Invacare CEO Claims Health Bill Jeopardizes Company’s Jobs

The healthcare reform effort underway in the nation’s capital has been a source of anxiety and angst for those in the medical device industry. Particularly, a proposed $20 billion tax on device manufacturers have left dozens of executives deeply concerned about their companies’ bottom lines.

Now, as healthcare reform (and its accompanying tax on device manufacturers) inches its way to becoming reality, one company is boldly predicting its fate.

Invacare Corp., based in Elyria, Ohio, claims the proposed tax puts thousands of jobs at stake. In an interview with The Plain Dealer (based in Cleveland, Ohio), Invacare Chairman and CEO A. Malachi Mixon said his firm would pay a “substantial” amount in taxes if the U.S. Senate’s healthcare reform bill passes. He also said the company could be forced to shift jobs to China or Mexico, lay off workers, or reduce employee benefits to pay the tab.

“In the haste to get something passed, a lot of unintended consequences will come out of this bill,” Mixon told the newspaper. “All I can tell you is if this tax passes, and we don’t know what is finally going to be there, we will take specific actions to pay for the tax.”

The Senate version of the healthcare bill imposes an annual tax on medical device manufacturers beginning in 2011. The fee, distributed according to market share, would not be tax deductible. Manufacturers with sales of $5 million or less would be exempt, and those with less than $25 million in sales would pay a reduced rate.

If passed, the Senate’s healthcare bill would result in a hefty tax for Invacare, a manufacturer of power wheelchairs, oxygen delivery devices and other medical equipment that employs 6,100 people worldwide and sells its products in 80 countries. The company reported $1.76 billion in sales and $38.6 million in net earnings in 2008, both of which were significant increases compared with 2007 figures. U.S. sales, however, were down $6.4 million in 2008, and the firm spent between $15 million and $17 million on research and development, Mixon said.

Mixon isn’t the only medical device executive who opposes the proposed tax. The Medical Device Manufacturers Association (MDMA) claims it will harm patient care and weaken America’s position as a global leader in medical device innovation.

Mixon and the MDMA also have Sen. George Voinovich (R-Ohio) on their side. As the Senate voted to move the healthcare reform bill for a final vote on Christmas Eve, Voinovich attacked the legislation’s tax proposal, claiming it would send jobs overseas.

“It has nothing to do with their profitability,” Voinovich said in his Dec. 21 speech on the Senate floor. “They say: ‘You are this business. You have a percentage of it, and we are going to lay the tax right on your back.’ Ohio cannot afford to lose these jobs to another country at any time, but certainly not right now in this struggling economy.”