Soapbox

Medical device tax stifles innovation

Clinical researcher Bill Smith, right, prepares a suture on the work surface of a da Vinci robotic surgery trainer at UC Davis Medical Center in 2009. Tom Fogarty says the medical device tax not only works against the very impetus of the president’s goals, but has already begun to unravel collaboration among engineers, doctors and innovators.
Clinical researcher Bill Smith, right, prepares a suture on the work surface of a da Vinci robotic surgery trainer at UC Davis Medical Center in 2009. Tom Fogarty says the medical device tax not only works against the very impetus of the president’s goals, but has already begun to unravel collaboration among engineers, doctors and innovators. Sacramento Bee file

Innovation does not occur in a vacuum. Propelling medical concepts from initiation to application takes knowledge, resources and investment and, most importantly, relationships built over time and across sectors.

The 2.3 percent medical device excise tax and its reverberating effects is stalling innovation and must be repealed.

President Barack Obama’s 2016 budget confirms that the country’s long-term economic competitiveness depends on healthy investment in research and development. However, public sector research needs healthy private sector research to fulfill its potential and return its investment to taxpayers. That’s why the medical device tax not only works against the very impetus of the president’s goals, but has already begun to unravel collaboration among engineers, doctors and innovators.

Not only do more than half of medical device companies report the tax is slowing research and development, venture capital investment in medical devices fell 17 percent in 2013 and the funding that has not dried up is shifting toward less risky, later-stage medical device companies, according to a recent Ernst & Young analysis.

Thanks to investment in medical imaging innovation, technologies once only imagined are now the standard of care, enabling more targeted disease detection, diagnosis and treatment and eliminating the need for invasive or exploratory surgeries. It was an eclectic group of doctors, engineers and other innovators whose military experience coupled with knowledge of echo-sounding led to ultrasound, a technology that revolutionized medical diagnostics.

The medical device industry is an American success story, employing more than 400,000 workers nationwide, generating approximately $25 billion in payroll and paying out salaries that are 40 percent more than the national average. The tax is not only eroding an industry responsible for developing lifesaving medical innovations, but its negative reverberations are being felt throughout the country. This will only slow the pace of innovation, delay new devices reaching the market or, worse, inhibit the research necessary to innovate from the beginning.

We need members of Congress to go beyond lip service saying they support repeal of this onerous tax. It’s time to roll up our sleeves and find a bipartisan solution to this problem. Let’s reward creativity and hard work, not penalize it. That’s the kind of policy that will unleash America’s potential for growth.

Tom Fogarty, a cardiovascular surgeon and inventor, is founder of the Fogarty Institute of Innovation in Mountain View.

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