Failure is an Option – what Joe Biden should have said instead of dropping the F-Bomb

A few months back I gleefully reported what the voters of Massachusetts did for the medical device industry by electing Scott Brown as our new Senator. The US Senate had cobbled together a poor Health Care Bill in order to send it onto the House of Representatives assured that the Republicans would not win Kennedy’s seat and gain the blocking vote. It was, by admission of many Democratic Senators, a terrible bill – but that it would be cleaned up in a House-Senate conference. 

With Senator Brown finally seated it seemed to be a no-brainer that the Health Care Bill would have to be dropped or reconfigured as it would not stand a filibuster challenge.

I was one of those relieved given my concern for my beloved medical device industry which was going to be the scapegoat of the current administration and be severely taxed for no other reason than its name sounded a lot like the pharmaceutical industry. I felt that we had ducked a massive bullet.

The gross distortions in favor of forcing through the bill under Reconciliation were mind-numbing. How the public could be convinced that spending more than a trillion dollars would result in a “massive middle class tax reduction” and how could taking $500 billion out of Medicare “strengthen” it?

Here’s what has happened and what we might expect – how much more damage can Congress inflict before the November elections?

Companies small to larger have written down expected charges to their bottom lines in order to comply with Sarbanes Oxley accounting practices. Caterpillar has charged their books a billion dollars while AT&T and other companies have taken write-downs in the range of $30 – $500 million. Of course Congress wants to interrogate their executives whose crime seems to be that they are complying with the laws set forth by Congress itself. Company executives could go to jail if they failed to disclose to investors how their expenses might change.

So the country is beginning to see the financial impact of Obama Care.

Massachusetts medical device companies are threatening to move their manufacturing and development facilities out of the US entirely. This is interesting given that our governor is a pal of the president. Our governor is “shocked” that hundreds of Massachusetts based life sciences companies would leave or export much of their business out of the country.

Of course he should be concerned – the medical industry is one of the few segments of the Massachusetts economy creating jobs. Thousands of Massachusetts jobs are at risk – and our federal and state elected officials seemed surprised. Go figure.

With many embedded vendors targeting the medical devices industry to hedge against expected A&D cutbacks, the consequences of the Health Care legislation couldn’t have come at a worse time. The financial impact of this legislation requires massive tax increases to pay for it, so if one group is given a safe haven from this taxation then other segments will be harder hit in order to cover the revenue needs.

Also, should the Supreme Court find that the legislative requirement that all US citizens must purchase health care (how can interstate transport laws pertain to those that don’t chose to buy?) is unconstitutional, the current congressional membership will certainly impose additional taxes on those already hit hard – and that would mean we the members of the medical device industry. We can’t expect that the members of congress would change their minds regarding the legislation given the sleazy way they forced the legislation through.

Of course should the mid-term elections change the constituency of the House of Representatives, they could choose not to fund the Program.

What is happening here in Massachusetts is happening across America. And those of you either currently in the embedded medical device industry or hoping to find new markets herein should pay careful attention.

Notwithstanding our weak global economy, the mindless imposition of new taxes (and the anticipation of additional taxes that are unknown to us at this time) can not only set our economy back further, but is likely to gut the embedded market segment that has shown the greatest growth in revenue and employment year-over-year.

Massachusetts Senator Scott Brown, who has filed an amendment that would repeal the tax, wrote “with unemployment in my state near 10%, placing a tax on medical devices is the absolute last thing we should be doing right now”. Our governor responded by saying health care reform is “very good for the people of America and the people of the commonwealth.”

Good luck Scott – November is only 8 months away.

I wonder how Schwarzenegger in California (whose state is harder hit than Massachusetts) is taking all of this. He’s not a buddy of our prez which might be a good thing.

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