Mourdock Blasts Medical Device Tax in Bloomington

Mourdock: Medical Device Tax a Job Killer
Medical device industry employees over 20,000 Hoosiers

Bloomington, IN (Oct 12, 2012) –State Treasurer and U.S. Senate Candidate Richard Mourdock visited Cook Medical in Bloomington today, met with the company’s leadership and toured the facility.  Afterward, Mourdock called the medical device tax included in the President’s health care legislation a job killer and stressed the urgency of repealing the tax and the rest of the Accountable Care Act and replacing it with market-oriented measures to actually reduce the cost of health care.

“This tax is a job killer, especially here in the heart of the life sciences world,” said Mourdock.  “In Indiana alone, this harsh tax penalty has put at least 2,000 high paying jobs at risk and stopped plans for many more,” said Mourdock, pointing to the announcement by Cook Medical, Inc. to suspend plans for five new plants, including one in Indiana. 

“I’m shocked that my opponent, Rep. Donnelly, could vote for legislation that does such obvious and direct harm to Hoosiers,” he continued.

More about the medical device tax:

• One estimate suggests the tax could result in job losses in excess of 43,000 and employment compensation losses in excess of $3.5 billion (Furchtgott-Roth 2). Analysts anticipate Indiana losing 2,124 jobs and $172,928,000 in related earnings (Furchtgott-Roth 21).

• The medical device tax not only kills jobs, it will kill patients—based upon the peer-reviewed literature on the relationship between investment in medical technology and improvements in life expectancies, this investment decline can be predicted to yield an annual decline of about 1 million expected life-years for the U.S. population (Zycher 1).

• In 2006 the medical device industry paid corporate income taxes of $3.1 billion on taxable income of $13.7 billion. The medical device tax would add approximately $3 billion annually to the taxes paid by medical device firms — a 100 percent increase (Herrick 1-2).

Facts about the medical device industry:

• The sector employees over 20,000 people, accounting for more than 40% of the jobs in the state’s life sciences industry (BioCrossroads).

• Indiana is the fifth largest state in percentage of medical technology industry employment.

• Industry generates more than $10 billion on annual economic output.

• In 2010, Indiana’s medical device companies generated $2 billion worth of exports.

• Average medical device company employee paid nearly $60,000 annually.

Industry Overview:

• The medical device manufacturing industry contributes to the economy of every state. Its revenues exceed $116 billion annually, and it is one of the healthier segments of American manufacturing, other segments of which have been declining (Furchtgott-Roth 3).

• In Indiana, it employs app. 20,000 workers and produces $6,937,715,000 worth of devices annually (Furchtgott-Roth 15).

• In 2009, the medical device industry provided well-paying jobs to more than 409,000 employees, who earned more than $33 billion dollars in labor compensation (Furchtgott-Roth 2).

• Labor costs per employee of more than $81,000 are well above average compensation for the American economy (Furchtgott-Roth 4).

Excerpts from Cook Medical, Inc. announcement and media coverage:

“Cook Medical Shelves Midwest Expansion Plans” 
Indianapolis Business Journal (J.K. Wall, July 27, 2012)

Cook Medical Inc. had been planning to open five new manufacturing plants over the next five years in small communities around the Midwest, including Indiana, but has shelved those plans because of the hit it will take from a new U.S. tax on medical devices.

The Bloomington-based medical device maker estimates it will pay between $20 million and $30 million once the tax takes effect in January, Pete Yonkman, executive vice president of strategic business units at Cook Medical, said this week.

The 2.3-percent tax on sales of all medical devices was created as part of President Obama’s 2010 health reform law to help pay for its expansion of health insurance coverage to as many as 30 million more Americans. The tax is projected to raised about $2.9 billion per year.

“It is a challenge for us, no doubt,” Yonkman said in an interview after the IBJ Life Sciences Power Breakfast on Wednesday (see video below). “We have fewer resources to be able to spend on those kinds of projects.”

He referred to a new plant Cook opened recently in Canton, Ill., renovating a plant abandoned by the International Harvester Corp. Cook has invested $30 million in the plant, which will eventually employ 300 or more people, Yonkman said.

Canton is the hometown of the late Bill Cook, who founded Cook Medical.

“We had hoped, as we get bigger, that that would be our model for expansion,” Yonkman said. “To take these small manufacturing facilities and bring them to these communities, that had been hard hit by jobs leaving, because the work ethic is amazing and the people are really supportive and excited.”

Yonkman said Cook had planned to open a similar facility each year for the next five years.

“So, for us,” he added, “that’s one less facility per year that we’re going to be able to use because of the tax.”

Cook officials have long been critical of the medical device tax. Even before it became law, Bill Cook said it could cost the company as many as 1,000 jobs.

Since then, Cook officials have said their future growth will be focused overseas. Cook already has production facilities in Ireland, Denmark and Australia.

Medical device makers pushed for a bill earlier this year that would repeal the tax. The bill passed the Republican-controlled House of Representatives in June but has gone nowhere in the Democrat-controlled Senate.

Other Plant Closings

• In November 2011, device maker Stryker Corporation announced its intention to lay off 1,000 workers in order to cut costs in advance of the tax (Medical Device Companies Cut (Jobs) and Run).

• Another firm, Covidien Plc, announced the layoff of 200 U.S. workers and plans to offshore production to Mexico and Costa Rica (Medical Device Companies Cut (Jobs) and Run).

• Industry leader Medtronic led the way when it announced plans to eliminate up to 2000 jobs—approximately 4 to 5% of its global workforce—back in February in the wake of a 3% decline in sales that quarter. In April, the medtech giant shed 268 jobs in the Twin Cities, home of the company’s global headquarters, as well as its cardiac rhythm disease management and neuromodulation businesses (Medical Device Companies Cut (Jobs) and Run).

• Boston Scientific announced plans to eliminate up to 1,400 U.S. jobs by the end of 2013, a move it attributed to growing operations in China and streamlining operations in general (Medical Device Companies Cut (Jobs) and Run).

• Johnson & Johnson announced that it would cut up to 1,000 jobs and close two manufacturing plants (Medical Device Companies Cut (Jobs) and Run).

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2012-10-13 19:03:43

Source: http://www.richardmourdock.com/news/mourdock-blasts-medical-device-tax-bloomington