Three of the world’s largest makers of medical devices are based in Warsaw, Indiana.
That’s where a damage assessment was done today by two U.S. congressmen who want to repeal a new federal excise tax on medical devices.
“A lot is at stake in both Minnesota and Indiana to keep this American success story alive,” said U.S. Rep. Erik Paulsen, (R) Minnesota’s Third District. Rep. Paulsen is the Co-Chair of the Congressional Medical Technology Caucus.
The 2.3 percent excise tax was imposed on January first as part of health care reform. “It doesn't matter if a company is profitable or not,” said Rep. Paulsen. “Studies have shown it’s actually about a thirty percent increase in taxes on many of these companies which is a dramatic hit.”
“Stryker based in Kalamazoo, Michigan has laid off due to the tax, thankfully, so far, nothing that major that we know of in relation to the tax,” said Indiana Third District Congressman Marlin Stutzman.
Today Rep. Stutzman and Rep. Paulsen toured OrthoPediatrics, a startup firm that is doing business in a Warsaw building that once housed a car dealership. “The volume of cash it sucks up at an early stage, it’s forced us to look at a couple of different R and D (research and development) projects and put those R and D projects on the back burner or delay those until 2014 and beyond,” said OrthoPediatrics Executive Vice President David Bailey. “R and D is the lifeblood of ultimate product development and sales.”
OrthoPediatrics is a startup company that has 55 people on the payroll after six years in business, but may see slower growth in the future because of the tax.
Repealing the tax is seen as necessary to prevent medical device makers from moving to greener pastures. “When you consider that competition is fierce in a global marketplace and we're just encouraging companies to expand overseas rather than in the United States.:
In Indiana, the average salary of a medical device worker is $60,000. That is 56 percent higher than the average salary for all jobs in Indiana.
“You know we often think of the excise tax to be on things that we want to kind of keep an a minimum, alcohol, cigarettes. Where medical devices are great devices that help lengthen life and keep people from being dependent on others,” said Rep. Stutzman.
The repeal measure passed the U.S. House of Representatives last year, and will likely do so again this year.
A repeal bill was introduced in the U.S. Senate last month.