Baucus Facing Opposition from Minnesota, Indiana Senators on Device Tax Proposal

Four Indiana and Minnesota senators sent a letter to Sen. Max Baucus, D-Mont., opposing a $4 billion tax on medical device manufacturers that is included in his proposal for healthcare reform released this week.

Minnesota and Indiana are both states heavy in medical and orthopedic device manufacturing, with device giants such as Medtronic Inc. and Zimmer Inc. headquartered there.

“Rather than specifying a tax rate, this proposal would assess all manufacturers at a rate based upon their U.S. sales. Recent independent estimates indicate that this tax could translate into an annual income tax surcharge of between 10-30 percent on medical device manufacturers. The amount of capital that these companies would have available to reinvest in product development and innovation would be threatened, dramatically reducing both the number of jobs in the industry and the types of devices available to patients,” wrote Minnesota Democrats Sens. Al Franken and Amy Klobuchar, and Sen. Richard Lugar, R-Ind., and Evan Byah, D-Ind., Sept. 15 to Baucus, chairman of the Senate Finance Committee.

Republican Minn. Gov. Tim Pawlenty had asked Franken and Klobuchar to oppose the proposed device tax in a letter. He wrote: “The proposed market-share based tax would be a severe burden on this industry, costing jobs and draining away funds needed for innovative research and development.”

The Advanced Medical Technology Association in Washington, D.C. also is opposing the device tax.