Medical device tax 'a deterrent'

April 18, 2010
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The 2.3 percent federal health care reform tax on profits of medical device manufacturers could be devastating for small companies, said the head of a national trade group for medical device manufacturers.

Medical Device Manufacturers Association President and CEO Mark B. Leahey is the keynote speaker at Thursday's MichBio Annual Business Meeting and Showcase at Grand Valley State University's Eberhard Center on the Pew Campus. His topic is "Washington Update: What Lies Ahead for the Medical Device Industry?"

It's a timely take, as device manufacturers try to determine how the tax will affect them. In addition to companies that are engaged solely in medical device manufacturing, West Michigan is home to manufacturers that diversified into medical devices as the auto and office furniture industries shrank. While the contract manufacturers won't be affected directly, their customers will, Leahey said.

"We have 250 member companies. About half of them are start-ups," Leahey said. "Now, to basically require these companies to pay a tax on sales when they may not even reach profitability, this is something that will be a huge deterrent, I think, to the growth of the industry here in the U.S."

To pay the tax, which goes into effect in 2013, industry leaders have told him that they would have to lay off workers, cut research and development or move manufacturing outside the U.S., Leahey said.

"Most of our member companies have manufacturing facilities here in the U.S.," he said. "We've got the skilled labor force, the intellectual properties. It's one of the few remaining industries with well-paying manufacturing jobs here in the U.S."

He said MDMA is working with federal lawmakers to alter the plan prior to its implementation in three years. Short of repeal, he said, MDMA would like to see the tax limited to profitable companies.

Thursday's event marks the first time that MichBio has brought its annual meeting west, MichBio President and CEO Stephen Rapundalo said. It is usually conducted in Ann Arbor.

"We haven't been to Grand Rapids since the Expo in 2006, so we're excited about coming back up to the area," Rapundalo said.

During the annual meeting, MichBio's 250 members, which includes hospitals, companies, public and private institutions, and related service organizations such as law firms, will choose board members and review other business of the statewide trade organization.

The event begins at 1 p.m. with a workshop, "May Your Partnering Be Long Lived and Prosperous," featuring representatives of pharmaceuticals, biotech, venture capital, law and software companies. The cost is $80 for MichBio members and $100 for nonmembers. The annual meeting follows.

At 5 p.m., the event will feature a strolling dinner and bioscience-related company exhibits, followed by Leahey's comments at 7 p.m. The cost is $85 for members and $110 for nonmembers.

Rapundalo said he is hoping around 200 people will attend. For more information, see www.michbio.org

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