Medtronic leaves Minnesota for Dublin: Senators Franken, Klobuchar cuckolded?

Medtronic-Covidien Deal Is a Marriage ofConvenience

By JEFFREY GOLDFARB and ROBERT CYRAN JUNE 16, 2014 11:53 AM

FiDA Highlight

The marriage of Medtronic and Covidien looks to be one of convenience. The $42.9 billion deal includes a premium that exceeds the estimated cost savings. Stents and sutures are not an obvious fit. And moving Medtronic’s headquarters from Minneapolis to Covidien’s Dublin base will not obviously cut the American company’s tax bill. Freeing up overseas cash is too shallow a reason to tie the knot.

There is reason to suspect a rush to the altar. Pfizer’s advance on AstraZeneca this year attracted the attention of lawmakers in Washington to merger tax arbitrage. Congress is now kicking around proposals to restrain so-called inversions, where a buyer finds a target overseas to reduce what it owes Uncle Sam annually. Medtronic’s pledge to invest an extra $10 billion in technology over the next decade as part of the deal suggests some political concern.

Yet while buying Covidien will relocate Medtronic to Ireland, there does not seem to be any immediate tax savings. Over the last two years, the companies have paid on average almost the same effective rate of about 18 percent.

What is more, although both companies operate in the medical supplies industry, they do not necessarily complement each other. Medtronic manufactures high-tech devices implanted in people while its target makes basic surgical materials. These require different mind-sets with regard to research, development and regulation.

Even so, there will be back-office, supply-chain and other costs to hack, estimated at $850 million a year. Taxed and capitalized, these would be worth about $7 billion today. Yet Medtronic’s cash and stock offer includes a premium of nearly $10 billion. Therefore, it is either overpaying or expects to reap greater benefits elsewhere.

Medtronic alludes to some tantalizing possibilities. It says the combination is expected to generate significant free cash flow, “which it will be able to deploy with greater strategic flexibility,” especially in the United States. One interpretation could be that by moving overseas, Medtronic would be able to distribute more cash to shareholders because it would no longer keep profit earned outside America offshore, as many United States companies do, to avoid paying taxes.

That’s a nice perk, but a bit like getting hitched for the party and the presents. Corporate betrothal, like the personal kind, ought to have greater meaning.


Jeffrey Goldfarb is an assistant editor and Robert Cyran is a columnist at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Held hostage by medical device cheerleader: Representative Erik Paulsen (R-MN)

Push to kill medical device tax isseen as way out of shutdown

Article by: KEVIN DIAZ , Star Tribune Updated: October 2, 2013 - 10:14 PM

FiDA highlight

WASHINGTON – A small group of rank-and-file House members trying to break through the impasse in the government shutdown revived talks on Wednesday aimed at repealing a health care tax that falls heavily on Minnesota’s medical device industry.

The effort is being led by Minnesota Republican Erik Paulsen, who has cast himself as the champion of an industry estimated to employ 35,000 in Minnesota. Paulsen said he discussed his proposal Wednesday with Republican House Speaker John Boehner hours before House and Senate leaders were scheduled to meet at the White House with President Obama.

“I said this can and should be part of the solution,” said Paulsen, one of about a dozen House Republicans who have signaled their willingness to drop GOP demands of defunding or delaying the Affordable Care Act, often called Obamacare, as a condition of keeping the government open.

Paulsen sponsored a measure to repeal the medical device tax as part of a GOP government funding proposal that got 17 Democratic votes over the weekend. The Democratic-led Senate stripped the language as part of a broader dispute over Republican efforts to derail the Affordable Care Act, which rolled out this week.

Minnesotans in Congress from both parties have been pressing to undo a $30 billion medical device tax levied under Obama’s health care overhaul. But the two sides have been unable to agree on a way to make up the lost revenue.

Now, with both sides looking for an end to the government shutdown, the repeal effort has been caught up squarely in the protracted politics of the standoff.

Democrats, including Minnesota Sens. Amy Klobuchar and Al Franken, have said they are unwilling to repeal the tax as part of any GOP funding measure that delays implementation of Obamacare as the price for keeping the government open.

“I continue to believe that the current continuing resolution is not the best place to work out a medical device tax repeal that the president would sign into law,” Franken said. “I think the surest way to quickly reopen the government is for the House to vote on the Senate-passed bill to fund the government at its current levels. But I will take a careful look at any proposal that emerges.”

Meanwhile, Republicans have used the issue to attack Minnesota Democrats who voted against the repeal of the medical device tax as part of a GOP funding measure that puts off the health care law.

Despite the discord, Paulsen said the repeal effort represents the best opportunity for compromise. “The number one provision in this entire debate that has brought the most bipartisan support is repealing the medical device tax,” he said. “So we’ve got an opportunity to make that the linchpin as part of a solution.”

Paulsen said he has been in talks with a group of Republican and Democratic House members, including Wisconsin Democrat Ron Kind, an opponent of the medical device tax. Kind, however, has been working on a way to offset any lost revenues that might result.

Optimism from the industry

Industry leaders expressed guarded optimism about the new push on the medical device tax, which already has collected more than $100 million.

“There is reason for optimism that there is a critical mass and bipartisan support for repealing the tax,” said J.C. Scott, chief lobbyist for the Advanced Medical Technology Association.

The House voted last year to repeal the 2.3 percent excise tax on medical device makers like Minnesota-based Medtronic, which has said the tax could cost it $175 million annually. But efforts to win passage in the Senate have been stymied by Democratic concerns about losing one of revenue streams to pay for Obama’s 2010 health care law intended to cover some 40 million uninsured Americans. The repeal measure also has faced a White House veto threat.

White House officials contend that medical device makers will benefit from the new business created by the expansion of coverage to Americans who are now uninsured.

Where state’s senators differ

While Franken and Klobuchar have vowed to get the repeal through the Senate, they differ on a key sticking point: how to make up for the revenue.

Last year’s House-passed bill would have offset the lost taxes by shrinking insurance subsidies for low- and middle-income workers under the health care law. Franken said the GOP plan would undermine the goal of affordable health care.

Klobuchar said Wednesday that she is committed to repealing the medical device tax. However, she said, “the president has made clear that he will not accept changes to the Affordable Care Act as a condition for opening the government.” That doesn’t prevent a repeal in future negotiations, she said, adding that “the best way to get there is for the House to take up the Senate bill to reopen the government so we can have those negotiations.

Paulsen said House members are working on new revenue measures. “It’s definitely something that’s being conducted by rank-and-file members looking for a way out and a solution with bipartisan support,” he said.

Even if enough Democrats come on board, Paulsen’s greatest challenge may be convincing other Republicans.

“I would call it a win,” Paulsen said. “It would be a major accomplishment that helps the economy.”

explanthis

Oct. 3, 13

1:12 PM

The medical device industry is poorly regulated. I have been a patient advocate on the federal level for nearly 5 years, testifying at FDA meetings about the high rate of failure of implanted hips, knees and surgical mesh. The industry has fought UDI (unique device identification), legal protections for harmed patients, transparency of doctor/device mfg. financial relationships and independent outcomes registries to adequately inform patients and their providers. Right now, in WV federal court there are nearly 50,000 harmed women fighting for their civil rights and compensation for 'morbid disfigurement' from multiple manufacturers of surgical mesh. The 2.3% tax is warranted and capitulation to this entitled industry by our elected representatives is undemocratic. Research on 'Failed Implanted Medical Devices'.

Righteous Indignation!

Righteous indignation is typically a reactive emotion of anger over perceived mistreatment, insult, or malice. It is akin to what is called the sense of injustice. In some Christian doctrines, righteous indignation is considered the only form of anger that is not sinful.

ReginaHolliday, the Walking Gallery, just completed this amazing jacket for my brother, Steven Baker.  "Don't Tell Me To Zip It!" 

 What you see in our eyes is not disappointment, but righteous indignation!

The righteous indignation stems from research (my blog is an aggregate of that research) that easily uncovers a continuing systemic abuse of our government by elements of the entitled implanted medical device industry.  The indicators are patient harm (mutilation, torture) and futile class action lawsuits that do not stop the perpetrators from exploiting others. 

This morning the Senate Medical Technology Caucus was briefed  (with the FDA/CDRH) about the new “Medical Device Innovation Consortium” an unnecessary and redundant platform for the industry to influence regulators and legislators.

Patients are the primary stakeholders.  Patient engagement is a term that is not being honored.  I am witness as a patient advocate who has dedicated much of my life the last 5 years to following protocol to determine why my brother’s elbow implant failed and to get him the care that he needs.   It is clear to me that our government (FDA) is unable to assure that implants are safe and effective and subsequently unable to provide justice/assistance to correct the system so this does not happen to others. 

The cost of this failure to U.S. healthcare consumers is staggering, but the profit of the device industry is driving exploitive legislation and status quo medical practice.  Public education and public indignation is coming.  Ethical CEO’s must get out in front and lead the US medical device industry to embrace patient adverse event reports as an essential, timely mechanism to improve product. 

Dear MDIC founders,

 "Maura Donovan, PhD" <maura.donovan@medtronic.com>  

Dale Wahlstrom <dwahlstrom@biobusinessalliance.org>

Please accept this as my application for MDIC membership.  Please waive the $5000 annual fee.  I represent patients harmed by failed implants with the goal of making implants safer and more effective.  FDA/OSHI has interviewed me, I attended a FDA Patient Representative workshop and testified at 2 CDRH Town Hall meetings and the first MDUFA meeting 1/2011.  I understand that MDIC is interested in inclusion of all stakeholders in this new 501(c)3 nonprofit partnership.  I look forward to working with you.

http://www.washingtonpost.com/business/technology/fda-pledges-to-work-with-medical-device-industry-consortium-to-speed-up-product-approvals/2012/12/03/0c9e4c10-3d64-11e2-8a5c-473797be602c_story.html

FDA pledges to work with medical device industryconsortium to speed up product approvals

           

By Associated Press, Updated: Monday, December 3, 10:11 AM

WASHINGTON — The Food and Drug Administration says it will collaborate with medical device manufacturers on a public-private partnership designed to speed up the development of new medical technology.

The agency says it hopes to offer guidance to the Medical Device Innovation Consortium, a new industry-backed group that aims to simplify the design and testing of medical devices.

Medical device makers have criticized the FDA for an overly burdensome review process, which they claim slows down development of important new therapies. Congressional Republicans have held several hearings to scrutinize the agency’s system.

Faced with criticism from industry and Capitol Hill, the FDA has been highlighting efforts to slash red tape and accelerate review times.

The new consortium was created by LifeScience Alley, a Minnesota-based industry group that includes leading manufacturer Medtronic Inc.

Device Industry self-inflicted injury-stop whining!

http://www.stthomas.edu/mc/nihp/20120627/default.html

BI-PARTISAN SELF-INTEREST TRUMPS OBAMACARE FINANCING

The ACA, a.k.a. Obamacare, expands insurance coverage to life-saving health care and medical technology to 32 million of some 50 million uninsured Americans. Every segment of the health care industry has agreed that the benefits of expanding coverage far outweigh the costs of some financial concessions they have made to achieve it, which is usually in the form of financial reimbursement changes. The exception is the medical device industry, which has fought making any concessions, and its congressional proponents who are currently engaged in repealing the one concession forced on them, an effective 1.5% profits tax for 10 years on companies with annual sales over $5 million. Democrats in Minn. such as Senators Klobuchar and Franken, and Congressman Tim Walz, oppose repeal of the law they voted for but favor gutting it of the revenue required to make it work. The StarTribune, which regularly publishes the self-serving opinions of the industry about how the FDA is driving U.S. jobs and innovation overseas, and only rarely digs deeply into the genuine health and safety issues associated with a local industry that some time ago passed from real medical innovation to iterative invention, editorializes here clearly on this bit of congressional double-speak.

Commentary from Dave Durenberger
Wednesday, June 27, 2012________________________

http://www.startribune.com/opinion/editorials/158245155.html

Jerry Holt, Star Tribune

Editorial: If device tax is lost, special interests win

•                June 9, 2012 - 6:00 PM

The Minnesota-led congressional charge to repeal a new tax on the medical-device industry that will help defray the cost of health care reform is another example of the outsized influence of special interests in Washington.

Instead of acceding to yet another demand by the device industry -- which has already had the tax halved, and recently won favorable regulatory reforms -- Congress needs to tell firms the hard truth.

Hospitals, drug companies and insurers have agreed to shoulder some health reform costs. The device industry isn't being singled out, especially when the 2010 Affordable Care Act will likely benefit its bottom line by expanding coverage to up to 33 million uninsured Americans. The proposed 2.3 percent device industry excise tax, which will raise about $2.9 billion a year when it kicks in next year, should not be repealed.

Minnesota Republican Rep. Erik Paulsen is a champion of a U.S. House bill that would repeal the tax. Minnesota's Democratic Sens. Amy Klobuchar and Al Franken also support repeal.

KLOBUCHAR'S VIEW"I congratulate Representative Paulsen on this vote. While the administration's statement that the president will veto this bill means that changes will likely need to be made, I will continue to pursue all options to get this done. I have long worked to get this tax reduced or eliminated, including a $20 billion reduction from the original proposed tax in 2010."-U.S. Sen. Amy Klobuchar

Paulsen, whose district is home to many device firms, has proposed offsetting the lost device industry tax revenue by recovering some subsidies given to individuals to help buy health insurance.

That proposal would result in needy people ponying up to cover the cost of special treatment given to a wealthy industry. Last week, the White House sensibly threatened to veto Paulsen's legislation, which passed the House on Thursday in a 270-146 vote. It's not clear when the Senate will take up the issue.

While the device industry trade organization is predictably predicting massive job losses if the tax is not repealed, independent analysts have cast serious doubt on research the industry commissioned to support its catastrophic claims.

A 2012 Bloomberg Government analysis said industry claims of up to 43,000 jobs lost are simply "not credible." The research "exaggerates the degree to which spending on health is affected by price increases" and ignores "positive effect of new demand [for devices] created by the law,'' according to Bloomberg analyst Christopher Flavelle.

There's further reason to be skeptical about the push for repeal. A Standard and Poor's industry report noted that the 2013 start date gives the industry time to adjust to the new tax. Because the tax can be used as an income tax deduction, the net increase is just 1.5 percent, the report found.

The tax is also structured so that it doesn't give companies an incentive to send jobs offshore. "The tax applies equally to imported and domestically produced devices, and devices produced in the United States for export are tax-exempt,'' wrote Paul Van de Water, an analyst with the Center on Budget and Policy Priorities.

The device industry faces many challenges -- many of them self-inflicted. High-profile recalls of flawed devices have given the industry a black eye. The Standard and Poor's report notes that the industry has produced "little in the way of new products that would be considered revolutionary.'' The tax will add to firms' challenges, but it certainly can't be blamed for all the industry's woes.

There's legitimate concern about the tax's effect on small- to medium-sized firms, which are developing products that aren't yet profitable. While some of the costs can be passed along to the device's end users -- patients, in other words -- these firms may be unduly burdened by the new tax, which is on revenue, not earnings.

Policymakers and the industry should have pushed for an exemption for these smaller firms instead of a total repeal -- this revamped option deserves consideration. It would minimize the loss of tax revenue, yet protect a vulnerable industry sector important in Minnesota and elsewhere. A trade group estimates that the 10 largest device firms will account for 86 percent of the new tax's revenue.

Unlike the new Medicare drug coverage passed under President George W. Bush, the Affordable Care Act at least attempted to provide new benefits without adding to the nation's debt. The amount of money generated by the device tax is a relatively small contribution to health reform's overall cost.

Still, it's helping to defray the cost. Given the nation's mounting long-term debt concerns, politicians need to find more ways to pay for promised benefits, not vote away one substantive way of doing so.

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