More reaction to medical sector taxation reform

Yesterday morning saw representatives from several Minnesota medical technology companies, a VC company and even a couple of patients gather at Plymouth City Hall to protest against the $40 Billion tax on medical device firms, proposed as part of the Senate Finance Committee's health care reform bill.

Minnesota, as highlighted previously on this blog, is a key area for medical device companies, with somewhere in the region of 200 companies listed as being located there, and employing around 20000 people.

Rumours of a possible additional tax for medical device companies is causing considerable concern because of the potential impact on research and development, jobs and manufacturing as companies try to cut costs. Rumours around the tax have already begun to impact VC funding to small companies, impacting innovation. These companies are not just the lifeblood of the larger medical companies who frequently acquire clever start ups, but in the long term they are the lifeblood for patients laying their hopes on improved medical advance to cure diseases. Increasing taxes will increase costs or stifle development.

We hope that the mounting concerns are heard and acted upon. Extraordinary developments continue to be made by medical device companies all of the time, and without the small start ups, innovation in the sector will be strongly impacted. Taxing the innovation and creativity taking place in U.S. device and diagnostics companies is counter-productive from nearly every perspective. How would the tax apply to a larger healthcare company which receives a minority of its revenues from devices/diagnostics? Would it be exempt? Would the tax apply on a pro rata basis? Anyone know?