In this era of complexity and global economic uncertainty, wouldn’t it be wonderful if we could invent a whole new industry? A field where people spend their days working on ways to change the world, adding new jobs in America (and of course the State of Minnesota), become an engine of economic growth and be a net exporter of goods. If you could find such an industry wouldn’t it be an American treasure? And wouldn’t you assume it would be an industry where government, whether local, State or Federal, created ways to support, invest in and accelerate its potential?
You don’t need to look any further than “Medical Alley” right here in the Twin Cities to find this industry. The medical device industry is a Minnesota success story and is home to hundreds of medical device companies, including Boston Scientific, Medtronic and St. Jude Medical. The patient benefits of medical technology is undeniable, both from a clinical and economic perspective. Medical devices have saved countless lives with products such as the implantable defibrillator and heart stent. And have allowed people to live fuller lives through minimally invasive procedures that treat cancer, alleviate pain, avoid amputation, or debilitating stroke.
The economic benefit of the medical device industry is laudable as well. The industry provides 420,000 direct US jobs with salaries 40% higher than the national average and invests more than $10 billion annually in R&D. Over 80% of the medical device industry is fueled by entrepreneurs and small businesses focused on the innovations of the future. Moreover, the medical device industry exports $33 Billion annually and is one of the few remaining industries with a positive trade balance ($5.4 Billion).
Unfortunately the future of the medical technology industry in America is in peril. FDA regulation has created a lack of predictability, increased costs for companies, longer product approval times and is causing venture capital to flee to other industries. U.S. corporate tax rates are already higher than competitor nations and as part of the Affordable Care Act (a.k.a. Obamacare) an entirely new tax was imposed on medical device companies. $30 Billion in new taxes on the sale of medical technology began this year regardless of whether a company is profitable.
As a result, companies have had to compensate for this tax by reducing R&D, clinical trials and manufacturing. In short, American jobs have been cut in order to offset the burden of this tax.
I applaud the work of Minnesota’s elected officials. Representative Erik Paulsen (R-MN), a longstanding supporter of the virtues of the medical device industry in Minnesota, introduced bi-partisan legislation to repeal the medical device tax. Senator Amy Klobuchar (D-MN) has been a leader in the Senate introducing a bill to repeal the harmful medical device tax. Senator Al Franken (D-MN) has also been a strong supporter of the industry, especially on FDA related issues.
The medical device industry hasn’t delivered its last innovation to save and enhance life for people worldwide. But we need to keep the U.S. medical device industry competitive on a global scale and preserve innovation and American jobs by repealing the medical device tax.
Jeff Mirviss, '93 M.B.A. is SVP and Global President at Boston Scientific.