston Scientific, a company that designs medical devices. My brother writes the technical manuals for their products. During his visit, Franken insulted the CEOs and dismissed employees´ concerns about the tax on medical devices. Now Franken is "shocked" to find out about this. (Franken and Amy Klobucharl have come out against the tax, but they both voted for the bill.)
In the very first example, and all examples, it is not just a matter of raising the selling price. There is a limit to what can be charged because of insurance and government reimbursement schedules. This tax squeezes the manufacturer and removes the incentive.
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