Blog: State of the Union Address Hits Home for Medical Device Manufacturers

The domestic medical device manufacturing industry, like many other manufacturing sectors, has suffered from devastating job losses, outsourcing to Asia, and a lack of skilled, high-tech workers in recent years. So, President Obama's State of the Union Address hit pretty close to home. And while he skirted the issue of healthcare reform, Obama did lay out a blueprint for bringing manufacturing and high-tech jobs back to our shores that served up some serous food for thought to medical device OEMs.

Aiming to achieve a "renewal of American values," Obama identified American manufacturing as the linchpin of a broad strategy to rebuild the nation's economy. He then pointed to the auto industry as a shining example of how American manufacturing can be restored, if the proper measures are put in place. Emphasizing that the American auto industry was essentially knocking on death's door just a few years ago, the president noted that the industry has since rebounded significantly despite initial debates as to whether the country should allow the industry to fend for itself and crumble.

"We can't bring every job back that's left out shores. But right now, it's getting more expensive to do business in places like China; meanwhile, America is more productive," he said. "We have a huge opportunity at this moment to bring manufacturing back. But we have to seize it. Tonight, my message to business leaders is simple: Ask yourselves what you can do to bring jobs back to your country, and your country will do everything we can to help you succeed."

The issues of outsourcing and offshoring are particularly poignant to the medical device manufacturing industry, especially as medical device companies plan for the impending excise tax. However, Obama proposed several steps that should be taken to ensure that more jobs and industry are not lost. Among these recommendations were to modify the tax code so that manufacturers no longer receive tax breaks for relocating overseas, to require every multinational company to pay a basic minimum tax, and to strive to lower taxes for companies that opt to remain in the country.

"If you're an American manufacturer, you should get a bigger tax cut," he added. "If you're a high-tech manufacturer, we should double the tax deduction you get for making products here. And if you want to relocate in a community that was hit hard when a factory left town, you should get help financing a new plant, equipment, or training for new workers. My message is simple: It's time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America."

Reinvigorating the 'made in America' spirit and restoring American manufacturing are indisputable concepts. But are all these proposed tax breaks and support for American manufacturers empty rhetoric? That's the million-dollar question. For the medical device industry, after all, one of the most-significant cited drivers of job loss and relocation is the medical device tax—a fact that Minnesota Congressman and cochair of the Congressional Medical Technology Caucus Erik Paulsen emphasized in a statement released after the address.

"In his speech, the President expressed the need to encourage more domestic manufacturing and keep jobs here in America. The first place he should looks is medical device manufacturing, which provides more than 35,000 jobs in Minnesota alone," he said. "This American success story has come under assault fro our own government and unelected bureaucratic agencies. As a result, American jobs are being forced overseas. We need to repeal the President's new tax on medical devices and modernize FDA so we can keep innovation, manufacturing, and jobs here in the United States."

If President Obama is serious about his commitment to high-tech American manufacturing, repealing the medical device tax would be a strong show of faith to the profitable medtech sector. But the chances of that happening are looking increasingly grim. As for Obama's most-recent ideas, they're inspired. Until Congress puts its money where its mouth is, however, they're just pipe dreams. If the government is as concerned as it says it is about companies shipping jobs and manufacturing overseas, something needs to be done—and fast—as medical device companies continue to flee from burdensome taxes and what they view as innovation-stifling regulation.

For more information and perspective about the State of the Union Address, check out "President's Proposals in State of Union Address Could Impact Industry," from our sister site, Medical Electronics Design. --Shana Leonard