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Upton, House Vote to Repeal Harmful Tax on Medical Device Manufacturers

Impact of tax would be devastating to jobs and innovation for local device manufacturer Stryker

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Washington, DC, June 7, 2012 | comments
WASHINGTON, DC – Congressman Fred Upton (R-St. Joseph) praised today’s House passage of bipartisan legislation to prevent a new 2.3 percent excise tax from being imposed on U.S. sales of medical devices.  The tax, which was included in the President’s overreaching healthcare law and is currently scheduled to take effect in 2013, would directly cost the U.S. medical device industry billions of dollars per year – not including costs of compliance – to the detriment of American jobs and medical innovation.  Last month, Upton met with employees of Kalamazoo-based job creator and medical device manufacturer Stryker Corporation concerning the harmful impact of the new tax, among other issues including efforts led by Upton to streamline the Food and Drug Administration’s (FDA) approval process for medical devices.  Upton is a cosponsor of the Protect Medical Innovation Act (H.R. 436), which passed the House by a vote of 270 to 146 and now awaits consideration in the Senate.

“The administration’s impending tax on medical devices is a ticking time bomb for manufacturing jobs and innovation here in Michigan and around the country,” said Upton. “A new tax is the very last thing Michigan device manufacturers and their thousands of employees need at this time of uncertainty and slow economic growth.  The devastating impact can already be felt here in southwest Michigan as local manufacturers prepare to comply with the new tax, dollars that could be better spent on wages, research and development, and investments in life-saving technologies.”

“Stryker appreciates House passage of legislation to repeal the medical device tax,” said Curt Hartman, Interim CEO and Vice President & Chief Financial Officer of Stryker.  “This tax is anti-competitive and decreases the money available for jobs and innovation.”

In November 2011, Stryker formally announced its intention to restructure and reduce its global workforce by approximately 5 percent in anticipation of the new tax.  In addition to repealing the medical device tax, H.R. 436 would also allow individuals to annually recoup unused contributions they have made to their flexible spending accounts (FSAs).  FSAs allow employees to contribute pre-tax dollars from their paychecks to pay for out-of-pocket healthcare expenses not covered by insurance, such as co-pays and over-the-counter drugs.  Under current law, individuals must spend their FSA balance by year’s end or forfeit the unused balance back to their employer.  H.R. 436 would allow every employee to make an annual FSA cash out of up to $500, taxed as regular wages.

Last week, by an overwhelmingly bipartisan vote of 387 to 5, the House passed Upton’s FDA Reform Act (H.R. 5651) to extend and reform the FDA’s evaluation and approval processes for prescription drugs and medical devices, enabling U.S. companies like Perrigo, Pfizer, and Stryker to bring their breakthrough products to market faster while maintaining the highest levels of patient safety.  Under current law, these Michigan employers have been put at a competitive disadvantage with overseas manufacturers who already benefit from a more streamlined approval process.  In addition, Upton’s bill also establishes new user fee programs for generic drugs and biosimilars, takes steps to prevent drug shortages, and encourages the development of treatment options for children with rare diseases.
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