Douglas Kohrs, AMS (American Medical Systems), Endo: Criminals Go To Jail - Executives Pay 'Settlements'

Transvaginal Mesh Settlement News: Endo ENDP Agrees to Resolve “Virtually All” Remaining Pelvic Mesh Claims, Sets Aside Additional $775 Million

Published on August 8, 2017 by Laurie Villanueva  FiDA Highlight

Endo International PLC has announced new agreements to settle “virtually all known” U.S. transvaginal mesh lawsuits involving devices manufactured by its American Medical Systems unit.

In a statement issued yesterday, the company disclosed that it would reserve another $775 million to resolve the remaining U.S. claims. With the additional reserves, Endo will have now set aside more than $2.6 billion to cover costs associated with transvaginal mesh settlements.

“While it remains possible that additional claims will be filed, we believe today’s announcement will assist most mesh claimants to move forward with their lives and will permit Endo to move forward with an even greater focus on executing against our core strategic priorities,” said Paul Campanelli, Endo’s President and Chief Executive Officer.

Under the new agreements, Endo will begin making installment payments in the fourth quarter of 2017. The installments will continue through the fourth quarter of 2019.

Roughly 22,000 transvaginal mesh lawsuits remain pending in the American Medical Systems litigation, all of which were filed on behalf of women who allegedly suffered serious complications after the devices eroded into their vaginal wall. The majority of claims are pending in a federal multidistrict litigation now underway in the U.S. District Court, Southern District of West Virginia.

Nationwide Transvaginal Mesh Litigation

Transvaginal mesh products were once widely-used to treat women suffering from pelvic organ prolapse and stress urinary incontinence. However, the U.S. Food & Drug Administration (FDA) has issued several public health alerts since 2008 detailing life-changing complications potentially associated with the implants, including mesh erosion, chronic pain, organ perforation, incontinence, scarring and adhesions, chronic infections, and more.

In 2011, the FDA reversed its previous position regarding the frequency of transvaginal mesh complications in pelvic organ prolapse repair, stating it no longer considered these adverse events to be rare. The agency also expressed doubt that such procedures offered any additional benefits compared to traditional non-mesh prolapse repair.

Last year, the FDA finalized new regulations that, among other things, reclassified transvaginal mesh intended for use in prolapse repair as a high-risk medical device. The new rules also made the implants ineligible for the agency’s 510(k) clearance program, which had previously allowed such products to come to market without first undergoing human clinical trial.

While it appears that most cases involving American Medical Systems will soon be resolved, the litigation surrounding transvaginal mesh is far from over. Johnson & Johnson and its Ethicon, Inc. subsidiary still face roughly 55,000 pelvic mesh claims now pending in state and federal courts around the country.

Other device makers involved in the massive transvaginal mesh litigation include Boston Scientific Corp., C.R. Bard, Inc., Coloplast Corp., Cook Medical, Inc. and Neomedic.

Ethicon and the other defendants have settled some pelvic mesh lawsuits, but thousands of cases remain pending.

____________________________________________________________________

https://seekingalpha.com/article/4096349-endo-international-plc-endp-q2-2017-results-earnings-call-transcript?page=2   

Earnings conference call today with global banks and investors

Paul V. Campanelli - Endo International Plc

Yesterday, the company announced that it reached agreements to resolve virtually all known U.S. mesh product liability claims. Beginning in the second quarter of 2017, we aggressively executed a settlement strategy in connection with Endo's mesh litigation. We believe that these efforts which include global resolution with all key plaintiff attorneys; case management orders issued by courts overseeing mesh cases, and our goal of having additional orders entered by other courts; our decision to stop selling mesh products in March of 2016; settlements recently entered into by other mesh manufacturers and the corresponding decrease in attorney advertising, as well as the continued running of statutes of limitations will collectively deter future filings.

Importantly, we believe these actions will assist most mesh claimants to move forward with their lives and permit Endo to move forward with an even greater focus on executing against our core strategic priorities. We increased our mesh liability accrual by $775 million in the second quarter, which is expected to cover approximately 22,000 U.S. mesh claims subject to a claims validation process for all resolved claims as well as all of the known international mesh claims and other mesh-related matters. I'll let Blaise address this more fully as he discusses our financial performance.

Blaise Coleman - Endo International Plc

Moving to slide 11, on the mesh litigation settlements, Paul already discussed we've reached agreements to resolve virtually all known U.S. product liability claims relating to the transvaginal mesh products sold by Endo's AMS subsidiary. As to the financials, in the second quarter 2017, Endo recorded a $775 million mesh product liability charge, reflecting an estimate for the expected future payments related to the resolved U.S. mesh product liability claims, the small portion of known unresolved U.S. claims and all of the known international mesh product liability claims and all other mesh related matters.

As of June 30, 2017 the mesh liability accrual was approximately $1,295 million, with $359 million in the qualified settlement funds, leaving approximately $935 million to be paid into qualified settlement funds. We expect to pay approximately $160 million to $185 million into the qualified settlement funds or directly to plaintiffs during the second half of 2017, with the remaining payments into the qualified settlement funds continuing through the fourth quarter of 2019.

Question-and-Answer Session

Operator

Yes, sir. First question comes from Liav Abraham of Citibank. Your line is now open.

Liav Abraham - Citigroup Global Markets, Inc.

Good morning. A couple of questions.  

And then secondly, on your settlement on mesh, congrats for closing this out. Just a couple of clarifications. The settlement amount that you announced, is this a post-tax amount or pre-tax? I assumed it was pre-tax, so what would the tax shield be on that? And I also noticed that the number of claims covered by the agreement that was announced yesterday of 22,000 was a lot higher than what was disclosed in Q1 of 10,500. So, was this just a significant step-up in the number of new claims in the recent past few months? Thank you.

Paul V. Campanelli - Endo International Plc

Thank you. So, I'll take the environment question, then I'll talk a little bit about the increase in claims to 22,000 and Blaise will talk a little bit about your financial question. 

Regarding the mesh update in terms of the increase from 10,000 to 10,500 to 22,000, the starting point was is when I was asked to take over as CEO in late September and early October, it took me a period of time to evaluate the current strategy that Endo was pursuing.

And then after careful consideration, looking at where we're heading in terms of looking at this for a series of years, looking at – opining with internal and external counsel, as you know, we made some disclosures early in the, I guess, mid to late second quarter would probably be better way that we disclosed at that period of time, that there was approximately 10,500 claims that had been filed or asserted or that we believed that were likely to be filed or asserted.

And that was our starting point. However, later in that period of time, we did change our strategy. I got closer involved and we had an opportunity to meet with private plaintiffs and we started to negotiate. At that point in time, we received more information that we did not have earlier in that period of time. And we learned a lot more about unfiled claims that totaled approximately 22,000 claims. So we had to make a business decision. We looked at where the company was headed, we were looking at distraction; we were looking at the amount of time that we were investing into resolving the mesh claims.

So at that point in time, we looked at the number of claims and we negotiated to $775 million accrual. And we view this as an inflection point for the company. So while it was a difficult negotiation, we are now moving forward as a company. We're focused on operational execution and we can focus on our business.

So with that, I'll pass it over to Blaise and can talk a little bit about the financial aspect.

Blaise Coleman - Endo International Plc

Yeah, sure. So, just in terms of the pre- and post-tax question, just as a remainder, as we've previously discussed, one really needs to model taxes at a total enterprise level. So as we said for 2017, we expect to be in a net tax cash receipt position of $15 million. And for modeling purposes for 2018 and 2019, we're providing a range that our cash taxes paid will be between $15 million and $30 million at a total company level. And that would obviously include everything including the mesh payments that are new here that we'll have in 2018 and 2019.

Liav Abraham - Citigroup Global Markets, Inc.

Great, thank you.

Young Min Lee - Raymond James

Good morning. This is Lucas Lee in for Elliot. Thank you for taking our questions. So, as a follow-up to the dialogue around resolution of mesh litigation claims, understand that this resolves the vast majority of known and potential cases. But assuming there could still be some emerging cases, could you help us frame what the cap on liability is, potential liability is? We're just trying to get a sense of how many patients ultimately used the mesh product and then how many of those have turned into claims. Thank you.

Paul V. Campanelli - Endo International Plc

Yeah. So no, Lucas, we're not going to be able to quantify that for you. What you have to understand is the 22,000 that we disclosed is virtually all known claims. Now, moving forward, what we've done is we've talked about things that have occurred and what we've put in place to deter, and I mentioned this in my opening comments, right? What's in place to deter the assertion of weak or meritless case, right? The sheer nature of having the CMO in place, the case management order at the MDL level and also having a case management order in the state of Minnesota, whereby that is the home state of AMS, that in itself is going to deter, again, weak or meritless cases, right? So, there is a process in order to move cases forward.

The CMO in itself is a deterrent of having mass tort cases coming forward. So, that's one component. You've got to recall that we stopped shipping and selling the product in Q1 of 2016, so you have a timing issue. You also have the statute of limitations. That ranges state by state in a range of two to three and up to six years, but the bottom line is is you have a statute of limitations.

When you look at all of these components, I think we have positioned ourselves in a good place to move forward and away from mesh. So I hope I answered your question, Lucas.

Young Min Lee - Raymond James

All right. Thank you.

Ann-Hunter Van Kirk - BMO Capital Markets (United States)

Good morning. This is Ann-Hunter Van Kirk on for Gary. Thanks for taking our questions. What are your expectations for leverage over the next couple years in light of the mesh payment and are you considering any additional cost cuts to help pay down debt?

Paul V. Campanelli - Endo International Plc

Thanks. So Blaise you'll take this?

Blaise Coleman - Endo International Plc

Yeah. So thanks, Ann, for the question. I think as we told you for 2017, we expect to be in the high 4 times range from a leverage perspective. And as we've previously communicated, we do continue to aspire to leverage down over time back into the 3 times to 4 times range. In terms of timing of when we'll be able to achieve that leverage goal, although today's announcement around mesh removes one of the near-term uncertainties we've been facing in terms of developing a path and timeframe in order to achieve that goal, we're just not going to able to provide any specific timeline today, as there continues to be a number of key uncertainties, both in the near-term and mid-term that could impact the timing of delevering. But again, we will, as we talked about when we come to 2018 guidance, we'll certainly provide what our expectations are, both from a cash flow perspective and from a leverage perspective for 2018.

Paul V. Campanelli - Endo International Plc

On the cost-cutting side, and I think you've seen that we've made some very difficult decisions over the last 10 months.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

https://www.bizjournals.com/philadelphia/morning_roundup/2016/02/endo-shutting-down-astora-womens-health-division.html

Endo shutting down its women's health division

Feb 29, 2016, 4:04pm EST Updated Feb 29, 2016, 4:33pm EST

John George

Senior Reporter

Philadelphia Business Journal

Endo International said Monday it is winding down its Astora Women’s Health division after failing to find a buyer for the business.

The company said it will cease business operations for Astora, based in Eden Prairie, Minn, by March 31 in part to “reduce the potential for product liability related to future mesh implants.”

Endo (NASDAQ: ENDP) and other medical manufacturers who make vaginal mesh products have been sued by patients allegedly injured by the makers of such products used to treat a variety of medical conditions including urinary incontinence and pelvic organ prolapse.

The company's stock closed down 21 percent to $41.81 per share Monday.

In August, Endo said it had set aide $1.53 billion for potential litigation and settlement costs, and the company said Monday it took an additional $834 million pre-tax charge during the fourth quarter related to vaginal mesh cases.

Endo, which is based in Dublin, Ireland, and has its U.S. headquarters in Malvern, said it will work with physicians to support their transition to alternative products.

The company, as part of its strategy to focus on global sales of its branded and generic pharmaceutical products, sold off its men’s and prostate health business last year to Boston Scientific in a deal valued at up to $1.65 billion.

Endo entered the urology device market in 2011 when it bought American Medical Systems Holding Inc. for $2.9 billion in 2011.

Last year, Endo bought rival generic drug manufacturer Par Pharmaceutical Holdings Inc. for $8 billion.

John George covers health care, biotech/pharmaceuticals and sports business.

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.

Proprietary Demands and Threats by Mayo Clinic CEO

Mayo CEO on Minnesota expansion: 'We'll have to rethink ... thebest use of our money'

•                Article by: KEVIN DIAZ , Star Tribune Updated: April 9, 2013 - 11:16 PM

He warned legislators on eve of hearing on $500M tax proposal.

WASHINGTON – In blunt words aimed squarely at the Minnesota Legislature, the president and CEO of the Mayo Clinic warned Tuesday that the hallowed medical institution has “49 states” eager to have Mayo’s planned multibillion-dollar expansion if the state is unwilling to pitch in.

“We’re never going to leave Minnesota, and we don’t want to leave Minnesota,” Dr. John Noseworthy said in an interview at the National Press Club, where the CEO made a pitch for federal investment in health care and medical research. “But we’ve got to decide where we’re going to put the next $3 billion.”

That money would be part of a $5 billion, 20-year expansion in Rochester dubbed “Destination Medical Center,” which would require a half-billion dollars from state officials for infrastructure improvements.

“If they say yes, that’s great, we want to stay in Minnesota,” Noseworthy said. But, he cautioned, “If they say no, or you’re going to have to go for a bonding bill every year for the next 30 years, we’ll have to rethink about whether that’s the best use of our money.”

Noseworthy, a neurologist, said Mayo is not threatening to leave Rochester, where the renowned clinic was established 149 years ago.

But in a clear message to the Legislature, where the clinic’s proposal is encountering significant sticker shock, Noseworthy pointed out that “there are 49 states that would like us to invest in them. That’s the truth.”

Noseworthy’s comments came on the eve of a House tax committee hearing, where skeptical legislators have split Mayo’s $500 million plan into separate tax and bonding provisions, a development that has concerned backers.

Mayo, the state’s largest private employer, says the taxpayer funding is needed for infrastructure improvements to keep up with the clinic’s expansion plans in Rochester.

Noseworthy said the clinic plans to pour $3.5 billion of its own money into the project and $2 billion from other potential private investors, fostering the city’s growth as an international destination, creating 40,000 jobs and expanding its tax base.

None of the proposed state money would be earmarked for the clinic, he said. “We just hope they’ll help us build some sidewalks and sewers,” he said.

Noseworthy also flexed some lobbying muscle in Washington, where he met with members of Congress on Tuesday to promote funding for medical research, quality care and payment reform under Medicare. Lagging federal provider rates have cost the clinic $128 million, he said, on top of another $47 million in the first year of the sequester budget cuts.

“This is a big deal,” he told the National Press Club audience. “It’s a very serious thing for all of us.”

The sold-out event, which included U.S. Sen. Amy Klobuchar, D-Minn., is an indicator of the Mayo Clinic’s influence in promoting a Minnesota model that drives down costs by emphasizing quality of care and collaboration among medical providers.

But the health care giant faces a tougher audience in St. Paul, where legislators are raising questions about the amount of the requested taxpayer assistance to a city of little more than 100,000 residents, about a third of them in the health care industry.

Noseworthy said the clinic is responding to legislators’ concerns.

“Yes, we’re listening to that input, and we’re trying to see how are we going to get the right answer,” he said. “It’s being reviewed, amended, revised and rethought as we go through.”

Some legislators have suggested that Rochester could pony up more for the stadium-size price tag by raising local sales tax rates.

But Noseworthy said the town doesn’t have the tax base to support the infrastructure improvements that could justify Mayo’s further expansion.

“I don’t know whether it will happen,” he said. “I hope it happens. We’ve told the state we want to grow, and we want to grow in Minnesota.”

In the meantime, other states beckon for a piece of the Mayo mystique.

“Medicine is a growth industry,” Noseworthy said. “We need to decide where to invest for that growth.”

Kevin Diaz • kdiaz@startribune.com

In a recent year Mayo Clinic made $7billion  though it is a 'non-profit' institution and it  paid its' CEO more than $1m.  It is so lawyered up that there has been only one conviction of a doctor in two decades.  Is it possible that these demands are being made by an institution that disguises it's mission as community-focused to derive maximum profit?  How can this be healthy for the majority of Minnesotans?   comment

MN Congressman Erik Paulsen Follows the Money

Erik Paulsen pushes medical device tax repealwhile getting megabucks from medical industry

By Aaron Rupar Fri., Feb. 8 2013 at 1:42 PM  FiDA highlight

On Wednesday, Republican U.S. Rep. Erik Paulsen introduced a bill to repeal the medical device tax included in Obamacare. In 2012, by a wide margin, Paulsen led the House in money received from medical supply companies.

Following the money suggests there's more to Paulsen's medical device tax view than a concern about stifling economic activity.

Seems like there's probably a connection between those two things, right? But Paulsen denies it.

Asked today by the Star Tribune whether the $110,100 he received from the medical supply industry last year plays a role in his interest in the medical device tax, Paulsen said: "No, none whatsoever." It's unclear whether his nose grew as he uttered those words.

Paulsen's push to repeal the tax is also supported by Amy Klobuchar and Al Franken, and guess what? Last year, Klobuchar received the third most money from medical supply companies of any Senator ($90,025); Franken clocked in at 12th ($30,349).

Of course, we're not exactly breaking news by suggesting financial contributions play a role what legislation various elected officials support. To take just one additional example, around this time last year, Klobuchar and Franken both supported anti-piracy legislation that would've benefited big media. And as we reported, both senators received hundreds of thousands of dollars from big media companies in the preceding years.

Last  year, Paulsen wanted to make up for the $29 billion that would be lost if the device tax were repealed by reducing health care subsidies for the poor. But as you'd imagine, that proposal wasn't popular with Democrats, and this year's bill doesn't specify what would make up for the lost revenue.

 Read my blog:  Failed Implant Device Alliance.  It records all the reasons why the public is now paying for the 'innovation' failures of the medical device industry.  Rep. Erik Paulsen ignores patient harm caused by medical products and thereby puts patients and medical device industry jobs in conflict.  Follow the money:  it is definitely corrupting our healthcare system. Secure Minnesota jobs are dependent upon creating value, not aggressively pursuing profit at all costs to ethics and morality.  Patient safety must be the first consideration and our government leaders pledge to put citizens rights before business interests.

021013 

Rep. Erik Paulsen (R-MN): Stop Cheerleading!

"Our elected leaders must rethink in their endorsement of corporate interests over public health.  Failed implanted medical devices are a huge taxpayer expense.  Joint replacements have become the #1 expenditure of Medicare and on 7/29/2011 the Institute of Medicine (in an FDA-commissioned study) determined that the majority of these implants were marketed through a flawed legislative process called 510(k).  "Revision" surgeries are extremely expensive and subject patients to untold dangers including job and home loss.  Cheerleading for more "innovation" may be profitable to legislators and the industry, but without balance, it will be a drag on our economy.  Congressman Erik Paulsen's constituent services to patients with failed implants:  FDA MedWatch #5009052   -silence-" 

Joleen Chambers-patient advocate-

http://post.mnsun.com/2012/12/guest-column-i-agree-with-president-obama-keep-manufacturing-jobs-in-america/

Guest column: I agree withPresident Obama – keep manufacturing jobs in America

By Sun Post Editor on

December 2, 2012 at 6:00 am

BY ERIK PAULSEN – MINNESOTA THIRD CONGRESSIONAL DISTRICT

Paulsen

I agree with President Barack Obama.

During the past year’s campaign, the president stated his support for keeping domestic manufacturing jobs in America. As he said in the first presidential debate, “That’s why we have to invest in advanced manufacturing. That’s why we’ve got to make sure that we’ve got the best science and research in the world.”

I agree with the president that we need to invest in manufacturing, and research and development. And, it is my sincere hope that he will work with members of Congress on both sides of the aisle to institute policies that will spur innovation, increase job creation, and keep manufacturing jobs here in America.

A key sector where America’s global leadership is threatened is the medical technology industry.  While other countries, especially Asian and European nations, are providing tax incentives for medical technology firms to do research, invest, and manufacture, U.S. policy makers are actively driving American innovators overseas.

Unfortunately, some of the president’s policies are already causing dramatic jobs losses in medical innovation.

Over the past two years, news headlines have highlighted thousands of jobs being eliminated from this dynamic industry: 1,050 from Stryker, 1,000 from Medtronic, 700 from Abbot, 595 from Covidien, 450 from Zimmer, 300 from St. Jude Medical, 275 from Welch Allyn. In Minnesota alone, 400 device companies, which sustain 35,000 high paying jobs, could be in jeopardy.

The question must now be asked: What is driving these jobs away?

The answer is a new $30 billion tax on medical devices in the president’s new health care law. It’s a 2.3 percent tax on revenue, not profit, and equates to a $30 billion burden being placed on the backs of medical technology companies around the country.

A new study by Ernst & Young, released in mid-November, shows that the new excise tax will actually add another 29 percent per year in taxes to the amount the medical device industry already pays in federal income tax. Estimates from Congress’ bipartisan Joint Committee on Taxation already show that medical technology companies will pay about $8.7 billion in overall federal income taxes next year, with the device tax adding another $2.5 billion to that tab.

The reality is if the tax goes into effect, the medical device industry will face one of the highest effective tax rates of any industry in the world.

This tax will cripple job creation in an industry that has become a true success story for made-in-America manufacturing. The layoffs are proof that companies are no longer investing and innovating here in America. Instead, they are cutting operations, and in some cases, sending those jobs overseas.

American manufacturers need a government that will partner with them to bring jobs back home and jump start our economy, not a government that builds barriers and prevents growth.

I know that medical device innovation and high-tech manufacturing is important to Minnesota, and that’s why I’m working across the aisle to stop this onerous tax. The House has already passed legislation to repeal the medical device tax – with the bipartisan support from the entire Minnesota delegation. But, the bill still waits for action in the Senate.

It is essential that U.S. medical device manufacturing remains a vibrant, innovative and successful industry that employs thousands of Americans. During the campaign, President Obama said he believes in American manufacturing. I do too.  The president has an opportunity to help American manufacturing by working together with Congress on pro-growth policies that will prevent jobs from going overseas and help create new jobs here at home. It’s my hope that the president recognizes that the medical technology industry is one of those opportunities and will support the repeal of this burdensome tax.

Erik Paulsen is the Republican congressman representing Minnesota’s Third U.S. Congressional District.

Help me win a Mayo scholarship!

Go to http://bit.ly/PakhxV  To vote: Like, Tweet and a positive comment-daily!    Thx!

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.

---------------------------