Senate Must Repeal Medical Device Tax

For more than two years, thousands of workers in Pennsylvania’s life sciences community have been waiting for Congress to repeal the 2.3 percent medical device tax imposed by President Obama’s overreaching health care law. These employees make everything from hand-held devices that help our troops detect traumatic brain injuries during battle to non-invasive respirators.

Now, after years of waiting, Congress may finally seize the opportunity to do the right thing, saving many of these jobs and maintaining America’s leadership in medical innovation. Last week, the U.S. House of Representativespassed bipartisan legislation repealing the onerous tax by a vote of 270-146, with more than three dozen Democrats joining their Republican allies to send this tax packing.

It’s never a good idea to single out a growing industry that is creating jobs and manufacturing important, lifesaving products with a punitive tax. It’s an even worse idea to target small, up-and-coming medical device companies. Unfortunately, that is exactly what this tax does. Because the tax applies to a business’ revenue — not just profits — it is especially punitive for start-ups that haven’t yet broken even on their investments.

Repealing this new tax is also especially important for Pennsylvania. The commonwealth is currently the fourth-largest producer of medical devices in the country and is home to 576 medical device companies. Already, the industry sustains more than 100,000 jobs among medical device companies, suppliers and other supporting businesses, and jobs in the medical device field pay 25 percent more than the average private-sector job. The life sciences industry is so important to Pennsylvania’s economy that 14 members of Pennsylvania’s congressional delegation voted to repeal the tax last week.

During my first year and a half in the Senate, I have met with various medical device companies’ leaders and their employees. I have heard from those who know the industry best and are equipped to determine how harmful this new tax will be.

The response has been unanimous and resounding: President Obama’s medical device tax will lead to fewer jobs, fewer breakthroughs, fewer new products and fewer lives saved.

For instance, I visited Fujirebio Diagnostics in Chester County, a world leader in the production of in-vitro diagnostics and biomarkers, helping doctors detect cancer faster. Based in Malvern, Fujirebio employs 170 workers. The company had been hiring two to three people a month, despite the recession. However, when the medical device tax passed as part of President Obama’s health care law, it stopped hiring in order to prepare for their impending increased tax bill.

Pennsylvania companies have warned that the looming tax, set to take effect in 2013, will have a chilling effect on growth. Chris Field, chief financial officer of Boas Surgical, a medical device company with headquarters in Allentown specializing in pedorthic, orthotic and prosthetic devices for veterans, warned, "Basically, if the tax goes through we will turn out the lights, lock the doors and go home and not be able to service patients anymore."

With facilities throughout eastern Pennsylvania, Boas Surgical has been a staple of Pennsylvania’s medical device community since its founding nearly a century ago. When a company like Boas warns that a new tax will destroy jobs, shouldn’t Congress listen?

Last week, the House of Representatives did just that, and now, it is the Senate’s turn. Multiple repeal bills have been introduced in the Senate, including two different bills I have co-sponsored. The responsibility lies on the shoulders of Majority Leader Reid to bring this important piece of legislation to the Senate floor.

Unfortunately, President Obama has turned a deaf ear to the voices clamoring for repeal, threatening to veto a repeal bill, but with bipartisan support building Congress has the power to make the president’s threat irrelevant.

When I first arrived in the Senate, we had plenty of time to repeal this tax and I was optimistic we would get the job done. Since then, there has been a lot of talk and very little action. Today, the clock is ticking, and thousands of Pennsylvania jobs are at stake. It is time to repeal this job-killing tax before it is too late.

U.S. Sen. Pat Toomey is a Republican from Upper Milford Township.

Nachama Soloveichik
Communications Director
U.S Senator Pat Toomey
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