May 23,2012

Press Contact:

Julia Lawless, Antonia Ferrier, 202.224.4515

In Speech, Hatch Presses for Repeal of Job-Killing Medical Device Tax; Reiterates Need to Fully Repeal Health Law

Utah Senator Says, “Obamacare’s $28 billion tax hike on these [medical device] manufacturers will do nothing to improve health care, but it will do plenty to undercut the viability of these companies that provide good wages and good opportunities to American families.”

WASHINGTON – In a speech on the Senate floor today, U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, called on his colleagues in the Senate to support his amendment to repeal the job-killing medical device tax that was included in the $2.6 trillion health spending law. Hatch filed the amendment to S. 3187, the Food and Drug Administration Safety and Innovation Act which is being debated in the Senate this week.  

“Obamacare’s $28 billion tax hike on these [medical device] manufacturers will do nothing to improve health care, but it will do plenty to undercut the viability of these companies that provide good wages and good opportunities to American families,” said Hatch.

Under the Patient Protection and Affordable Care Act (PPACA), medical devices ranging from surgical tools to bed pans will get hit with a 2.3 percent excise tax hike that will raise $28.5 billion in revenue over 10 years and ultimately hinder industry innovation, job creation and the overall delivery of quality patient care to fund the $2.6 trillion health law. The Hatch Amendment, which mirrors legislation (S. 17) he introduced earlier this Congress, would immediately repeal the tax, which is slated to take effect in 2013.

 “The President and his supporters seem to think that you can simply tax corporations and individuals with impunity and face no adverse economic consequences. Yet economists understand that when you tax these companies, employees will pay for it in lower wages,” said Hatch. “The unemployed will pay for it with the job that was never created.  And patients will pay for it with higher health care costs. Whatever our economic circumstances, this tax is bad news.  But it is particularly foolish given the precarious state of our economic recovery.” 

Hatch, who has championed efforts in Congress to repeal the entire health law, further reiterated his position for full repeal.

“Whatever the Supreme Court does, I want to be clear about something.  All of ObamaCare needs to go.  It needs to be pulled out root and branch.  The entire thing needs to be repealed,” Hatch said.

Below is the text of Hatch’s full speech delivered on the Senate floor today:

Mr. President, I rise to discuss my amendment that would repeal the costly and counterproductive medical device tax in President Obama’s health care law.

            In the mad scramble to find money to pay for his $2.6 trillion health spending law, the President and his Democrat allies created a number of new taxes that serve no purpose other than to fuel this new spending.

            Economically these taxes are a disaster.  They will undercut job creation.  And they will increase costs for patients.

            The new 2.3 percent tax on medical device manufacturers, which kicks in at the beginning of next year, is particularly onerous.  For that reason, last year I introduced legislation to repeal it.  That bill, the Medical Device Access and Innovation Protection Act — S. 17 — has been cosponsored by 25 of my colleagues.

            They understand that all of Obamacare needs to go.

            The President’s health care law is now over two years old, and it is not aging well.

            Even before Obamacare became law, the American people made themselves absolutely clear that they wanted nothing to do with this Washington take-over of the nation’s health care system.

            The President and his advisors refused to face reality, telling reluctant Democrats that all was well, in spite of the Tea Party townhalls.

            According to the President and congressional Democrat leadership, as soon as the legislation became law, Americans would come to embrace the wonderful benefits bestowed on them by the Department of Health and Human Services.

            It has not quite turned out that way.

            Poll after poll shows that substantial majorities of Americans continue to oppose the law and favor its full repeal.

            A majority of Democrats think that the law is unconstitutional.

            And in a matter of weeks, the Supreme Court might issue the coup de grace to President Obama’s misguided adventure in big government.

            Whatever the Supreme Court does, I want to be clear about something. 

            All of Obamacare needs to go.  It needs to be pulled out root and branch.  The entire thing needs to be repealed.

            That said, some parts of the law stand out for their wrongheadedness.

            The individual mandate and Medicaid expansions are flat out unconstitutional.

            The IPAB, the CLASS Act, the Medicare cuts, and the employer mandate — All deserve honorable mention for being bad public policy.

            And among the most counterproductive parts of the law are its over $500 billion in new taxes and penalties.

            The medical device tax sits at the top of the list of foolish new Obamacare taxes, and my colleagues who have supported S. 17 and this amendment understand the critical importance of eliminating it.

            I want to thank in particular my colleagues Senator Brown from Massachusetts and Senator Toomey from Pennsylvania, who have spoken on this issue and understand completely the devastation this tax will create for patients and for employers that provide good jobs for communities in their states.

            Thanks to Obamacare, medical devices will get hit with a $28 billion tax.  And so we are clear about what these medical devices are, they include surgical tools, bed pans, wheelchairs, stethoscopes, and countless other products that patients and doctors rely on every day.

            Surgical masks, gloves, blood pressure monitors, scissors, needles, cribs, trays, lights, stents, pacemakers, scales, scalpels, inhalers, and ankle, knee, and hip braces.

            The cost of all of these products is going up thanks to this tax.  Somebody is going to have to pay for it.  And that somebody is the already overburdened American taxpayer and middle class breadwinner.

            The President and his supporters seem to think that you can simply tax corporations and individuals with impunity and face no adverse economic consequences.

            Yet economists understand that when you tax these companies, employees will pay for it in lower wages.  The unemployed will pay for it with the job that was never created.  And patients will pay for it with higher health care costs.

            Whatever our economic circumstances, this tax is bad news.  But it is particularly foolish given the precarious state of our economic recovery.

            The President once liked to tout all of the jobs created or saved by his over $800 billion stimulus bill.

            Yet by supporting the medical device tax, the President and his allies have shown a real disregard for good high-paying American jobs.

            Medical device companies employ nearly half a million people.  They pay a salary that is nearly 40 percent higher than the national average. 

            These manufacturers are small businesses that we must be cultivating if our economy is going to recover and we are going to bring down unemployment.

            Roughly 80 percent of medical device companies have fewer than 50 employees.  Ninety-eight percent have fewer than 500 employees. 

            Obamacare’s $28 billion tax hike on these manufacturers will do nothing to improve health care, but it will do plenty to undercut the viability of these companies that provide good wages and good opportunities to American families.

            According to one recent analysis, the medical device industry provided jobs to 409,000 employees in 2009.  Yet this tax could result in job losses in excess of 43,000.

            And it will hit certain states harder than others.  California, Florida, Illinois, Massachusetts, Minnesota, New Jersey, New York, Ohio, Pennsylvania, and Wisconsin — the presence of medical device manufacturers is significant in all of these states.

            This new tax will roughly double the device industry’s total tax bill and raise its average effective corporate income tax rate to one of the highest effective tax rates faced by any industry in the world.

            The President and his allies frequently attack industries that choose to move their operations overseas, but they do not seem to grasp that their policies are driving these industries to do just that.

            With the onset of this new tax, U.S. device manufacturers are increasingly likely to close plants in the United States and replace them with plants in foreign countries.

            According to another report by the Lewin Group, the medical technology industry contributes nearly $382 billion in economic output to the U.S. economy every year.

            And President Obama, in the middle of a weak economy facing high rates of joblessness, has decided to attack that industry.

            An industry that pays workers on average $84,156 has become a victim of the President’s desire to pay for his new health spending law.  Or better put, those workers and the families they support, became the victims of the President’s health spending law.

            In my own state of Utah, the device tax is an issue of great importance.

            There are over 120 medical device companies in Utah.  As the Utah Technology Council wrote in a letter to me, these companies “are a vibrant part of the Utah economy providing high?paying, high tech jobs for citizens of our great state.”

            They certainly are.  And they are under assault as a result of this tax, targeted for nothing other than their success and the fact that they were a so-called stakeholder that could pay its so-called fair share to subsidize the President’s health spending bonanza.

            Mr. President, I request that that letter be included in the record.

            And just yesterday, the Governor of Utah, Gary Herbert, sent a letter to Congress addressing the negative impact this tax will have on the state.

            He wrote:

            “As a Governor of a state with a significant concentration of medical technology manufacturers, I believe this tax could harm U.S. global competitiveness, stunt medical innovation and result in the loss of tens of thousands of good paying jobs.”

            There is little doubt that the President’s medical device tax, one that unfortunately received the vote of every Democrat in the Senate, will do just that — kill jobs and undercut our economy.

            Mr. President, I ask that Governor Herbert’s letter be included in the record. Mr. President, the President’s health care law is a travesty.  The American people know it.  They think that it is fundamentally illegitimate — unconstitutional to its core and enacted over the deep and loud objections of citizens and taxpayers.

            All 2,700 pages of that law must be stricken from the U.S. Code one way or another.

            Eliminating its medical device tax is absolutely essential.  It is critical for our states, for our economy, and for America’s families and workers.

            I ask for my colleagues to join the repeal effort, and I thank my colleagues who have already joined as cosponsors.

            Mr. President, I would like to briefly touch on another issue that is of great importance to me and to the people of Utah.  Over 150 million Americans regularly consume dietary supplements as a means of improving and maintaining their health.  The passage of the Dietary Supplement Health and Education Act — or DSHEA — in 1994 brought clarity, predictability, and a better understanding of what the FDA expected from industry and vice versa.  DSHEA provides an appropriate structure that balances the risks and benefits to consumers with continued access and affordability. 

            Unfortunately, my colleague from Illinois, Senator Durbin, has filed an amendment to the current bill that would undo that well-balanced approach.  As the author of DSHEA, I strongly oppose his amendment.

            It would require facilities engaged in the manufacturing, processing, packing, or holding of dietary supplements to register with the FDA, provide a description with a list of all ingredients, as well as a copy of the labeling for each dietary supplement product.  Additionally, the facilities must also register with respect to new, reformulated, and discontinued dietary supplement products. 

            While I appreciate my colleague’s commitment, his amendment is based on the misguided presumption that the current regulatory framework for dietary supplements is flawed and that the FDA lacks authority to regulate these products. 

            This is simply not the case. 

            Previous FDA Commissioners including Drs. Jane Henney, Mark McClellan, Les Crawford, and Andy von Eschenbach, as well as the former Deputy Commissioner, Dr. Josh Sharfstein, have all agreed that DSHEA provides an appropriate and sufficient level of oversight of this industry.     

            Under DSHEA, Congress set out a legal definition of what could be marketed as a dietary supplement and safety standards that products have to meet.  It allowed the FDA to develop good manufacturing practice standards, and clarified what types of claims could be made.

            And it provided the Secretary of Health and Human Services with the authority to impose an immediate ban on any dietary supplement that poses an imminent hazard to public health.  DSHEA already provides the Secretary with the enforcement tools of seizure, injunction, or criminal prosecution for ingredients that pose an unreasonable risk of illness or injury, are poisonous or deleterious, contain unapproved drugs or food additives, or fail to meet good manufacturing practice standards.

            Furthermore, under the Dietary Supplement and Nonprescription Drug Consumer Protection Act, a manufacturer, packer, or distributor whose name appears on the label is required to report a serious adverse event related to the use of a supplement within 15 business days to HHS; submit any related medical information received within one year of the initial report within 15 business days; maintain records related to each report for 6 years; and permit inspection of such records.

            To me, that sounds like a whole lot of regulation. 

            The FDA already has a tremendous amount of regulatory oversight and enforcement tools when it comes to dietary supplements. 

            Yet instead of urging FDA to use its current enforcement authority to find and punish those companies that are not following the law, Senator Durbin’s amendment serves to punish all responsible companies with its overreaching mandates.

            Finally, I would be remiss if I did not mention another obvious point, Senator Durbin’s amendment would have the devastating effect of piling on more work for an underfunded agency already struggling to keep above water with its current core responsibilities. I will be voting against Senator Durbin’s amendment, and I urge my colleagues to do the same.

###