"Over the past few decades, we've enriched the labs, drug
companies, medical device makers, hospital administrators and
purveyors of CT scans, MRIs, canes and
wheelchairs...Meanwhile...we've squeezed everyone outside the
system who gets stuck with the bills."
If you read Steven Brill's 26,000-word
"Bitter Pill: Why Medical Bills Are Killing Us," you're already
versed in the unregulated free-for-all that is the medical
industrial complex and its detrimental toll on the American
Take a 64-year-old woman who was bankrupted in the space of a
three-hour, $21,000 hospital visit for suffering from nothing more
than heartburn. Or a man, age 42, whose treatment plan and initial
chemotherapy doses for non-Hodgkin's lymphoma ran him $84,000.
Simple, in-patient lab work for another patient, performed over a
few days, ended up being more expensive than the price of a new
car. A lung cancer diagnosis from a Northern California medical
center ran a man $348,000 -- including a $77 bill for gauze pads
and niacin pills at $24 a pop.
This kind of sticker shock is what you get in an anti-competitive
marketplace unbounded by transparency. Because of confidentiality
agreements hospitals are required to sign with medical device
manufacturers, equipment prices are kept tightly under wraps, which
hamstrings hospitals from shopping around for the best deal.
Personal relationships between firms and physicians (who can be
awarded consulting fees) further muddy the marketplace as
physicians often buy equipment on behalf of hospitals without ever
knowing the price or negotiating for a volume discount.
What results is the antithesis of a free market where price-gouging
is the law of the land and it's the unwilling customers -- the
patients -- who end up eating the costs. This year alone the
health-care industry as a whole was allowed to make an unchecked
$2.8 trillion off the backs of the sick and vulnerable.
So, when the Affordable Care Act imposed a 2.3% levy on sales for
device manufacturers and importers that would raise $30 billion
over a decade, it seemed like a Band-Aid on the gaping wound that
is our health-care system; at best, it's a sanction to help offset
the costs of implementing Obamacare. The
New York Times
the medical device tax a "distraction from reforms to the industry
that are urgently needed to lower health care costs."
But the tax actually goes too far, say many lawmakers. Members on
both sides of the aisle -- as far to the right as Sen. Mitch
McConnell (R-KY) and Rep. Eric Cantor (R-VA) and as left as Sen. Al
Franken (D-MN) and Sen. Elizabeth Warren (D-MA) -- have voted for
its repeal. As diverse as this bunch may be politically, they all
share one common denominator: a trail of money that goes from the
industry to their respective campaign kitties.
And there's a lot of money to go around --
$29 million a year
to be exact. That's what AdvaMed, the industry's trade association,
has spent on lobbying to ensure medical device companies get out of
this tax. Members of AdvaMed are the most moneyed and powerful in
the business and include
Johnson & Johnson
The argument being pushed by AdvaMed and its lawmaker mouthpieces
against the medical device tax is that it will threaten innovation
and jobs. The truth is that these firms already pay a very low
effective tax rate, and some, like Abbot, take advantage of
dozens of tax havens
. While this new 2.3% tax will cut slightly into the massive
profits the industry has enjoyed from inflated pricing, it's not
nearly enough to compromise technological advancements or
"Consider the device division of Johnson & Johnson, which in
2012 had an operating profit of $7.2 billion,"
. "By the company's own estimate, the device tax would amount to at
most $300 million, and its investment in research and development
amounts to only $1.7 billion."
Moreover, the law does nothing to oversee pricing practices or
force competition among manufacturers that would not only
incentivize innovation but keep the US from spending 50% more than
Europe and Japan. Consulting firm McKinsey & Company found that
an excess of $26 billion is levied on Medicare, insurance
companies, and patients in this country every year.
Still, Congress stands behind this straw man "innovation and job
killer" argument, and shamelessly so. Seventy-five House
Republicans sent an urgent letter to Speaker Boehner demanding a
vote for the repeal of the medical device tax. The letter was
written by Ryan Strandlund, a member of AdvaMed's government
Last February, H.R.523 - Protect Medical Innovation Act of 2013 was
by Erik Paulsen (R-MN) with 266 co-sponsors. Paulsen has made the
bill one of his biggest priorities in Congress.
Paulsen has also collected
more than $121,000
in campaign cash from the medical device industry. Other top House
recipients include Ron Kind (D-WI) and Jim Matheson (D-Utah), both
of whom have pushed to repeal the tax.
The congressional effort to ax the medical device levy hit an
egregious low when members used it as the chief bargaining chip in
the government shutdown negotiations. A group of 12 bipartisan
senators, including Amy Klobuchar (D-MN) and Susan Collins (R-ME)
-- making over
, respectively from the industry -- held as ransom for reopening
the government, a two-year delay in enacting the tax.
Although tax repeal advocates lost that battle, the war wages on
and those fighting the tax are nowhere near surrender. Senator
, "We have gained enormous momentum for repeal," and budget talks
about the medical device tax are "certain" to move forward in