State Biotechnology Association Opposes Medical Device Tax

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State Biotechnology Association Opposes Medical Device Tax

Premiere Date: 
October 18, 2013

BioForward's Bryan Renk explains the impact of the tax on Wisconsin medical device makers.

 

Episode Transcript: 

Frederica Freyberg:

One feature of the healthcare law places a revenue tax on makers of medical devices. Opposition to that tax is shared by congressional members of both parties. Wisconsin is number 10 in the country in the manufacture of medical devices. It’s a key part of the Badger State’s growing biotech industry. Bryan Renk is the executive director of BioForward, the association for Wisconsin's biotech companies. Thanks for being here.

Bryan Renk:

Thank you.

Frederica Freyberg:

In your mind what does this 2.3% tax on revenues of medical devices mean for Wisconsin?

Bryan Renk:

Well, we feel it means that it is going to hinder innovation in the sector and also going to-- We also feel that to begin with it was bad policy out of the gate because it was a tax on revenue and not profitability. And if you look at the makeup of the sector, not only in Wisconsin but in the United States, most of the med device companies are small companies. So as an example, 75% of our companies are 50 employees or less. So it’s going to be an additional tax burden on those companies based on revenue and not profitability.

Frederica Freyberg:

Describe the growth model for this sector in Wisconsin of the medical devices, as long as that's what we're talking about with the tax.

Bryan Renk:

Sure. Well, Wisconsin has been great at innovation and historically if you look at recessionary period in the state for most recently, our sector grew 5% in job growth. The state lost 6-1/2% in overall jobs. If we are going to impinge the innovation, we're going to lose job growth.

Frederica Freyberg:

What kind of medical devices are people working on and, you know,  growing?

Bryan Renk:

Well, it's all the way-- I mean, we're big in imaging here. That's one thing. Diagnostics is another one that is growing very rapidly. There is also new med devices from-- for treatment of-- just for therapeutic treatment for cancer therapy.                                  

Frederica Freyberg:

And so is there any discussion, to your knowledge, in Washington about kind of changing it, as you say, from a tax on revenues to a tax on profits?

Bryan Renk:

We haven’t--I guess with the whole conversation that we've seen to date we haven't seen that type of discussion. It is more-- the discussions have been more, if we get rid of that excise tax because it was a revenue piece of ACA, where is the offset? I think the discussion has all been around what’s the offset? We’re not going to touch it unless there’s an offset. We haven't seen that conversation of, well, what’s a better structure for the revenue stream?

Frederica Freyberg:

Because, clearly one of the big boys in this sector in Wisconsin is GE Healthcare.

Bryan Renk:

Right.

Frederica Freyberg:

And in fact its CEO says, you know, it's okay. We can weather that tax because we're growing and mostly internationally, so it's okay with us. Does that hurt your message that this is injurious to the sector?

Bryan Renk:

I think they would say that they might be able to weather it but they don't like it, as well. I think that they've been supportive of the repeal in addition to all the other small companies. And so, you know,  I think that they will look at it maybe a little differently than some of the other companies. The start-ups are going to say, I have this many dollars to get this new product on the market. And how am I going to get that product on the market if I have to pay this additional tax? GE might say, I have this many dollars in the revenue stream. Will I hire more employees or will I pay the tax? They'll look at it a little differently when they prioritize their dollars spent.

Frederica Freyberg:

All right. Bryan Renk from BioForward, thanks very much.

Bryan Renk:

Thanks for having me.


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