Indiana governor's letter to Obama latest salvo against device tax

A letter from Indiana Gov. Mike Pence imploring President Barack Obama to repeal the 2.3% medical device tax helping fund the federal healthcare law is the latest salvo in a battle the industry said is causing job casualties and draining funds for research and development.

In the letter, sent Monday and published by the Indianapolis Business Journal, Pence said the healthcare law that went into effect in 2013 has hurt the economy and jobs not only in his state but across the country. 

"Repealing the medical device tax will allow companies to expand and grow jobs, not only in Indiana but across our great nation," Pence said in the letter. "This thriving industry should be allowed to innovate and grow, rather than be hampered by an industry-specific tax."

The White House, in the past, has countered the argument by saying the healthcare industry, including medical device makers, will be bolstered by additional customers because millions more Americans will have health insurance. 

Pence's stance on repealing the tax is not a surprise, as Indiana is considered an epicenter for medical device companies. The tax is expected to generate about $29 billion over 10 years to fund subsidies to help lower- and middle-class Americans afford health insurance. Specifically, the tax is levied on equipment, stents, pacemakers and other devices sold to hospitals and healthcare providers.

According to Pence, Indiana is second in the nation in exports of life sciences products valued at more than $9.7 billion, and the industry employs more than 55,000 workers in the state, with about 20,000 of those working directly in medical device-related jobs.

Earlier this year, the CEO of Indiana-based OrthoPediatrics publicly criticized the tax and said it has already forced him to freeze hiring and cut back on product development. Industry opposition to the tax, which is into its second year, is widely expected to gain momentum in the coming months.

In February, AdvaMed released a survey that cited the loss of 33,000 jobs and growing due to the device tax. Those losses, the industry group said, were either through layoffs or decisions not to fill positions. About a third of the respondents to the survey (conducted at the end of 2013) also said they slashed R&D spending due to the tax.

- read the Indianapolis Business Journal story