With efforts to repeal and replace the Affordable Care Act stalled in Congress, lawmakers should seize the existing opportunity to score a bipartisan legislative victory — for patients, jobs and innovation — by permanently repealing the jobs-killing medical device excise tax.
Originally envisioned to help pay for the ACA, this 2.3-percent tax on medical devices went into effect in 2013 — and its negative effects have been felt ever since. As one of the nearly 6,000 U.S. employees of Smith & Nephew, a global medical technology company that specializes in both orthopedic and wound care products, I can attest that our company was not immune to these effects. The device tax’s bite meant less capital was available to invest in growing our business and developing the next generation of pioneering advanced medical devices.
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U.S. Sen. John Cornyn, a champion for permanent repeal, has noted that the medical device tax “has already cost us American jobs and economic investment.” In fact, data from the U.S. Department of Commerce shows that nearly 29,000 U.S. medical technology industry jobs were lost during the three-year period the tax was in effect. Add to that losses in venture capital and research and development funding. That meant millions less going into technologies that have the benefit of creating jobs, spurring the economy and contributing to a healthier population.
The tax was suspended in late 2015, thanks in large part to Cornyn and Rep. Kevin Brady’s leadership. The suspension allowed medical technology companies — including the hundreds of medical technology companies throughout Texas — to reinvest resources in new hiring, research, development and capital improvements.
For example, Smith & Nephew created 100 positions for newly qualified graduate engineers across our six U.S. facilities, which include locations in Austin and Fort Worth. In Austin, my colleagues develop products for use in sports medicine and ear, nose and throat procedures.
But suspension, while helpful, is not enough. Why? Because companies like Smith & Nephew are making decisions now about whether and how much we can invest in our workforce, operations, research and development to ensure a long-term innovation pipeline. We need certainty to plan the investments that will unlock future health innovation.
If the tax is permanently repealed, it is likely to result in 53,000 additional jobs nationwide, which includes jobs lost while the tax was in effect combined with an additional 25,000 projected to be lost if the device tax is not repealed, according to a study by the American Action Forum.
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That’s good news for Texas, where medical technology companies account for more than 54,000 direct and indirect jobs, and contribute $10.5 billion to the state’s economy. Texas cannot afford to lose high-quality jobs that are contributing to the state’s economic competitiveness.
If Congress doesn’t act fast, these companies will be hit with a $20 billion tax increase at the end of the year, which will stifle these investments. We need to encourage innovation for breakthrough medical devices here in Texas and across the country, not discourage it. That is why Congress must act this fall to permanently repeal this tax. It’s a win-win for Texas patients, jobs and health care innovation.
Warner is president of Smith & Nephew, a medical technology company with a facility in Austin.