As any job creator knows, when government creates roadblocks for growth and innovation, difficult choices must be made. At Cook Medical, we faced a provision in the Affordable Care Act that hampered our efforts to innovate and improve patient care. This provision is the medical device excise tax, enacted in 2013, which increased our federal taxes by more than 30 percent that is applied to revenue, regardless of a company’s profitability. Many innovators in our region and across the United States paid these taxes even though they weren’t profitable. For many small medical technology companies, this tax stifled their ability to help patients before they could even get started.
While the device tax was in place, U.S. Department of Commerce data showed that this dynamic industry lost approximately 28,000 jobs across the country. According to a survey of more than 100 medical technology companies by the Medical Device Manufacturers Association, 85 percent reported that if the device tax is reinstated in 2020, they would cut or freeze R&D investments to address the tax. The survey also found that if additional relief was not secured by September 30, 2019, they would need to begin taking negative steps to prepare for the tax.
Congress recognized the devastating effects this policy had on patient care and job creation. Sens. Richard Burr and Thom Tillis and many in the North Carolina delegation helped lead bipartisan efforts to suspend the tax for four years beginning in 2016. As predicted, this reprieve gave medical technology innovators the resources to invest resources back into shelved research and development projects, job creation and expanded manufacturing.
Since the suspension of the tax, we have been investing in our company to ensure that we remain ready to serve the needs of patients and clinicians as health care continues to evolve. These investments include facilities, upgrading our IT, manufacturing and quality systems, in addition to creating education and training opportunities for employees to grow with our company. A full repeal of the tax would provide our company and industry the long-term assurance we need in order to continue investing in our business and the communities where our employees work, live and play.
Unfortunately, the medical device tax is scheduled to return at the end of the year. If Congress does not act quickly, we will see more cuts to research and development. Medical technology innovators will begin making monthly payments of approximately $175 million to the IRS to comply with this tax in January 2020 rather than investing in their communities and businesses. Simply put, reinstatement of this tax would be damaging to patient care and innovation.
We need bipartisan leadership to put a permanent end to the medical device tax once and for all to provide stability to these businesses and the communities where they operate. I’m hopeful that North Carolina’s congressional delegation can and will continue to lead the way.
Winston-Salem has a long-standing history in manufacturing, and we’re proud to be part of that legacy. Cook joined the community in 1983 and today employs approximately 650 people who manufacture minimally invasive devices that help address respiratory, digestive and other serious chronic conditions. Of the thousands of Cook products manufactured across the U.S., 72% are exported around the world, creating thousands of American jobs to serve a growing global market.
The future is bright for patients as local innovators continue to develop cutting-edge advancements in the medical cures and therapies of tomorrow. While it is critical to expand our leadership in highly-skilled manufacturing, it is equally important that these jobs strengthen our communities.
Innovators and entrepreneurs in our region are ready and eager to make Winston-Salem a manufacturing success story of the 21st century, but we need the right policies in place to do so. Permanently repealing the medical device tax will boost medical technology innovation at a time when patients — and our economy — need it most.