New tax worries medical devices industry

Published: .
Updated: .

Indiana's medical device industry is worried about the future as it faces a new tax to help pay for President Barack Obama's health care law.

Business leaders say the 2.3 percent tax could end up hurting job growth in Indiana.

If you undergo a knee or hip replacement, there is an 85 percent chance it was made in Indiana. In fact, 40 percent of Indiana's sizeable life sciences industry is in the medical devices industry, so when Congress decided to tax gross receipts on medical devices to fund the president's health care program, it hit Indiana especially hard.

"It's a mystery to me how, on one hand, we know we are not competitive, and on the other hand, that makes us not competitive here," said Steve Ferguson, Cook Medical.

Ferguson says the ongoing debate in Washington could affect the medical devices future in Indiana and America dramatically.

"Eighty percent, or over 80 percent of our devices are manufactured in the U.S. Only 43 percent of our sales are in the U.S. It used to be 75 percent of sales in the U.S.," Ferguson said.

The U.S. House voted to repeal the tax, but it is uncertain whether the Senate will even vote on the issue.

"They are going to take their business overseas if they are continue to be regulated and taxed the way this government is trying to do," said Sen. Dan Coats (R-Indiana).

In fact, Democratic Congressman Andre Carson agrees. He released a statement Friday, saying "Indianapolis is a national leader in the medical device industry, which is why I have always opposed the device tax and was eager to vote for its repeal. Unfortunately, I could not cast that vote in good conscience. House Republicans chose to increase the tax burden on lower and middle income families, which will result in an estimated 350,000 people being unable to buy insurance coverage."

So for now, when you talk about expansion, Ferguson says you look for a better tax structure where it is easier to reach their market quicker.

"The best place to expand would be, like, Ireland," he said.

Democrats in the Senate say they have no intention of considering another Republican effort to weaken the president's health care law.