Scott W. Atlas has the bad news.
The CEO of one of the largest health-care companies in America recently told me that the device tax his company paid last year exceeded his company’s entire R&D budget. Already a long list of companies—including Boston Scientific , Stryker and Cook Medical—have announced job cuts and plans to open new centers for R&D, manufacturing and clinical trials overseas.
The bureaucrats at the Food and Drug Administration are also hindering medical-technology and drug development. According to a 2010 survey of more than 200 medical-device companies by medical professor and entrepreneur Josh Makower and his colleagues at Stanford University, delays of approvals for new medical devices are now far longer in the U.S. than in many other developed countries. In the European Union—not exactly known for cutting through red tape—it takes on average seven months to gain approval for low- to moderate-risk devices. In the U.S., FDA approval for similar devices takes on average 31 months.
The FDA is no longer safe and effective.
Says more about how little they spend on r&d than how much tax, which is quite minimal. Nor is there any advantage to offshoring since the tax will fall whenever sold here. Someone really needs to up their bunk detector.
From the 2013 Boston Scientific annual report w/r/t the ACA 2.3% on medical device tax: “We recorded $73 million of expense within our selling, general and administrative expenses for 2013 as a result of this excise tax.” That is $73 million that cannot be spent on anything productive.
Remember, this tax is calculated on gross sales, before any operating deductions, taxes, etc. There very well may be companies that could be thrown into losses simply because the tax eats up any profit.
I’m not defending the FDA, but doesn’t this kind of bureaucratic behavior contradict the public choice theory that regulated industries capture their regulators? It looks like the FDA has not been captured – which, again, is not to defend what the FDA is doing.
A great way to bend the medical care cost curve is to effectively discourage the R&D and introduction of any new treatments that are likely to be expensive.
My impression is that the architects of Obamacare are open, in venues for elite policy discourse, about that being one of their goals. The Republicans, as usual, are too dim-witted to figure out a way to exploit this effectively in attacking Obamacare in the political arena. Just more John Philip Sousa music from them.