Alex Lukianov: “Medical Devices Tax Hinders Innovation”

As the chairman and CEO of NuVasive, a medical device company based in San Diego, I want to share serious concerns I have about certain aspects of the Affordable Care Act (ACA, aka Obamacare) and explain how it is destroying jobs, hindering innovation and slowing the economic recovery.NuVasive embodies the American dream. In just 13 years, we’ve grown from simply having an idea as a startup backed by venture capital to become a market leader and the fifth largest company in the global spine market. As a medical device company, we have developed innovative surgical products and procedures for patients suffering from spine problems. These products have enabled patients to be treated with shorter, minimally invasive operations, allowing for quicker hospital stays and a faster return to normal activity which results in significant cost savings for our health care system.
Innovation by the medical device industry has directly benefited patients. In the last 20 years, Americans have been the beneficiaries of these technologies as demonstrated by increased life expectancy of more than three years, a 16 percent decrease in annual mortality rates and a 25 percent decline in elderly disability rates.
We are in the midst of an exciting moment in our industry. Rising middle classes in China and India will result in literally hundreds of millions of new consumers for the kinds of medical devices created by our industry. In the last 20 years, our industry has created more than 423,000 American jobs and is indirectly responsible for the creation of 1.5 million jobs. As well, NuVasive is primed to grow and to add to our workforce. Right now, we employ approximately 1,500 people in good jobs that pay well above the national average. One hundred percent of our research and development and over 90 percent of our manufacturing currently takes place in the United States. We are an American company and we want to remain an American company.Unfortunately, parts of Obamacare are making this very difficult.The law places a new 2.3 percent tax on revenue – not on profit, but on revenue – generated by medical device companies. NuVasive is a profitable company, but we estimate this tax will force us to pay a tax rate on profits of approximately 60 percent next year. To offset this tax increase, we will be forced to reduce investments in research and development and cut up to 200 planned new jobs next year.I am also sad to say that as a result of the law, for the first time in our history we are being compelled to consider moving manufacturing, clinical trials and investment in new innovation to more business-friendly countries.
This is not something we want to do. Indeed, we are eager to avoid it. But like other companies in our industry, we want to stay in business, which means remaining profitable. The new medical device tax is hurting the entire industry and prompting every one of us to evaluate where best to locate our operations.This tax is especially harmful for those companies that are just starting out and are not yet profitable. They have to face the extraordinary burden of paying a tax on their revenue even while they are losing money. I can confidently say that if this tax were in place 13 years ago, NuVasive would not be here today. Thousands of jobs would never have been created and hundreds of thousands of patients would be worse off. Innovation is one of the things that have made America the world leader in health care innovation. Discouraging innovation with a tax that penalizes startup companies is the last thing the federal government should be doing.Like so much in the proposed health care reform, this tax increase expands the role of government, drives up costs, stifles innovation and hurts job creators. It will reduce the quality of health care in this country for future generations and kill jobs. Today, the House of Representatives is set to vote on a bipartisan repeal of this tax. Democrats and Republicans in both the House and the Senate support this measure. I urge everyone to support the repeal of this misconceived tax and support legislation which promotes innovation and not penalize those that are creating new jobs and better health care for all Americans.
Source:Alex Lukianov.Chairman & CEO of NuVasive, Inc., a San Diego-based company.