Sensing the Winds Shifting, Medtronic Applauds Efforts to Repeal the Device Tax

Posted in Regulatory and Compliance by Arundhati Parmar on March 28, 2013

Even as companies like Boston Scientific and Stryker and smaller ones like Cook Medical have complained loudly about the medical device tax, Medtronic has largely stayed aloof.

To my knowledge, the company has not signed formal petitions that industry trade groups like Medical Device Manufacturers Association have sent to Congress saying that the tax should be repealed because it willl hurt jobs and innovation. Medtronic executives like CFO Gary Ellis and CEO Omar Ishrak have simply said that the device tax is a cost of doing business in the U.S.


In fact in November, when an analyst asked Ishrak on an earnings call whether he is hopeful that the tax would be repealed, Ishrak provided the obligatory nod to AdvaMed's efforts in trying to undo the 2.3 percent tax. And then he said something that demonstrated his pragmatic nature.

"Right now, that’s what the law is and that’s what the projection is going to be, and we can assume that that’s going to come into play and therefore we have to build our business to deal with it,” Ishrak said. “[As I said before] we like to focus on things we can control and that’s why we have taken this approach."

But now sensing that the winds are shifting with the recent symbolic bipartisan vote in the Senate to repeal the tax, the company seems to be getting into the fray. Earlier this week the device maker issued a statement applauding the efforts of members of Minnesota's Congressional delegation - Democratic Senators Al Franken and Amy Klobuchar and Republican Congressman Erik Paulsen - in trying to get the tax repealed. Here's the full statement:

 Medtronic recognized Senators Franken and Klobuchar, and Congressman Paulsen for recent efforts to introduce bipartisan-supported legislation to repeal the medical device excise tax. The tax went into effect January 1, 2013 adding a significant challenge to the medical device industry in its ability to continue to deliver innovative research and development and create jobs in an innovative sector of the Minnesota economy. We applaud continued efforts to address this challenge through a variety of options and recognize that a repeal of the tax will be an uphill battle. The building debate on international and corporate tax reform holds similar consequences for the industry’s ability to compete both here and abroad.

These members of Minnesota’s congressional delegation have demonstrated persistent and thoughtful leadership around the medical device tax from the beginning in an attempt to exclude it from healthcare reform, and when a separate vote was not possible, worked to limit its size and impact. We need policies in the U.S. that will encourage investment and job creation in this high skill industry and maintain a favorable balance of trade, providing tremendous opportunity for growth in emerging markets around the world. For companies like Medtronic, these efforts will protect our ability to continue to deliver world-class clinical research and product development that advances care and patient access to innovative therapies.

Note that the sense of pragmatism is still there in the acknowledgment that getting the industry off the hook is still an "uphill battle."

-- By Arundhati Parmar, Senior Editor, MD+DI

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