August 21 2014
How To Slow The Pace Of Medial Progress
Carrie L. Lukas
The Americans infected with the Ebola virus appear to be improving — very welcome news, especially given the virus’s death rate, which is estimated to be as high 90 percent.
Currently, no cure exists for Ebola, though one company has developed a vaccine that is being prepared for human testing. All the world prays that its efforts will prove successful, a treatment for the infected will emerge, and this threat will be eliminated permanently.
What can our national leaders do to ensure that we are better prepared for the next deadly threat that’s sure to emerge? Here’s an idea: How about a special, dedicated tax on the companies researching and developing treatments and cures for infectious diseases such as Ebola to drain billions of dollars from their vital work and further bloat the federal Treasury?
Sounds crazy, right? No one would ever propose such an obviously counterproductive policy that would impede urgently needed research. No one would seek to punish efforts to develop lifesaving treatments, alleviate suffering and use the critical nature of such work as a government revenue-raiser.
Yet, this is pretty much our current tax law. Drugmakers are currently spared, but under Obamacare, medical-device manufacturers must pay a special 2.3 percent tax on the sale of medical devices, which is draining billions from the industry. Typically, such sales taxes are reserved for items such as cigarettes and alcohol, with the explicit purpose of discouraging these products’ use and distribution. Why are medical devices being treated this way? After all, while the companies affected by this tax aren’t researching cures for infectious diseases like Ebola, medical-device manufacturers are responsible for developing life-enhancing technologies that help alleviate the effects of heart disease and paralysis, to help those in need of artificial limbs and hip replacements, and to make all manner of surgeries less invasive.
Obamacare proponents had suggested that this tax would be harmless and the increased costs would be passed easily from manufacturers to patients to insurance companies, who would be flush with cash from higher enrollment owing to Obamacare. It hasn’t worked out that way, though. Numerous medical-device manufacturers have been slashing U.S. jobs in part as a result of the increased costs associated with this tax: In June, Arrow International, which specializes in producing disposable catheters, announced it would close its plant in Charlotte, N.C., and move operations to Mexico. DePuy Synthes, a medical-device arm of Johnson & Johnson, reported it would eliminate about 2 percent of its jobs, which means layoffs for about 400. Medtronic, Boston Scientific and Abbott Laboratories have also all slashed jobs since this new tax took effect.
Those of us whose chief concern is that innovation continues can be thankful that rather than just contracting operations, some of these companies are shifting activities to lower-tax countries so they can continue their work. Yet it’s a sad situation for America: Our country has become so inhospitable to innovators that we are chasing away these businesses and the good-paying jobs they provide.
There is an old policy adage that if you want less of something, you should tax it. Why, then, are we singling out companies that are delivering hope, greater health and a higher quality of life for the rest of us with this special tax? Do we want less of these things? Of course not. That’s why policymakers should eliminate such punitive taxes, and instead focus on making it easier for such innovators to operate, by lowering corporate taxes across the board, simplifying tax laws, and reducing onerous regulations that drain away resources. Better yet, policymakers should start anew on health care reform to prevent government from being a roadblock to progress. Rather than Obamacare’s top-down, government-centered approach, Congress should focus on returning resources and giving more control and flexibility to patients and doctors, in order to create a highly competitive, dynamic health marketplace that
Fortunately, a major Ebola outbreak is unlikely to occur, particularly in the United States, given that transmitting the disease requires significant contact. Proper precautions can limit the virus’s reach. What about the next disease that may emerge, though?
Once an outbreak occurs, politicians can be counted on to make speeches about the vital cause of medical research. Yet rather than waiting for a crisis, Americans should be urging action now to rescind counterproductive policies, and instead create a health care system conducive to continued medical progress.
Carrie Lukas is managing director of the Independent Women’s Forum.