Jeff Scialabba at the Ayn Rand Institute has written a two-part blog post on how HR 3962 would punish medical innovation. Part one is about the benefits of medical devices and the cost of bringing them to market. It begins:
America is the world leader in medical device innovation, producing more new medical devices annually than any other nation. Its medical technology industry is responsible for nearly two million jobs and is one bright spot in a health-care system with many flaws. Yet, as I’ll discuss here and in my next post, if the health-care reforms presently advancing through Congress are enacted, the medical technology industry as we know it may be severely cut down.
Read the whole post: Punishing health-care innovation – part 1. Here’s an excerpt from part 2 on how the legislation would stifle innovation:
The Max Baucus legislation introduced by the Senate Finance Committee would fund the expansion of government health care in part by an imposing industry-wide $40 billion tax on all medical devices costing more than $100 (and a similar tax on insurers, drug manufacturers and medical labs). That would be ruinous to medical progress. At $4 billion per year, that exceeds what the medical technology industry received in venture capital funding in 2007 and represents nearly half of what the entire industry spent on research and development that same year.
To make matters worse, the tax is apportioned on device manufacturers not according to their profits, which would be bad enough, but according to their market share. This would be devastating to companies creating products with a large market share but small margins, such as businesses breaking ground in completely new areas of medicine. By the very nature of what the most innovative companies are doing—creating novel, never-before-imagined products—they have a large if not complete share of an undeveloped, and therefore still unprofitable, market. The tax would crush them. Would we be reaping the benefits of MRI machines and CT scanners today if the reward awaiting their inventors had been a massive tax hit?
Read the whole piece: Punishing health care innovation, part 2.