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Lymphland International Lymphedema Online
| Information on what the passage of the Obama Healthcare Bill Can Mean for us? As time passes I will add more articles and information as they are published. |
| Medical manufacturers wary of new tax Health reforms include fees on medical devices Jim Courtney Harmac CEO John Somers is seeking ways to combat higher fees in order to keep employees such as Mary Bell, left. View Larger Buffalo poised for growth in biomedical industry, Clinton says A little-known provision of the federal health reform bill passed in late March could have a major impact on area medical device manufacturers. The reconciliation measure replaces a proportional fee on device makers with a 2.3 percent excise tax on device sales, starting in 2013. That will put major pressure on manufacturers to decrease costs, says John Somers. He is president and CEO of Harmac Medical Products Inc., a contract engineer/manufacturer of single-use medical devices. Harmac’s customers own the rights to those products and are the ones who will pay that tax. But to recoup their losses, they will likely pay Harmac less. “That will put pressure on our company to decrease costs, which is a standard practice around here to be competitive. But obviously, it’s another cost we have to manage,” Somers says. With 250 employees operating from an 80,000-square-foot manufacturing facility on Buffalo’s East Side, Harmac competes with companies in China, Europe and around North America. Rather than cut staff, Somers says the company pursues cost improvements through such strategies as lean manufacturing and Six Sigma. “Our goal would be to offset these costs through those types of improvements,” he says. The Medical Device Manufacturers Association says the tax, which is projected to generate $20 billion over 10 years, will be especially tough on small employers and could have a significant impact on patient care and innovation. The national association says many of its members could be faced with layoff of employees, cutting research-and-development budgets or slowed development of new therapies. Smaller-device manufacturers here in Western New York say it will be difficult to maintain those areas while dealing with increased taxes. Some aren’t even sure how the excise tax will be applied. Bonny Lou Owens is president of Accu-Fit Compression Garments, a tiny manufacturer in Depew that makes compression garments for burn, vascular and lymphedema patients, primarily through referrals in the Western New York market. Owens employs two part-timers. It’s still unclear whether the bill will directly affect her business, or by how much, she says. “Insurance companies pay for a lot of these garments that we make, so are we going to be taxing the insurance companies or the patients on their co-pays?” Owens says. “Or are we going to have to shoulder the responsibility for the health insurance company and the patients and pay the tax? Nothing seems to be clear with this health-care bill.” At this point, there are no exemptions for manufacturers based on size, but a spokeswoman for Rep. Louise Slaughter said it’s possible exemptions and modifications could take place over the next two years before the excise tax is implemented. For startups, the outlook could be even more grim, with more costs meaning less funds to put back into the business. Frank Codella is board chairman and co-chair at Medical Acoustics, a startup in Clarence that makes a therapeutic lung flute designed for individuals with respiratory illnesses such as chronic obstructive pulmonary disease. “You’re constantly in a struggle to plow whatever earnings you make back into growing the business, so it’s just money that will be siphoned off that would go back into building the business,” he says. “The U.S. sort of leads the world in medical devices and R&D and development. I think it will just siphon money out of what is one of our stronger export industries.” Others are hopeful for amendments and changes to the federal bill that could at least minimize the impact. “It will be a negative impact on the bottom line, which cannot be recouped,” says Rajnish Mittal, CFO at IMMCO Diagnostics Inc. The Amherst manufacturer of test kits for laboratories and a provider of lab services has 85 employees and annual revenues of $15 million. Mittal says he hopes to be able to recoup costs on the medical device side of the business by passing it through the distribution channel. But the lab services side of the business would likely suffer as reimbursement levels decline. “It will definitely have an impact, no doubt about that,” he says. http://buffalo.bizjournals.com/buffalo/stories/2010/04/05/story7.html?b=1270440000%5E3124671 Read more: Medical manufacturers wary of new tax in the Business First of Buffalo: |