Medtech Companies Should Reinvest in Communities, but U.S. Government in the Way

Many medical device companies pride themselves on their local reinvestment efforts, which promote job growth and community development. Groups such as Orthoworx, which was established with the help of the Lilly Foundation, are dedicated to education, training, research, and economic development at a local level. Giving back to communities is important to medtech companies, but more and more, the chatter is about how the U.S. government is standing in the way rather than paving the way.

Perhaps no president of a device company has been more consistently frank about this issue over the past year than Cook Medical’s Kem Hawkins. Although the company just opened a new PTFE manufacturing facility in Canton, IL last week (at a cost of $19 million), its plans to establish more plants in the United States are delayed until further notice—until the government starts supporting reinvestment instead of discouraging it.

Cook Medical previously planned to build a new facility every year for the next five years. “You’ve seen tremendous announcements over the last year from a number of companies that are downsizing their workforce,” Hawkins says. “Our whole reason for stopping our building in the United States is to protect our workforce.” Any money that Cook reinvests will be put into new products, clinical trials, and employee training. Not surprisingly, Hawkins blames the 2.3% excise tax.

What should the U.S. government be doing to encourage medical device companies to reinvest in local communities? According to Hawkins, these four changes would significantly change the medtech landscape in America, for the better.

Reinvestment in the local community is important, and as evidenced by Cook Medical’s efforts in Canton, IL, can cause a positive chain reaction. The company decided to establish two plants in the town (founder Bill Cook’s hometown) two years ago, after International Harvester pulled out and took jobs out of the community. In addition to the 300+ jobs generated from Cook’s facilities alone, the company invested about $9 million in a 32-room boutique hotel called the Canton Harvester Inn, $3.5 million into a mixed-use property for commercial space and apartments, and about $4 million in the town’s indoor-outdoor mall, Fulton Square. New businesses have emerged around the town, including a winery and a water park, and the local hospital has invested $40 million in a new diabetes center.

“Many companies already do this. You have to look in your own backyard. You want to be a good steward, wherever you live. In our community, we have grown dramatically and reinvested in our community to make it a better place to live for all our employees, and for the citizens in this city and county,” says Hawkins. “But if people on the front end in our country make a decision that they want to take so we can’t give back, then that’s the decision we have to live with. That $20 million [Hawkins is referring to the amount of money that the 2.3% excise tax will take from Cook] we reinvest turns out to be $1 billion or $100 million. It’s exponential by the time it all gets done, because it’s every year. If the government takes and spends it, it’s not creating anything—it’s just gone.”

Maria Fontanazza is managing editor at UBM Canon. Follow her on Twitter:@MariaFontanazza.