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Medical Device Tax: Don’t Believe the Hype

Medical Device Tax: Don’t Believe the Hype

November 12, 2014

#DeviceTax

American Politics Concept

The purpose of this website is to provider consumers, patients, employees, taxpayers and media a tool to help them identify when company or government officials (regardless of party affiliation) may employ tactics from The Sociopathic Business Model™, how to identify when PR Spin (that includes titles like Democrat and Republican) are used to suppress the truth and encourage people to trust fact based evidence to make the best decisions for themselves and their families.  The goal is to not allow those who employ The Sociopathic Business Model™ who have encouraged, replicated and been rewarded for their unethical and illegal behavior to continue at our expense any longer.

PRSPin: Medical Device Tax

The latest political pawn to hit the U.S. stage meant to distract from real issues both the Democrats and Republicans  is the Medical Device 2.3% Excise Tax under the Affordable Care Act. Republicans after taking back the think it should repealed and Democrats want to keep it in place.

PRSPinUnSpun:  Medical Device Tax

Remember under The Sociopathic Business Model™ all accomplices eventually become victims and it’s not a matter of “if” it’s “when,” unless we all force accountability on the corrupt by exposing the truth they’d rather remain hidden damaging their image and in turn profits or political positions.

The Medical Device Tax only hurts one group:  Startup Medical Device Companies

Yep, it’s just that simple, but neither side wants to make it that simple because they want patients, consumers, employees, taxpayers and media to remain confused and allow something that’s really a non-issue to become an issue.  The startup medical device company’s goal is show profits quickly and more often than not get sold to a larger company like a Johnson & Johnson or Medtronic. Startup medical device companies operate under a different business model (hypergrowth) than publically traded device companies or pharmaceutical companies (sustainable growth.)

Apples-and-Oranges-Planetvisits

Startup medical device companies are created via incubator (idea firm) and are funded by Venture Capitalist  (VC’s)who expect a swift return on their investment. Unlike a large publically traded pharmaceutical or medical device company with deep pockets, a startup medical device company is lean, working with limited financial resources and limited number of people with little (if any) profit left over after investors are paid. This is why the 2.3% Medical Device Tax only harms this group.

The government taking money from a place where there’s technically negative money off of borrowed money  is problematic and demonstrates the lack of understanding of the industry from both sides of the aisle. In order for startups funded by VC’s to pay this tax they have to cut back on R & D, employees, and in turn innovation to pay for a tax that really shouldn’t apply to them.

Tax should be tied to free and clear profit. not project or expected profit before investors are paid back.  Again, this differs from established medical device in that they have money in reserve from years of profits-most startups are sold or IPO in four-five years and most publically traded device companies have four-five years of profits to help offset the tax-startups do not.

In simple terms, it’s like a kid who borrows $20 from mom and dad to start a lemonade stand and the lemonade stand only makes $15 but the government wants to take 2.3% on that $15 the “made.” It looks like profit, but it’s not. The kid is expected to open the lemonade stand again the next morning but after taxes has nothing left over to reinvest in the stand.  But when mom & dad make a $1 million off their $20 investment after the kid sells the stand five years later-tax everyone then when there’s actual profit.

lemonade

Accomplices/Victims and what the Medical Device Tax means to each group

Consumers/Patients

PRSpin:  This money collected will be used to their benefit.

PRSPinUnSpun: This money never benefitted this subset and is actually hurting them. Just look to all the recent federal lawsuits against medical device companies. Most devices start out as a startup who cannot afford additional testing or continued research as they’re sold off and it becomes the responsibility of the conglomerate to continue the research and testing.  This clearly isn’t happening

Employees

PRSPin: The repeal will “save the industry.”

PRSPinUnSpun: It will help startup medical device but don’t think the publically traded device companies are all of a sudden are going to pass that windfall on to the employees-they won’t.

Taxpayers

PRSpin: Anything that currently exists from Democrats or Republicans regarding this tax isn’t working to help anyone.

PRSpinUnspun: Neither side of the aisle is right currently. The bottom line is that the Medical Device Tax needs to be retooled and not repealed. It should only be applicable to publically traded medical device companies that can withstand the tax hit and to venture capitalists who greatly profit from their investment after the sale of a company. The tax as it stands now cripples innovation, research, the industry and hurts patients, employees and taxpayers alike.

Need more proof the Med Device Tax Repeal is nothing more than a manipulation? Look no futher than the unethical JNJ to demonstrate the point.  Oh and again here: 4th of July Big Business in Bed With Big Media: JNJ & WSJ Hobby Lobby Case Study

1 Comment
  • Anonymous
    Reply

    Glad you cleared that up. I know Ethicon makes 80-90% profit on their surgical mesh devices and J & J makes literally billions of dollars in profit. $13 billion in profit in 2006 alone. So I thought they were crying about nothing. But did not understand about the start ups and how it affects them. Makes sense to make the changes you describe. Thanks! Lana Keeton

    November 13, 2014 at 6:20 pm

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