The Medical Device Industry

Floor Speech

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Mr. YOUNG of Indiana. I thank the gentleman for his leadership on this issue, a bipartisan issue. And I am encouraged to see so many colleagues on both sides of the aisle be here with us this evening to speak out to encourage our leadership, to encourage our fellow Members to stay engaged on this.

In the end, this is about improving lives. This is about delivering innovation within one of our highest growth economic sectors so that lives can be changed in a very positive way.

And to bring this sort of down to Earth here, aside from the very important economic statistics that we'll be citing this evening related to jobs and economic growth and losses in revenue, aside from the stories that we're going to hear this evening about manufacturing facilities being moved overseas, plans to build them no longer in the Midwest in a place like Indiana, instead, Europe is a better place to do business, let's set all that aside just for a moment and talk about one individual. This young lady, her name is Sheila Fraser.

Now, Sheila is a Hoosier, and she testified at a field hearing on the device tax and its impact on the individuals who benefit from medical devices and on businesses. This field hearing was held in Indianapolis a couple of years back, and Mr. Paulsen helped convene it, and we appreciated that.

But Sheila testified that, at age 10, she was diagnosed with bone cancer in her leg. She was an elite athlete for her age, playing gymnastics and track. And one day she just woke up facing the prospect of amputation, of all things, at age 10.

Biomet, a company out of Indiana, made a custom device for Sheila designed to expand as she grew and to replace the diseased bone while saving her leg.

Now, today, Sheila's much older. She leads a normal, active life. When we first met, she was a senior at Marian High School in Mishawaka, Indiana. Her courses were geared for college preparation. She received honors for a GPA of 3.5 or above. She's a member of the National Honor Society.

Now, Ms. Fraser, no doubt, has a bright future ahead of her. We have to wonder how differently her life might be were it not for the innovation that occurred at that Indiana medical device company.

Innovation in devices changes lives, thousands of lives every year across

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this country. It's just--she's just one remarkable example of all the people that benefit from these devices.
And without this type of innovation, let's think about what Sheila's life would look like. Well, she'd be physically disabled. She'd face a future of sky-high health care costs. Who knows what sort of opportunities she wouldn't be able to seize as a result of the innovations that came out of Biomet, just one company.

Now, taxing companies that rely so much on research and development and are positively impacting so many lives, it makes absolutely no sense to me. And the only way I can make any measure of sense out of it is something that my good colleague from the other side of the aisle, Mr. Matheson, said earlier.

This medical device surtax wasn't included in the Affordable Care Act, what the President calls ObamaCare, for any sort of policy reason. It was just put in to raise revenue. There was no real consideration when this bill was passed about how to make the bill sustainable from a fiscal standpoint. Instead, it was an insurance coverage bill, and they were going to figure out some of the financials later. And so this was one effort, I think, to mitigate the cost of the bill.

We've discovered that it's just incredibly costly in other ways, though, the opportunity costs that will be borne by people like Sheila Fraser if this innovation doesn't occur. So, for Sheila and for millions of Americans, tens of millions of people around the world that benefit from these devices, I think we owe it to them to repeal this medical device tax, a very bipartisan issue, a bicameral issue. My constituents are demanding it. The American people are increasingly demanding it across the country.

And so I just look forward to getting this done in conjunction with those here and others in this body.

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Mr. YOUNG of Indiana. This hits very close to home. Because for every Zimmer or Biomet I visit in the State of Indiana, there have to be four or five small, fledgling businesses that aspire to become the next Zimmer or Biomet of the world. We're inhibiting, with this device tax, their future growth, their research efforts, and the lean years when they're just trying to get a product approved into market.

With entrepreneurship at a 15-year low, we need to be doing everything conceivable to incentivize people to start businesses, to grow jobs, to increase personal incomes, which is exactly what this medical device sector has done in recent years. But it's all in jeopardy as a result of this surtax.

I'm in the mood this evening to tell stories. So you have opened the door there, my good friend, Mr. Paulsen of Minnesota. So let me share with you another story about innovation in this sector.

There was a young college student who dreamed one day of becoming a doctor. So he did very well in school and studied incredibly hard. When he graduated, the U.S. military came calling. He was brought into the service against his will--drafted--and served his time as a medical technician. He got married later and they had children and one thing led to another.

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They ended up moving to my hometown of Bloomington, Indiana.
And so this once-aspiring doctor did what so many Americans decide to do: they didn't give up on their dreams. So he and his wife decided to try and make a difference in the area of medicine in their own little way. He started tinkering with some wire guides in a spare bedroom of their apartment in Bloomington. Eventually, this turned into a small business--a profitable business--and they were able to hire other people and move out of the spare bedroom.

In later years, this company would grow to become the largest privately-held medical device company in the world, the Cook Group, headquartered in Bloomington, Indiana. Its founder was Bill Cook and his wife, Gayle, who survives him.

They have created thousands of jobs not just in Bloomington but around the State of Indiana, all around the Midwest. And now they're creating them in Europe. They're creating them in Europe not because they want to. In fact, there were plans, I'm told, for a number of manufacturing facilities to be built in America's Midwest. But because of our regulatory burdens and, more importantly, this medical device surtax, the plans were changed and those manufacturing facilities are now going to be constructed and jobs created in Europe. Because that's a better place to do business when they look at their financials. They tried hard. They resisted making this decision. But their Federal Government pushed them in this direction.

There's still an opportunity to salvage so many jobs, to rescue this great American industry that's really in its early stages of development. We must repeal this medical device tax. This is a no-brainer, as my oldest child says. It's a bipartisan issue.

So I'm really encouraged to see Republicans and Democrats down here this evening trying to ensure that the next Cook Group can be created and the next Cook Group won't be strangled in the cradle during its early formative years when it's trying to get cash-flow positive.

I'm glad we're getting out the word tonight to the American people on this important issue.

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Mr. YOUNG of Indiana. They are, indeed. And the numbers add up quickly. Right now, you indicated we're looking at a semi-monthly payment of this tax by our device companies. Roughly $100 million is due to the Internal Revenue Service semi-monthly as a result of this tax, And those numbers add up quickly.

So far in fiscal year 2013, the taxes already cost device manufacturers nearly $2 billion, and next year is looking even worse. Next fiscal year, starting October 1, the device tax is projected to cost manufacturers over $2.5 billion. So, once again, these taxes are not just being paid by the large companies; they're being paid by companies that are drawing on all their financial wherewithal--all the venture capital they can find, all their personal savings, all the community bank loans they may be able to get during these rough times. Those monies are being used to, with a threadbare budget, to research and develop these technologies into something that can finally make their way to the market. And all the while Uncle Sam is taxing away any profits they might be realizing on another product that may already be at market.

So this is absolutely something that is a disincentive to innovation. It undermines job creation at a time that all politicians are talking about creating jobs and saving the middle class. These are good-paying jobs. Manufacturing jobs, which you started off talking about, we need to be creating more manufacturing jobs here in the United States. So these pay better than your median or your average wage in a given State.

This is why we have 79 supporters in the United States Senate, Republican and Democrat--and I think perhaps an independent in there, one never knows, that might favor repealing this device tax. Here in the House, we have 260 cosponsors for repealing the device tax, Republican and Democrat. So let's get it done.

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Mr. YOUNG of Indiana. I would absolutely agree. And I throw another wrinkle into this conversation.

We need to be identifying ways to control health care costs. Whatever one thinks of the Patient Protection and Affordable Care Act--as the President's health care law is known--we are not here to discuss the larger law. But to the extent we figure out or can incorporate into our policies cost-saving measures that still maintain the quality of care that Americans have grown to expect from our medical system, that allows us to reduce the burden of taxation.

So I think those who are enamored of this law need to reflect on this litany of different taxes that have been put into place in order to pay for it--many of them, I believe, unwise. But this one is particularly unwise; that's why we have so much bipartisan support behind its repeal.

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