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Ayotte: Medical device tax hinders innovation

Union Leader Correspondent

August 26. 2014 6:35PM

KEENE — U.S. Sen. Kelly Ayotte talked about the medical device tax and FDA regulations at Smiths Medical in Keene on Tuesday afternoon.

Ayotte, R-N.H., spoke to about 100 employees in the cafeteria. It was not her first visit to the company that makes medical devices, and she took the opportunity to talk about the medical device tax that has impacted the company.

The 2.3 percent tax on medical device company revenue was established as part of the Affordable Care Act, or Obamacare, to help fund the federal law.

When asked by an employee how she would make up for the lost federal revenue if the tax were repealed, Ayotte said the federal budget committee has identified several options, including tax reform.

“I can tell you I would vote to repeal it with or without a replacement because I think it’s that important for our jobs,” she said.

The tax hurts innovation, Ayotte said, since its targets revenue, not profits, causing established companies like Smiths to lessen its research and development budgets and make it more difficult for new startups to find investors.

“When they know that 2.3 percent of what they are investing is going to go automatically to the tax and not into the company and building the company it’s harder to get investment into these companies now,” Ayotte said.

Chris Swonger, senior vice president of government relations at Smiths Medical, urged employees to contact their elected officials about repealing the tax.

After the event, he said the tax has caused the company to close a facility in the United Kingdom and one in Massachusetts as well as a distribution center in New Hampshire.

“We spend about $16 million bucks a year on tax, and it’s applying pressure across all of our businesses, but certainly it’s a tax that we need to get repealed,” Swonger said.

Employees were also concerned about FDA regulations that slow federal approval processes. One employee asked if the 2012 Food and Drug Administration Safety and Innovation Act designed to reform the process was actually speeding up approval.

Ayotte said approval of medical devices is still lengthy and that there needs to be oversight to ensure the process is moving along and not getting dragged out unnecessarily.

“Frankly, we can do a lot better,” Ayotte said. “We’ve got to look at what Europe’s done that’s better. I think there are better models and more efficient models. Because the problem is it takes you two or three years longer here than it does in Europe. And we’re trying to preserve jobs here.”

The Smiths Medical facility in Keene employs more than 450 people. The company employs approximately 8,000 employees world-wide.

It is known for infusion systems that deliver medication, tracheostomy tubes to open airways and safety needles and safety catheters that prevent needle-stick injury and exposure to bloodborne pathogens.

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