- The Foundry: Conservative Policy News from The Heritage Foundation - http://blog.heritage.org -

House Hearing: Obamacare Threatens American Medical Innovation

Posted By Kathryn Nix On March 1, 2011 @ 3:00 pm In Obamacare | Comments Disabled

[1]

In his State of the Union address, President Obama emphasized the need to focus on innovation, job creation, and global competitiveness as part of a strategy to “win the future.” Unfortunately, by signing Obamacare into law, the White House has endangered these very things.

Until now, the United States has been the world leader in medical innovation, but this is by no means a given for the future. Due to burdensome, time-consuming regulations, medical innovation faces an uphill battle in the United States. The Food and Drug Administration (FDA) has taken note of this and just this week released a white paper proposing a new approval pathway [2] for medical devices that would accelerate the process and reduce costs for medical device companies. Unfortunately, at the same time that the FDA is taking steps to encourage future innovation, new taxes under Obamacare will further diminish the United States’ competitiveness in the industry.

In a recent hearing, Representative Joe Pitts (R–PA), chairman of the House Energy and Commerce Subcommittee on Health, remarked that companies in European markets “are able to make their products available to patients faster and at a significantly lower cost.” Josh Makower, founder of six independent medical device companies, told the committee, “as medtech hurdles have climbed and available funding has declined, device companies are considering alternative strategies that are less U.S.-dependent.”

Rather than wait on the FDA—whose approval process Makower described as unpredictable, non-transparent, inconsistent, and slow—American companies considering the European market first, where new products can be approved two years faster [2]. As companies move the development of their products overseas, they take American jobs with them. The medical technology industry represents over 2 million jobs. During a time of 9 percent unemployment, the U.S. can’t afford to lose them.

While the FDA takes action to accelerate the approval process by loosening regulations for medical device makers, Obamacare places additional barriers on innovation by levying a new 2.3 percent excise tax on medical devices.

The American Action Forum’s Douglas Holtz-Eakin, Michael Ramlet, and Cameron Smith explain in a recent paper [3] that, as “businesses juggle the potential for higher interest rates or higher taxes, these medical costs will translate to higher insurance premiums, further increasing the cost of operating a business in the United States.”

The life sciences industry plays an especially significant role in the state economy of Massachusetts, where companies have already signaled that they may consider moving jobs elsewhere [4]. Even Massachusetts Governor Deval Patrick (D), an Obamacare supporter, has signaled concern with the effects of the new law on his state’s economy. Senator Scott Brown (R–MA) has warned [5], “For some of these companies, [the tax is] their entire net profit. That’s jobs, it’s R&D, it’s a whole list of other things. It’s not a necessary tax.”

If the United States is going to remain the global forerunner in medical innovation, serious change is needed. The federal government needs to support, rather than impede, development. But even as it seeks to do this, new taxes on the industry under Obamacare will not only slow medical innovation in the United States but force it—and the jobs it has created—overseas. This is hardly a recipe for “winning the future.”

This post was co-authored by Amanda Rae Kronquist.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2011/03/01/house-hearing-obamacare-threatens-american-medical-innovation/

URLs in this post:

[1] Image: http://www.foundry.org/wp-content/uploads/doctor-test-tube.jpg

[2] proposing a new approval pathway: http://thehill.com/blogs/healthwatch/other/142715-fda-unveils-accelerated-review-process-for-medical-devices

[3] a recent paper: http://americanactionforum.org/sites/default/files/OHC%20White%20Paper_Repeal%20for%20Jobs%20and%20Budget%20Austerity_1182010%20dhe.pdf

[4] where companies have already signaled that they may consider moving jobs elsewhere: http://www.foundry.org/2010/03/30/side-effects-medical-devices-tax-will-costs-jobs

[5] has warned: http://www.medcitynews.com/2011/02/medical-device-tax-a-tax-just-because

Copyright © 2011 The Heritage Foundation. All rights reserved.